9911796707
TMI Blog1985 (11) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... hare on retirement, in respect of one-third property contributed by each of them to the firm. According to the ITO, the said firm had not done any business or any construction activity during the year ending 1980-81. Part 4 of the agreement consequent to dissolution, deed reads as follows: "In consideration of the party on the second part agreeing and leaving the partnership business with all its assets and liabilities, it was agreed that the party on the first part shall pay to the party of the second part, a sum of Rs. 6,51,000 (rupees six lakhs fifty-one thousand only), equally divided amongst the three persons comprised and collectively called 'party' on the second part, in full and final settlement and as and by way of and in satisfaction of the interest, rights and titles of the party on the second part as partners in the erstwhile dissolved partnership firm and its business referred to above." 4. The ITO held that when the three assessees contributed one-third share of this property towards capital in the firm, there was a transfer involved in relation to this capital asset as defined in section 2(47) of the Income-tax Act, 1961 ('the Act'). He further held, following th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hips observed in para 20 of the order as follows : "We have decided these appeals on the assumption that the partnership firm in question is a genuine firm and not the result of a sham or unreal transaction, and that the transfer by the partner of his personal asset to the partnership firm represents a genuine intention to contribute to the share capital of the firm for the purpose of carrying on the partnership business. If the transfer of the personal asset by the assessee to a partnership in which he is or becomes a partner is merely a device or ruse for converting the asset into money which would substantially remain available for his benefit without liability to income-tax on a capital gain, it will be open to the income-tax authorities to go behind the transaction and examine whether the transaction of creating the partnership is a genuine or a sham transaction and, even where the partnership is genuine, the transaction of transferring the personal asset to the partnership firm represents a real attempt to contribute to the share capital of the partnership firm for the purpose of carrying on the partnership business or is nothing but a device or ruse to convert the personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the formality of the sale, so that no capital gains tax would be leviable. In short, his contention was that the case falls fairly and squarely within the ratio of para 20 of the judgment of the Supreme Court in Kartikey V. Sarabhai's case. 9. We have heard the rival contentions. We have perused the voluminous paper books placed before us on behalf of the assessee. The firm came into existence on 26-10-1979. On 11-12-1979, a letter was addressed to the Additional Collector and Competent Authority, Urban Land Ceiling, Greater Bombay, vide page 51 of the paper book, and on 28-12-1979, vide page 52 of the paper book, the said clearance from the Urban Land Ceiling was granted for redevelopment of the said property as commercial and residential one. The application for passing the plans was also made to the Bombay Municipal Corporation and on 18-12-1980, the municipal corporation required certain particulars to be supplied, vide pages 54-55 of the paper book, and vide pages 56-57, by letter dated 19-5-1980, the plans were disapproved with certain observations. The contention of the assessee was that this was really an approval and not disapproval because what this letter meant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owners of the land to the other party who intends to develop it and make money thereby. In a normal case, when business is carried on for some years or so, differences may arise which may require one party or the other to take over the business, but in a case like this, when very little work has been done and the firm is dissolved, the obvious conclusion would be that the whole exercise of forming a firm and then dissolving it was nothing but a device or a ruse and, in fact, there was no genuine firm in existence. The assessees who owned the lands had no experience of developing lands or the properties, while the other group, who joined the firm, were well known builders and land developers. Obviously, the other group was interested in getting hold of this land in order to develop it, while the conduct of the assessees shows that they were interested in disposing of the lands and making money thereby. It appears, therefore, that this partnership firm was nothing but a camouflage, for the real intention was to transfer the lands by the assessees and to escape payment of capital gains tax the firm was formed. It is immaterial that the firm was granted registration because the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
