TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 686
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....xisted on the date of transfer in the case of Gulmarg Hut when the assessee had duly reflected a value of Rs.61,834/- as book value of the Hut which had been transferred to the partners." 3. The brief facts of the case are that the AO found from the Schedule of fixed asset enclosed with the return of income that the assessee has distributed certain fixed assets to its partners during the year as per the following details:- S.No. Fixed assets Value as on 01.04.2005 1. Residential House Rs.18,00,000/- 2. Gulmarg Hut Rs.61,834/- 3. Show Room site at Gulab Bagh, Srinagar Rs.40,036/- 4. Land at Gulmarg Rs.35,304/- 5. Shop at Bund Rs.1,65,000/- Total Rs.21,02,174/- 3.1. He further noticed that the entire value of the fixed assets as on 01.04.2005 has been equally distributed amongst all the four partners there by crediting the current capital accounts of the assessee by an amount of Rs.5,25,543/- in each case. The assessee was asked to furnish complete details regarding the address and locations of the assets and the same are as under: S.No. Name and address of property 1. Residential House, Kathi Darwaza, Srinagar. 2. Gulmarg Hut, Ali Shah, Gulmarg, Kashmir 3. Show R....
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...., Adv. From the reply, following description of the property emerges: a) Residential House: The house and the land is owned by the partners of the assessee firm and was subsequently transferred into the firm. b) Shop at Bund: The assessee had the possession as tenant. The amount reflected against it was the amount paid to the M/s. Chinar Commercial Complex, as per copies of receipt enclosed, in Jan., 2003 against premium for reconstruction and renovation. It is true that the same could have been taken as revenue expens during the relevant assessment year. c) Showroom site at Gulab Bagh: Land purchased by the partners of the assessee firm and subsequently transferred to the firm. d) Land at Gulmarg: Taken on lease by one of the partners in Oct. 1979 and subsequently transferred to the firm. Already a continuous period of 26 years passed as on 01.04.05. Since 12 years have passed therefore deemed owner in view of section 269UA(f) of the I.T. Act, 1961. d) Hut at Gulmarg: Construction on leased land. Therefore, the partners of the assessee firm are either owners or deemed owners of all the properties mentioned above, except the shop at Bund, which were transferred earlier t....
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....herwise" has to partake the nature of dissolution or deemed dissolution then the very object of the amendment could be defeated by the partners by distributing the assets amongst themselves. Prior to the Finance Act, 1987, in the case of a partnership, it was considered that the assets are of the partners and not of the partnership firm. Therefore, if a partner received the assets from the firm, it was not considered a transfer. Another devise resorted to by an assessee was to convert an asset held independently as an asset of the firm in which the individual was a partner. Parliament with avowed object of blocking this escape route for avoiding capital gains tax, by the Finance Act, 1987, has introduced sub section 3 to section 45. The effect of this was that the profit and gains arising from the transfer of a capital asset by a partner to a firm are chargeable as the partners income of the previous year in which the transfer took place. Similarly, the conversion of the partnership asset into individual asset on dissolution or otherwise also formed the part of the same scheme of tax avoidance. Therefore, if the object of introduction of section 45(3) and 45(4) is seen and the mis....
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....ontinued till its assets were sold. The case is entirely distinguishable hence of no help. I find myself in agreement with the AO that the word used otherwise "in section 45(4) of I.T. Act brings the case into its ambit. In view of this, the ground No.1(a) is dismissed. 4.1. Ground No.(i)(b) is specific to various assets which are treated as transferred in the assessment order. In view of submissions of assessee and the facts as emerged from the remand report in respect of Gulmarg Hut, it comes out that there was no asset to be transferred. It is further supported from the remand report that the construction work was being carried out by one M/s. Manzoor Construction to whom an advance was also made on 31.03.2006 and such fact was reflected in the balance sheet of this assessment year. In view of this no transfer has been affected and no capital gains could be charged in respect of Gulmarg Hut. 4.2. The position of Gulmarg land/hut is at same footing as the shop at Gulab Bagh which was on rent. The said land is also on lease from the Development Authority. The facts in respect of this property are claimed to those of shop at bund in respect of which no addition has been made by ....
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.... market value of the asset on Ist April, 1981." In view of the above, it is held that the option as per section 55(2)(b) of the I.T. Act is to be made available to assessee. 4.4. After exercising the option one more issue needs to be discussed i.e. exclusion or otherwise of land from the value of residence at Saida Kadal. I agree with the AO that in the case land cannot be segregated from the residence and valuation of both to go together.The contention of assessee is not acceptable in view of detailed and reasoned narration given in the assessment order. Another objection of assessee is that if value of and was included while arriving at fair market value the year 2005-06 then cost of land should also be included in cost of acquisition. This proposition is fair and acceptable. In view of the above capital gain are computed as under: (i) Residence at Saida Kadal, Srinagar FMV of building as taken by AO Rs.1,30,00,000/- Less: Indexed cost of building Cost of building 18,00,000 Cost of Land 6,40,000(As valued by AC Revenue) 24,40,000 Index cost 2440000 x 497/100 Rs.1,21,26,800/- Capital gain Rs. 8,43,200/- (ii) Show Room a....
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....hey require. Therefore, it is a clear cut case of transfer of capital assets by way of distribution which is covered by the word "otherwise" contained in section 45(4) of the Act. 7.1. As regards the value of Rs.18,00,000/- in respect of residential house, the assessee had contended that the said value pertains only to the building and not to the land. We are convinced with the arguments of the Ld. DR and the remand report of the AO that the residential house can not be separate between land & building . The assessee had never objected to the value taken by the AO during assessment proceedings even after show cause was given to the assessee. The assessee did not exercise option for the fair market value as on 01.04.1981 or the cost of residential house as on 01.04.1981 during assessment proceedings inspite of the fact option given vide show cause letter dated 26.12.2008. Therefore, the value taken by the AO at Rs.18,00,000/- is correct. 7.2. As regards the cost of land amounting to Rs.40,036/- and that of show-room constructed before 01.04.1981, which was written off by debit to the partners capital account. The A.O. has given findings in paras 10 & 11 and we do not find a....