Retiring partner's payment not a capital asset for tax purposes. Appeals dismissed.

The Third Member, in a detailed order dated 10.01.2019, determined that the money equivalent to the enhanced portion of the asset revalued does not constitute a capital asset for tax purposes. Additionally, it was held that there is no transfer of a capital asset on dissolution of a firm or "otherwise" when the partnership firm pays the money equivalent to the retiring partner. Consequently, both the Revenue's and the Assessee's appeals were dismissed on 3rd April 2019.

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Issues:
1. Whether the money equivalent to the enhanced portion of the asset revalued constitutes a capital asset for the purpose of section 45(4) r.w.s. 2(14) of the Income Tax Act.
2. Whether there is a transfer of capital asset on dissolution of a firm or "otherwise" within the meaning of section 45(4) r.w.s. 2(14) when the money equivalent is paid by the partnership firm to the retiring partner.

Detailed Analysis:
Issue 1: The first issue revolves around determining if the money equivalent to the enhanced portion of the asset revalued constitutes a capital asset for tax purposes. The Judicial Member and the Accountant Member had differing views on this matter, leading to a reference to the Third Member. The Hon'ble Third Member, in a detailed order dated 10.01.2019, answered this question in the negative and in favor of the assessee. The Third Member's decision aligned with the view of the Judicial Member, concluding that the money equivalent did not give rise to Capital Gain under section 45(4) r.w.s. Section 2(14) of the Income Tax Act.

Issue 2: The second issue pertains to whether there is a transfer of capital asset on dissolution of a firm or "otherwise" when the money equivalent is paid by the partnership firm to the retiring partner. The disagreement between the Judicial Member and the Accountant Member led to the reference to the Third Member. The Third Member's decision, as mentioned earlier, was against the Revenue, deciding that there was no transfer of capital asset in this scenario. Consequently, the grounds raised by the Revenue were decided against them, and both the appeals of the Revenue and the Assessee were dismissed.

Additional Points: The judgment also addressed other grounds raised by the parties. The challenge to the jurisdiction of the Assessing Officer in passing the Assessment Order was withdrawn by the assessee and dismissed as withdrawn. Furthermore, the ground raised on the reopening of the assessment proceedings under section 147 of the Act was rejected by concurrent orders for the reasons explained therein. Therefore, the grounds raised by the assessee in its appeals were also rejected. The final decision was pronounced in the open court on 3rd April 2019, with both the Revenue's and the Assessee's appeals being dismissed.

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