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TMI Blog2024 (8) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... xpansion and investment in shifting of the business, and (v) The assessee made new investment in the firm and the assessee is a partner and therefore the assessee has total right in the investment of the firm. Hence, we note that the important conditions to comply with the object and intention of section 54G of the Act have been fulfilled by the assessee under consideration. We find that assessee has invested amount of Rs. 1.22 Crores in the firm, as a partner and same was utilized in construction of building and purchasing of new plant and machineries. The assessee has shifted the existing plant and machinery, along with all important business plans, goodwill to rural area and therefore the whole manufacturing undertaking has been shifted to rural- area. Therefore, the assessee is eligible for exemption u/s 54G of the Act. The firm name is only a compendious name given to the partnership for the sake of convenience. The assets of the firm belong to and are owned by the partners of the firm as held by Hon'ble Supreme Court in the case of N. Khadervali Saheb Anrs. Vs. N. Gudi Sahib [ 2003 (2) TMI 63 - SUPREME COURT ] Any property owned by it is really the property of the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the Ld. CIT(A) are not justified and are bad-in-law. 4. That, the assessee craves to add, amend, alter or delete any of the above grounds of appeals. 3. The facts of the case may be briefly stated. The assessee, before us, is an Individual and has filed return of income on 16.10.2016, declaring total income at Rs. 4,78,670/- and the same was processed u/s 143(1) of the Act. The assessee s case was selected for LIMITED scrutiny under CASS (Computer Aided Scrutiny Selection). The notice u/s 143(2) of the Act, was issued on 13.07.2017, by the Assessing Officer, and served upon the assessee electronically. The reason for selection of case under Limited scrutiny is to verify the following items: (i)Whether sales turnover/receipt has been correctly offered for tax, (ii) Whether deduction from capital gains has been claimed correctly. The assessee is engaged in the business of manufacturing and job work of CI Casting, as a proprietor of Uttam Foundry at address: Plot No.223/1- D, Road T, Aji GIDC, Rajkot-360002. The assessee has furnished audit report u/s 44AB of the Act, alongwith Balance-sheet, Profit Loss account, copy of bank statement and computation of total income which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961. However, on further verification of the submission of the assessee, it was noticed by the assessing officer that the investment has been made by the firm and not by the assessee for claiming deduction u/s.54G of the Act. Therefore, vide show cause notice dated 08.12.2018, the assessee was requested to show cause as to why disallowance of Rs. 1,15,94,133/- u/s.54G of the Act should not be made. 6. In response to the notice of assessing officer, the assessee submitted its reply before the assessing officer, which is reproduced below: With reference to deduction u/s 54G of the I.T. Act, we have to state as under: 1. The assessee has been carrying out manufacturing activity since past many years at Aji GIDC, Rajkot. 2. The assessee has shifted the undertaking along with Plat Machinery at Jiyana, Kuwadva, the said area is also notified as rural area and duly eligible for deduction u/s 54G of the I.T. Act. 3. The assessee has entered into Memorandum of Understanding (MOU) with 3 other persons to shift existing business to the rural area and also carry out expansion and also make further investment to the extent of sale proceeds received from the sale of the old land and buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54G of the Act, are fully satisfied. However, ld CIT(A) rejected the contention of the assessee and observed that in section 54G of the Act, there is specific mention that who is eligible for claim of deduction under section 54G of the Act. The assessee, an individual person and a partnership-firm, as a person, are clearly different assessees. The case pertains to an individual assessee, whereas, Investment in the new industrial undertaking, in the rural area, is made by another assessee, a partnership- firm. Therefore, the ld. CIT(A) noted that assessee has not fulfilled the conditions of section 54G of the Act. Hence, ld.CIT(A) upheld the action of the Assessing Officer. 10. Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before us. 11. Shri Kalpesh Doshi, Learned Counsel for the assessee, pleaded that during the year consideration, the assessee has claimed exemption u/s 54G of the Act, on account of Capital Gain arising, on account of shifting of an undertaking from urban area to rural area. The assessee has executed deed of assignment for the industrial land and building situated at Aji GIDC, Rajkot, for consideration of Rs. 1,22,41,000/-, as on 22/03/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking carried out in the rural area of Rs. 1.38 crores. The copy of bills and copy of ledger of further investment in the construction of building and purchasing of plant and machineries were submitted by the assessee. The firm, M/s Om Metal Cast, has filed return of income for the year under consideration, as on 22/12/2017. The copy of return of income along with computation was submitted before assessing officer. The copy of profit and loss account and Balance Sheet of M/s Om Metal Cast, were also submitted before assessing officer, which show the investment in building and plant and machineries, as required by section 54G of the Act. The Ld. Counsel submitted that assessee has fulfilled all the conditions mentioned in section 54G of the Act, namely: (a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted, (b) acquired building or land or constructed building for the purposes of his business in the said area, (c) shifted the original asset and transferred the establishment of such undertaking to such area, and (d) incurred expenses on such other purpose as may be specified in a scheme f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no difference between Individual(partner) and partnership- firm, as the partners are owners of the all assets of the partnership- firm, are applicable in general law and not under the Income Tax Act. In the Income Tax Act, the individual stated as a separate entity for taxation and partnership -firm is also stated, as a separate entity, therefore, assessee is not eligible to claim exemption u/s 54G of the Act. The Ld. Sr. DR also relied upon the following judgments: (i) CIT vs. Nagpur Golden Transport Co., 233 ITR 389 (Delhi) (ii) Hotel Centre Point vs. ITO, 160 taxmann.com 604 (Guwahati Trib) 15. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that object of the section 54G of the Act, is to promote decongestion of urban areas, as also balanced regional growth. The Section 54G of the Act, exempts capital gains on transfer of plant, machinery, land, building etc., used for the purpose of the business of industrial undertaking. The transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership. On dissolution of the partnership- firm, accounts are settled amongst the partners and the assets of the partnership are distributed amongst the partners as per their respective shares in the partnership firm. The distribution of assets may be done either by way of an arbitration award or by mutual settlement between the partners themselves. The document which recorded the settlement in instant case was an award which did not require registration under section 17 since the document did not transfer or assign interest in any assets. [Para 3] 17. We note that on similar and identical facts, the Co-ordinate Bench of ITAT, Ahmedabad in the case of Chandra N. Jethwani, 111 taxmann.com 58, held as follows: A partnership firm is not an independent legal entity, the partners are the real owners of the assets of the partnership firm. Actually, the firm name is only a compendious name given to the partnership for the sake of convenience. The assets of the partnership belong to and are owned by the partners of the firm. So long as the partnership continues, each partner is interested in all the assets of the partnership firm as each partner is owner of the assets to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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