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TMI Blog2012 (12) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... se option for the fair market value as on 01.04.1981 or the cost of residential house as on 01.04.1981 during assessment proceedings inspite of the fact option given vide show cause letter dated 26.12.2008. Therefore, the value taken by the AO at Rs.18,00,000/- is correct. Value of showroom at Gulmarg Bagh taken by the AO as on 01.04.1981 was duly communicated to the assessee vide show cause dated 26.12.2008 and sufficient opportunity was given to opt either for book value or fair market value. But the same option was never exercised by the assessee during the assessment proceedings. Transfer with regard to the land at Gulmarg was a lease property and the land cannot be transferred without the prior approval of the authority - It was correctly observed by the AO that the lease of land was more than a period of 12 years and therefore, assessee is the deemed owner. The arguments of the assessee, therefore, cannot help the assessee. Regarding boundary wall, the same is also a capital asset, has rightly been observed by the A.O. Gulmarg Hut - same had been dismantled and construction of the hotel was going on when asset was transferred in the name of the partners - Held that:- As in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the four partners there by crediting the current capital accounts of the assessee by an amount of Rs.5,25,543/- in each case. The assessee was asked to furnish complete details regarding the address and locations of the assets and the same are as under: S.No. Name and address of property 1. Residential House, Kathi Darwaza, Srinagar. 2. Gulmarg Hut, Ali Shah, Gulmarg, Kashmir 3. Show Room Site at Gulab Bagh, Srinagar. 4. Land at Gulmarg, Near Gulmarg Hut at Sr. No.2 5. Shop at The Bund, Srinagar. 3.2. The assessee was further asked to intimate the fair market value of the properties as on date of distribution to the partners. In response to this the assessee has furnished copies of valuation reports dated 18.12.2008 from Sh. Shahid M. Peerzada, Consultant Engineer and Registered Valuer, in respect of the properties mentioned in S.No.1,3,4 and 5 above on 18.12.2008. The current value of the above mentioned properties has been given in the said valuation report and the value as per the following details was valued by the Registered valuer: S.No. Name and Address of Property Current Value 1. Residential House, Kathi Drawaza, Srinagar Rs.1,64,00,000/- 2. Show Room Site at Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Already a continuous period of 26 years passed as on 01.04.05. Since 12 years have passed therefore deemed owner in view of section 269UA(f) of the I.T. Act, 1961. d) Hut at Gulmarg: Construction on leased land. Therefore, the partners of the assessee firm are either owners or deemed owners of all the properties mentioned above, except the shop at Bund, which were transferred earlier to the firm and which have been distributed to the partners during the current asstt. year. As regards the shop at Bund, since only the amount paid as premium for renovation and reconstruction of a Shop already on tenancy, therefore, the expenditure was not of the nature of capital expenditure and could have been taken as revenue expenses. Thus, not considered as asset transferred. 10. The assessee has itself conceded that the definition of Transfer in the section 2(47) of the Act has been broadened and would include sale, exchange, relinquishment of asset or extinguishment of any right in the capital asset or extinguishment of any right in the capital asset. Section 2(47) of the I.T. Act, 1961 defines transfer extending beyond the concept as is generally understood. However, the definition is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of a capital asset by a partner to a firm are chargeable as the partners income of the previous year in which the transfer took place. Similarly, the conversion of the partnership asset into individual asset on dissolution or otherwise also formed the part of the same scheme of tax avoidance. Therefore, if the object of introduction of section 45(3) and 45(4) is seen and the mischief it seeks to avoid, it would be clear that the intention of parliament was to bring into the tax net transactions whereby assets were brought into a firm or taken out of a firm. The expression "other wise" has not to be read ejusdem generis with the expression "dissolution of firm or BOI or AOP". The expression "other wise" has to be read with the words "transfer of capital assets" by way of distribution of capital assets. If so read, it becomes clear that even when a firm is in existence and there is a transfer of capital assets it becomes clear that even when a firm is in existence and there is a transfer of capital assets it comes within the expression "other wise" as the object of the amending act was to remove the loophole which existed whereby capital gain tax was not chargeable." 3.5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no transfer has been affected and no capital gains could be charged in respect of Gulmarg Hut. 4.2. The position of Gulmarg land/hut is at same footing as the shop at Gulab Bagh which was on rent. The said land is also on lease from the Development Authority. The facts in respect of this property are claimed to those of shop at bund in respect of which no addition has been made by the AO himself at the assessment stage, hence no addition is sustainable in respect of Gulmarg land/hut. 4.3. Now ground No.(1)(c) is taken up for consideration which is regarding the actual computation of capital gains in respect of residence at Saida Kadal and show room at Gulab Bagh. The contention of assessee that the option as to chose between cost of asset ( book value or fair market value in terms of section 55(2)(b) of I.T. Act is to be made available to assessee which it had not exercised at the assessment stage. I find that it is true that as per the provisions of section 55(2)((b) of I.T. Act such option was available to assessee which could not be exercised before the AO. Now the assessee wants that capital gain to be worked out after exercising its option to opt for fair market value as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain are computed as under: (i) Residence at Saida Kadal, Srinagar FMV of building as taken by AO Rs.1,30,00,000/- Less: Indexed cost of building Cost of building 18,00,000 Cost of Land 6,40,000(As valued by AC Revenue) 24,40,000 Index cost 2440000 x 497/100 Rs.1,21,26,800/- Capital gain Rs. 8,43,200/- (ii) Show Room at Gulab Bagh Present value as per valuation report dated 18.12.2008. Rs.4,00,000/- Estimated value during the year 2005-06 (The assessee has not objected the estimated FMV, as per show cause dated 26.12.2008 Rs.3,00,000/- Indexed cost of acquisition taking the FMV As on 01.04.1981 at Rs.40,036/- as the property Is held by you prior to 01.04.1981 and on depn. Is claimed by you during Earlier years 40,036x497/100 Rs.1,99,978/- Long term capital gain 3,00,000-1,99,978/- Rs.1,00,022/- In view of the above addition of Rs.9,43,222/- is confirmed on account of capital gains and the balance is deleted." 5. Ld. DCIT(DR), Sh. Tarsem Lal, supported the order of the Assessing Officer, in particular, he read the provisions of section 45(4) of the Act. He argued that the assessee has distributed the capital asset, which is covered under section 45(4) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value taken by the AO at Rs.18,00,000/- is correct. 7.2. As regards the cost of land amounting to Rs.40,036/- and that of show-room constructed before 01.04.1981, which was written off by debit to the partners capital account. The A.O. has given findings in paras 10 & 11 and we do not find any error in the said findings. 8. As regards the cost as on 01.04.1981 taken by the AO, it was contended by the assessee that the same is not fair but the book value as at 01.04.1981 should have been taken contended by the assessee before the ld. CIT(A). 8.1. In this regard, the value of showroom at Gulmarg Bagh taken by the AO as on 01.04.1981 was duly communicated to the assessee vide show cause dated 26.12.2008 and sufficient opportunity was given to opt either for book value or fair market value. But the same option was never exercised by the assessee during the assessment proceedings. 9. As regards the issue of transfer with regard to the land at Gulmarg was a lease property and the land cannot be transferred without the prior approval of the authority, it was correctly observed by the AO that the lease of land was more than a period of 12 years and therefore, assessee is the deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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