TaxTMI 
TaxTMI 
1986 (10) TMI 94
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....paid off their capital amount and also some amount for not claiming any further interest in the assets of the firm. On the same day Mr. Narain M. Punjabi who was also the partner in the assessee-firm entered into an agreement for bringing in the assets of the firm New Tej Talkies taken over by him as assets of the present assessee-firm. The claim of the assessee was the total value of the assets was to the tune of Rs. 3,40,958 on which depreciation was allowable in view of the fact that the assets so taken over had encumbrances in the shape of arrears of lease money payable to Rajasthan Government to the tune of Rs. 1,76,958, liability owing to exhibitors Rs. 39,000 and a sum of Rs. 1,25,000 payable/creditable to the account of Mr. Narain M....
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....ual cost to the earlier firm less depreciation allowed to that firm. The written down value on which depreciation was allowed ultimately was Rs. 76,931. 4. Aggrieved, the assessee preferred appeal to the Commissioner (Appeals). The Commissioner (Appeals) in paragraph 1 had reproduced the observation of the Tribunal when the matter first travelled to the Tribunal : " We have carefully considered the rival submissions. Shri Saxena has not controverted the fact that the finding by the Commissioner (Appeals) that a new firm was constituted to which the assets of the old dissolved firm were transferred was subsequently constituted was factually incorrect. In our opinion, a wrong of fact has vitiated the order of the Commissioner (Appeals). She....
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....in both the firms but in view of the fact he had paid off the other partners and brought in the assets to the new firm, the transaction is a genuine one resulting in acquisition of the assets at a higher value thereby the farm is entitled to depreciation at the value brought in by Shri Narain M. Punjabi. 5. Aggrieved by the finding of the Commissioner (Appeals) the department has come in appeal before us and the main stress before us was that section 43 read with Explanation 3 clearly demolishes the claim of the assessee that this is only a device with a view to reduce the income-tax liability. On the other hand for the assessee reliance was placed on the orders of the Commissioner (Appeals) stating that the entire submissions of the asses....
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.... 47(ii) of the Act the Legislatures have provided that the distribution of assets amongst the partners as a consequence of dissolution of the firm would not be treated as a transfer. Therefore, the claim of the assessee that since the other partners were settled at a higher value than what was in their capital account before the revaluation of the assets resulted in increase in the cost in his hands is not an acceptable proposition and even on logic it is clearly an unacceptable proposition. The fallacy in the argument is also brought out by the fact that on dissolution there is no sale by some partners to another partner but only adjustment of each others interest in the firm's assets amongst the partners. If it is to be treated as a sale ....
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....al cost means the actual cost of the asset to the assessee. We have already observed above that the claim of the assessee that the cost has enhanced is pulpably wrong. Even considering the Supreme Court decision in the case of Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 recently concluded by their Lordships of the Supreme Court. We find that our view on the subject as regards the cost is on proper lines. Their Lordships had observed that the issue of the assets being valued by credit to the partner's capital account when the asset is brought in by that partner. Their Lordships observed that : " ...The credit entry made in the partner's capital account in the books of the partnership firm does not represent the true value of the considera....