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TMI Blog2001 (9) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... sets consisting of shares in the joint stock companies as fully described in the annexure hereto, as the property of the partnership firm as on and from October 1, 1976. Adjustments of the value of shares will be taken at the face value or at the break up value of shares whichever is higher. The value of shares as worked out above shall be credited to the individual partner's current account and this will, therefore, be treated as investments by the firm entitling the firm to have all the benefits including dividend, bonus, shares, etc. Due intimation to the respective companies will also be given by the individual partners for the shares treated as holdings of the firm." Pursuant to the agreement the assessees transferred their holdings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of capital asset within the meaning of section 2(47) read with section 45 of the Income-tax Act, 1961, when the assessees transferred their shares to the firm in which they were partners? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has rightly held that no profit accrued to the assessees on the transfer of their shares to the firm in which they were partners 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has rightly held that no capital gains has arisen to, the assessee within the meaning of section 45 of the Income-tax Act, 1961?" The Supreme Court in the case of Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 after considering qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iddharthbhai v. CIT [1985] 156 ITR 509). The court held that when the personal asset of a partner merges into the capital of the partnership firm, a corresponding credit entry is made in the partner's capital account such entry is made merely for the purpose of adjusting the rights of the partners inter se when the partnership firm is dissolved or a partner retires. That court further observed: "It evidences no debt due by the firm to the partner. Indeed, the capital represented by the notional entry to the credit of the partners account may be completely wiped out by losses which may be subsequently incurred by the firm, even in the very accounting year in which the capital account is credited. Having regard to the nature and quality of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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