1999 (9) TMI 42 - HC - Income Tax

Capital gains on machinery received by retiring partner: firm's holding period counts, treated as long-term; relief upheld

On whether capital gains arising on receipt of machinery by a partner on retirement from a firm were long-term, the HC upheld the Tribunal's view that the ... Long-term capital gains - machinery received by a partner from a firm on retirement - Appeal To Appellate Tribunal - Powers Of Tribunal - HELD THAT:- The Tribunal in this case has held in the light of the undisputed facts before it, which facts are available in the record, the capital gain that had arisen was a long-term capital gain as the firm had held the assets for over sixty months and that period should be taken into account for determining the period for which the assessee had owned the assets. The reasoning of the Tribunal is in accordance with the decision of this court, to which we have referred earlier. The question referred to us therefore is answered in favour of the assessee and against the Revenue. The facts required for examining the claim were before the Tribunal. The absence of an appeal by the assessee against the order of the Commissioner, who had remanded the matter to the Income-tax Officer, did not in any way preclude the Tribunal from holding that the capital gain in the instant case was a long-term capital gain. The ends of justice justify the Tribunal to grant the relief to the assessee even in the absence of a specific appeal or cross-appeal, if the facts available on record permit the grant of such relief and such relief had in fact been sought by the assessee before the assessing authority. Issues involved: 1. Determination of capital gains on machinery received by a partner from a firm on retirement.2. Admissibility of assessee's contention on capital gains without filing an appeal.Issue 1: Determination of capital gains on machinery received by a partner from a firm on retirement The High Court considered whether the Appellate Tribunal was correct in holding that the assessee, as a partner in a firm, was a part owner of the machinery and should be treated as having held the property from her membership in the firm. The Tribunal concluded that the capital gains arising from the machinery received by the assessee on retirement and subsequently sold should be treated as long-term capital gains. The Court referred to a previous case where it was established that partners in a firm are considered owners of the property held by the firm, and if the property is transferred to a partner after a certain period, it cannot be regarded as a short-term capital asset. The Court upheld the Tribunal's decision, stating that the capital gain in this case was indeed a long-term capital gain due to the firm holding the assets for over sixty months.Issue 2: Admissibility of assessee's contention on capital gains without filing an appeal The second issue revolved around whether the Tribunal was correct in admitting the assessee's contention on capital gains as long-term without the assessee filing an appeal against the Appellate Assistant Commissioner's order. The Court ruled in favor of the assessee, stating that the Tribunal was justified in granting relief to the assessee even without a specific appeal or cross-appeal. The Court emphasized that the Tribunal had the authority to consider the claim made by the assessee before the Income-tax Officer, especially when the necessary facts were available on record. The absence of an appeal by the assessee against the Commissioner's order did not prevent the Tribunal from determining that the capital gain was a long-term capital gain. The Court held that the ends of justice supported the Tribunal's decision to grant relief to the assessee in such circumstances.