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TMI Blog2015 (12) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court which was not brought to the notice at the time of hearing of the appeal. This Tribunal is of the considered opinion that there is an error in the order of this Tribunal dated 26.6.2015. Accordingly, in exercise of the jurisdiction conferred on this Tribunal u/s 254(2) of the Act, the order of this Tribunal dated 26.6.2015 is rectified as follows: At page 6, para 7, the following shall be deleted: "Now coming to the valuation, the Assessing Officer has rightly taken the value as reflected in the balance sheet of the partnership firm and it was confirmed by the CIT(Appeals). Therefore, this Tribunal do not find any infirmity in the order of the lower authority and accordingly, the same is confirmed." Now the following shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed by the CIT(A), therefore, there was no infirmity in the order of the CIT(A). Referring to section 45(4) of the Income-tax Act, 1961, the ld. Counsel submitted that when the profit or gain arises from transfer of a capital asset on dissolution of the firm, shall be chargeable to tax and for the purpose of sec. 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer. Therefore, according to the ld. Counsel, the fair market value as on the date of dissolution of the firm shall be taken into consideration. The ld. Counsel placed his reliance on the judgment of the Apex Court in A.L.A Firm vs CIT, 189 ITR 285 and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stock had been valued at market price, the surplus had to be reflected in the profit of the firm and had to be charged to tax. In the case before this Tribunal, it is not the case of the assessee that stock-in-trade was revalued at the time of dissolution. Since the stock-in-trade and assets were not revalued, this Tribunal has rightly confirmed the order of the lower authority. 4. We have considered the rival submissions on either side and also perused the material available on record. The question arises for consideration is with regard to valuation of the property. It is not the case of the assessee that on the date of dissolution the property was revalued. We have gone through the judgment of the Apex Court in A.L.F Firm (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts only on a real basis and not at cost or at their other value appearing in the books. In fact, the Apex Court observed as follows at page 306 of the ITR: We are not quite sure that the first of the considerations that prevailed with the High Court is relevant in the present case. Even in a continuing business, the valuation at market value is permissible only when it is less than cost; it is not quite certain whether the rules permit an assessee if he so desires to value closing stock at market value where it is higher than cost. But, in either event, it is allowed to be done because its effect can be offset over a period of time. But here, where the business comes to a close, no future adjustment of an over or undervaluation is poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the event of the accounts being drawn up to the date of death or retirement, no departure from the normal procedure arises, but it will be necessary to see that every revaluation required by the terms of the partnership agreement is made. It has been laid down judicially that, in the absence of contrary agreement, all assets and liabilities must be taken at a 'fair value' not merely a 'book value' basis, thus involving recording entries for both appreciation and depreciation of assets and liabilities. This rule is applicable, notwithstanding the omission of a particular item from the books, e.g., investments, goodwill (Cruikshank v. Sutherland [1922] 92 LJ Ch 136 (HL)). Obviously, the net effect of the revaluation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 285, the value of the asset has to be revalued and the fair value on the date of dissolution has to be taken into consideration. As observed by the Apex Court, the partner of the firm being a commercial man, will value the asset only on real price and not at cost or at any other value. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall find out the fair value/market value of the property as on the date of dissolution of the firm i.e 20.2.2007 and thereafter compute the capital gains in accordance with law. 6. At para 8, page 7, the following shall be deleted: 8. In the result, the appeal of the assessee is dismissed. Now the following shall be inserted: 8. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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