2009 (6) TMI 120

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....emented only on January 10, 2000. (3) The Commissioner of Income-tax (Appeals) erred in law and facts in holding that the book entries made on June 23, 1998, is the actual date of distribution of assets. (4) The Commissioner of Income-tax (Appeals) erred in law and facts in not excluding the value of goodwill from the computation of capital gains as the same has not been transferred to the expelled partner." We heard Shri P. Balakrishnan, learned counsel appearing for the assessee and Shri C. Karthikeyan Nair learned Additional Commissioner of Income-tax appearing for the Revenue. The assessee is a partnership firm constituted under a partnership deed dated August 31, 1991. During the year under appeal, Shri P. Kunhunni, one of ....

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.... Commissioner of Income-tax (Appeals) examined the clauses of the original partnership deed dated August 31, 1991, and on examining clauses 18 and 19 of that partnership deed, the Commissioner of Income-tax (Appeals) found that the exit of Shri P. Kunhunni did not dissolve the firm. But the Commissioner of Income-tax (Appeals) on the basis of a clause reflected in the reconstituted deed dated June 24, 1998, held that the new partnership firm has been constituted after the dissolution of the former partnership firm. The clause referred to by the Commissioner of Income-tax (Appeals) reads as follow: "now this instrument of partnership witnesseth as follows: It is hereby agreed that the said parties have become partners among themselves ....

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....peals) has become an anti-climax. This turtle-turn is not justified in the present case. As per the clauses contained in the original partnership deed, the compulsory exit of Shri P. Kunhunni has not dissolved the firm. The accounts of Shri P. Kunhunni was determined on June 24, 1998. On the very next day, the new deed was executed and the remaining four partners continued to carry on the business without any break physically or operationally. The business of the firm continued without even a slight gap. The determination of the accounts of the continuing partners were made on June 23, 1998, on a technical/memorandum basis so as to facilitate the retirement allocation of assets and dues to the account of Shri P. Kunhunni. Once the firm i....