https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=456705 https://www.taxtmi.com/caselaws?id=456705 Capital gains on sale of hospital land and building - taxable as short-term capital gains in the hands of the appellant-firm or in the hands of the two partners - determination of real ownership - immovable property is introduced by the partners towards their capital contribution - CIT(A) held that the capital gains on sale of hospital land and building was taxable as short-term capital gains in the hands of the appellant-firm - HELD THAT:- We find that the identical issue has come for the consideration before the Hon ble High Court of Allahabad in the case of K.D. Pandey [ 1977 (4) TMI 35 - ALLAHABAD HIGH COURT] wherein held that the partner can bring his immovable property into the stock or capital of the firm otherwise than by means of a registered instrument of conveyance. Tribunal was not justified in holding that the business assets consisting of the Grand Hotel could be transferred to the partnership only by a registered deed and that in the absence of such deed the building remained the individual property of partner. Tribunal was not justified in holding that the entire value of the building was assessable in the hands of the assessee, individual. We, accordingly, confirm the order of the learned CIT(A) on this issue and ground Nos. 1 and 2 are dismissed. Benefit of sec 54EC - There is no dispute on the legal position that the investment made by two partners on their individual names in the notified RECL bonds is otherwise eligible investment for getting the exemption from the taxable capital gain u/s 54EC of the Act as applicable to asst. yr. 2008-09. As per facts on record, the assessee-firm has been dissolved on 2nd April, 2008 and before the dissolution the professional assets i.e. hospital building and land were sold out. Admittedly the assessee-firm has claimed the depreciation on the hospital building and hence, s. 50 is applicable. In terms of s. 50 whatever capital gain is worked out on the depreciable asset then the same is treated as short-term capital gain. Whether the assessee-firm can claim the benefit of sec 54EC which is specified for the benefit of long-term capital gain? - This issue is decided in favour of the assessee by case of CIT vs. ACE Builders (P) Ltd. [ 2005 (3) TMI 36 - BOMBAY HIGH COURT] We, accordingly, hold that even though the assessee-firm has claimed the depreciation on the hospital building but benefit of s. 54EC can be given following the legal principles laid down (supra). We, direct the AO to give the benefit of s. 54EC to the assessee-firm subject to ceiling of Rs. 50 lacs as per proviso to s. 54EC of the Act. In the result, ground No. 4 is allowed. Addition made by the AO, on a protective basis, towards long-term capital gain on account of the assessee s 50 per cent share in sale of land and building - It was the contention of both the assessees that the hospital building and land which were otherwise the properties of the firm were claimed as having the individual ownership of those two partners and accordingly, both the assessees (partners) declared the long-term capital gain in their individual returns and also claimed the benefit by making the investment in the notified bonds under s. 54EC and also s. 54 of the Act. While completing the assessments of these two partners, the AO made the addition of capital gain on protective basis. CIT(A) deleted the addition as he upheld the addition in the hands of the firm on substantive basis. We have held that the capital gain is taxable in the hands of the firm upholding the order of the learned CIT(A) on substantive basis. Hence, the Revenue s appeals become infructuous and do not survive and hence, both the appeals of the Revenue are dismissed. Case-Laws Income Tax Fri, 30 Jan 2015 00:00:00 +0530