2002 (12) TMI 61 - HC - Income Tax

Capital contribution treated as sum received on retirement from partnership not eligible as capital loss

Siddharth Media Holdings Pvt. Ltd. Versus Deputy Commissioner of Income Tax.

The High Court affirmed the Tribunal's decision that the assessee was not entitled to claim alleged losses as capital losses upon retirement from the ... The assessee is a partner in a firm by name Express Traders and it transferred its interest in the firm to another company for a consideration of Rs. 30,000. The assessee during the course of assessment proceedings for the assessment year 1982-83 claimed short-term capital loss and long-term capital lossi - It is impermissible for the assessee to claim that the losses which were already adjusted should once again be considered in its individual assessment as a capital loss, viz., either short-term or long-term capital. Moreover, the alleged losses never arose as there was no transfer of any capital and hence the assessee is ineligible to claim the same as capital loss. We find that the view of the Tribunal that the assessee has not suffered any loss when it received the sum of Rs. 30,000 at the time of retirement is perfectly in order and we do not find any question of law, much less a substantial question of law, warranting interference by us in the order of the Tribunal. Issues:Claim of short-term and long-term capital loss by the assessee upon retirement from a partnership firm.Analysis:The assessee, a partner in a firm, transferred its interest to another company for Rs. 30,000 and claimed short-term and long-term capital losses during assessment for the year 1982-83. The Assessing Officer denied the claim, stating the capital and consideration were equal. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal upheld this decision, emphasizing the absence of any capital loss to the assessee. The Tribunal noted the sum received equaled the capital contributed, rejecting the claim for deduction of losses. The High Court concurred, stating no partner can claim firm property, and the sum received absolved the assessee of further loss liability. The Delhi High Court precedent cited by the appellant was distinguished, as it involved a different scenario of excess amount receipt, unlike the present case where assets and liabilities were accounted for before determining the sum payable to the assessee. The Tribunal's finding that the assessee did not suffer any loss upon receiving Rs. 30,000 at retirement was upheld, with no legal question warranting interference.In conclusion, the High Court dismissed the appeal at the admission stage, affirming the Tribunal's decision that the assessee was not entitled to claim the alleged losses as capital losses upon retirement from the partnership firm.