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TMI Blog2008 (2) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... K. George for the appellant. M. R. Rajendran Nair and K. R. Sudhakaran Pillai for the respondent. JUDGMENT The judgment of the court was delivered by C. N. RAMACHANDRAN NAIR J. - The common question raised by the department in these appeals filed in the case of two assessees is whether the Tribunal was justified in holding that there was no "transfer" within the meaning of that term contained in Section 2(47) of the Income-tax Act to attract tax on capital asset under Section 45(4) of the Act. We have heard senior standing counsel appearing for the Income-tax Department and separate counsel appearing for the two assessees. 2. The common assessee in I.T.A. Nos. 146 and 168 of 2002 is a partnership firm that consisted of tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to raise this additional ground and after hearing the parties , all the appeals were disposed of holding that the dissolution of the firm with two partners and taking over of land and factory building by one partner did not involve any "transfer" as defined in Section 2 (47) of the Act. Consequently, the Tribunal cancelled all the impugned orders pertaining to assessment on capital gains. In view of this decision, the Tribunal did not go into the dispute on valuation which was the issue originally raised in all the three appeals. So far as I.T.A. No. 219 of 2002 is concerned, the position is the same in as much as the Tribunal has considered only whether there is capital gains arising on the dissolution and reconstitution of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 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." 4. While counsel for the revenue relied on the decisions of the Andhra Pradesh, Bombay and Karnataka High Courts reported in Rajlaxmi Trading Co. v. CIT [2001] 250 I.T.R. 581, CIT v. A.N. Naik Associates [2004] 265 I.T.R. 346 and Suvardhan v. CIT [2006] 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve upon one of the partners who wanted to continue business as a proprietor. Dissolution deed is an agreement and if the provisions of such deed provide for relinquishment of right of one partner on the assets, namely, immovable property in favour of another partner, then the latter becomes absolute owner of the property. 5. In the case of assessee in I.T.A. No. 219 of 2002 also, even though there is simultaneous reconstitution of the firm, it is clear that reconstitution took place after dissolution of the firm wherein one partner assigned his right in the assets in favour of the other partners on taking consideration in cash. 6. In short, the transactions in both the cases have resulted in dissolution of the firm and partner or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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