TaxTMI 
TaxTMI 
1982 (9) TMI 184
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 31st Oct 1976, the assessee claims to have decided to convert a part of the shares held by here as investment shares ionto trading assets. While doing so, the assessee revealed the shares in her own books of account with reference to the market value as on that date, viz. 31st October, 1976. The shares in Sudarshan Chemical Industries Pvt. Ltd. were valued at Rs.221 per share and thus the shares were valued by the assessee in her own books on 31st October 1976 for Rs. 1,54,258. Six days later, i.e., on the 6th Nov, 1976, she entered as a partner in the firm of M/s Laxmi Investment Centre, wherein she introduced the shares as her capital contribution valued at Rs. 1,54,258. The firm as well as the assessee had filed a declaration u/s 187 ('C') of the Companies Act regarding the transfer of the beneficial interest in the shares. 3. It was the assessee's case before the ITO in the assessment proceedings that no capital gains arose to her in the process of crediting the value of the shares to her account in the books of the firm, as according to her the shares were valued earlier at that price and at the fresh valuation the shares were brought in as a capital in the firm in which sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f right and it was simply a case of joint right instead of individual right and the contention of the ITO that this was a case of extinguishment of right was not correct. Since according to him there was neither "transfer" nor "consideration", there was no capital gains as propounded by the ITO. He allowed the assessee's appeal. 4. Revenue is in appeal against the order of the AAC holding that there was neither transfer nor consideration involved in this transaction. According to the revenue, the AAC has erred in holding both the issues in favour of the assessee and therefore, the AAC's order may be reversed and the ITO's order may be restored. On behalf of the revenue, the ld. Deptl. Rep. Has referred to the facts as stated earlier and submitted that the facts as stated earlier and submitted that when the assessee joined the partnership on 6th November 1976 and brought in the shares in Sudarshan Chemical Industries Pvt, Ltd. as capital in kind contributed to the firm, there was a "transfer" of an asset within the meaning of s. 2(47) of the IT Act. The assessee's rights in the shares were extinguished and the new owner of the shares was the firm in which she has joined as a partne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision in the case of Kartikey V. Sarabhai referred to above, Karnataka High Court decision in the case of M.A.J. Vasanaik, and Kerala High Court decision in the case of A. Abdul Rahim. As regards the case of CIT vs. Hind Construction Ltd. (1972) 83 ITR 211 (SC), the ld. Deptl. Rep. Pointed out that the Supreme Court was concerned with the interpretation of the IT Act of 1922 in that case wherein the word "transfer" did not have the same definition as under the IT Act of 1961. There they were concerned with the question whether handing over of the capital asset by the partner to a firm was a sale and they held that it was not. Likewise, he proceeded to distinguish the Madras High Court decisions in the cases of CIT vs. Janab N. Hyath Batsha sahib (1969) 72 ITR 528 (Mad), CIT vs. Sree Kaliswari Colour Match Works (1978) 112 ITR 346 (Mad) and CIT vs. Abdul Khader Motor & Lorry Service (1978) 112 ITR 360 (Mad). He also pointed out that even the Supreme decision in the cae of CIT vs. T.N. Arvinda Reddy (1979) 12 CTR (SC) 423 : (1979) 120 ITR 46 (SC) had no application. 6. On behalf of the assessee, the ld. Rep. for the assessee has referred to the facts of the case detailed above an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he case of CIT vs.Janab N. Hyath Batcha Sahib (1969) 72 ITR 528 (Mad) and Gujarat High Court decision in the case of Mohanbhai Pamabhai (1973) 91 ITR 393 (Guj). 7. On behalf of revenue, the ld. Deptl. Rep. Points out that the grounds taken by the revenue are wide enough to cover all the aspects of the case and to challenge the action of the AAC in vacating the addition on account of capital gains on assessment. Further he proceeds to distinguish each of the cases relied on by the assessee in support of his case. 8. We have carefully considered the facts and circumstances of the case and the submissions on either side. Bare facts necessary for deciding this appeal are that the assessee who never traded earlier or later in shares purchased some shares in the Sudarshan Chemical Industries Pvt. Ltd. On 30th June 1970. Her accounting period was year ending 31st Oct. On 31st Oct, 1976 against purchase price of the shares at Rs.2.664 per share she revalued the shares in her books of account at Rs. 220 per share. A firm was brought into existence by a deed of partnership dt. 6th November, 1971 wherein she joined as a partner and contributed the shares by way of capital in kind. It was th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ries (1966) 61 ITR 241 (Guj) and R.M. Amin (1977) 106 ITR 368 (SC). These cases are clearly distinguishable on facts. These are not cases wherein a partner brought in some capital in kind to a firm. These are cases of transfer of assets arising under totally different circumstances. Therefore, these cases have no application whatsoever. About the case of Janab N. Hyath Batcha Sahib that case is also dealing with sale, so is the decision in the case of Hind Construction Ltd. The question was whether it was a sale. We are not dealing here with the question of transfer resulting from the extinguishment of the rights of the assessee in the shares and our answer to the question is in emphatic affirmative. 11. As to the question of consideration received, namely, whether the assessee received any consideration on transfer of these shares to the firm, we find that the partner has a right to share the profits of the firm. Further she has a right to share the surplus, if any, on the realisation of the assets of the firm on dissolution of the firm. This is a very valuable consideration and to our mind it is for this consideration that the assessee agreed to transfer her shares to the firm. ....