9911796707
TMI Blog1998 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... be valued at Rs. 27 lakhs and further holding that there was no escapement of income The facts in brief are as follows: The assessee is a firm consisting of three partners, i.e., two individuals and one limited company by name Agarwal Vanaspati Private Limited. The firm was constituted on November 24, 1980. The business has dealings in real estate, buildings, properties, etc. The two partners, Smt. Shantabai and Sint. Kantabai, brought in as their contribution towards capital their interest in an immovable property situated at Edenbagh. The property was valued at Rs. 6.5 lakhs and a half share was credited to the account of each individual partner. The third partner, i.e., the limited company, contributed cash of Rs. 3.25 lakhs. On Janua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to this court for opinion. The undisputed facts are that the two partners, Sint. Shantabai and Sint. Kanthabai, brought in as their contribution towards capital their interest in an immovable property valued at Rs. 6.5 lakhs and a half share was credited to the account of each individual partner. The firm was constituted on November 24, 1980, and it was dissolved on January 21, 1981, i.e., within two months from the date of its constitution. The Assessing Officer accepted the valuation mentioned in the books of account on the date of constitution of the firm. He also took the same value on the date on which the firm was dissolved. The Commissioner of Income-tax stated that the value of the opening stock should be the same as sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the value mentioned in the books of account should be taken into account. If so, there is escapement of income. Counsel submitted that the Tribunal committed an error in holding that the opening stock should also be valued at the market price. Learned counsel for the assessee relying on a decision in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 (SC), contended that the credit entry made in the partner's capital account in the books of the partnership firm does not represent the true value of the consideration. Therefore, the value mentioned in the books of account by the partners at the time of constitution of the firm does not represent the real value of the stock-in trade. If it does not represent the real value of the stock-in-tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A short passage from Pickles on Accountancy (Third Edition), page 650, will make this clear : '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 at 'book value' basis, thus involving recording entries for both appreciation and depreciation of assets and liabilities.' " From the above, it is clear that it is not always necessary that the book value should be accepted. The true test is what is the fair val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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