Registered firm taxed on capital gains as a separate assessee under the Income-tax Act, 1961.

A registered firm, though not a company, was held liable to tax on capital gains where such gains formed part of its total income under section 114 of the Income-tax Act, 1961. The court treated the firm as a separate assessable entity distinct from its partners, and held that the possibility of taxing partners on their shares did not exclude the firm from the statutory charge. The capital gain realised by the firm on sale of its capital asset therefore remained exigible to tax, and the issue was answered against the assessee and in favour of the revenue.

---

---

Issues: Whether a registered firm, not being a company, is liable to pay tax on capital gains under section 114 of the Income-tax Act, 1961.

Analysis: Section 114 applied to an assessee not being a company whose total income included income chargeable under the head capital gains. A registered firm is not a company within section 2(17) and, for assessment purposes, is treated as a separate entity distinct from its partners. The fact that partners may also be taxed on their respective shares did not justify excluding the firm from the statutory charge. The capital gain derived by the firm on sale of a capital asset held by it remained exigible to tax under the Act.

Conclusion: The registered firm was liable to pay tax on capital gains under section 114 of the Income-tax Act, 1961, and the question was answered against the assessee and in favour of the revenue.

Ratio Decidendi: A registered firm, being an assessee distinct from its partners and not a company, falls within the charge of section 114 of the Income-tax Act, 1961 on capital gains included in its total income.

---