9911796707
TMI Blog1984 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... hased 58.22 acres of agricultural lands in Seegahalli, Hoskote Taluk in 1972 from Krishna Mining Co., Gudur. Permission was obtained from the Dy. CIT, Bangalore, for converting the said land for non-agricultural purposes. In order to meet the conversion fees new partners were brought in April 1979. The continuing partners, of whom the assessee was one, also brought in moneys for this purpose in November, 1979. The land was revalued because of its conversion for non-agricultural purposes. The revaluation was as follows: Cost of land Rs. 57,500 Conversion fee paid Rs. 2,30,284 Difference in revaluation Rs. 9,12,216 . Rs. 12,00,000 The land account was debite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant to note from the facts reiterated above that the appellant alongwith other retired taking from the firm whatever amount was due to the time of retirement. The new set of partners who hand enough financial resources continued the business of the firm. If the facts of the appellant's case is properly understood and interpreted, the position is that the appellant lady has been paid merely the amount which was due to her at the time of retirement and there has been no relinquishment of her rights in the assets of the firm. Long before the date of retirement, revaluation of the assets were done by the first group of partners and the appreciation in the land value on account of conversion of agricultural land into non-agricultural land was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his share might not invariably be done in that manner and it was quite conceivable that, without taking accounts on the footing of national sale, by mutual agreement, a retiring partner might be receiving an agreed lump sum amount for going out as and by way of consideration for transferring, releasing, assigning or relinquishing his interest in the partnership assets to the continuing partners and if the retirement takes this form whether payment on that basis would be exigible to tax as capital gains, as are the facts of the instant case before me, the Bombay High Court did not express any opinion. But as we said, it is not necessary. But the Bombay High Court also recognised that where accounts had been gone into and the partner rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssolution of the firm. Quoting from the head lines, at p. 98 the High Court held as follows: "In the instant case, having regard to the particular mode employed by the assessee and the continuing partners to effect and bring about retirement of the assessee from the partnership, the transaction will have to be regarded as amounting to 'transfer' within the meaning of s. 2(47) of the Act, inasmuch as the assessee could be said to have assigned, released and relinquished his interest and share in the partnership and its assets in favour of the continuing partners and the transaction cannot be regarded as amounting to any distribution of capital assets upon dissolution of a firm. On the construction of the deed dt. 19th Jan., 1962, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the partners and there was no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of s. 2(47) of the IT Act, 1961. There was no involvement of a transfer of assets even in the sense of any extinguishment of the firm's rights in the partnership when the distribution took place upon dissolution. In order to attract s. 34(3)(b) of the IT Act, 1961, it was necessary that the sale or transfer of the assets must be by the assessee to a person. The Supreme Court held that the dissolution of a firm must in point of time be anterior to the actual distribution, division or allotment of the assets that took place upon the taking of accounts and discharging the debts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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