Individuals transferring capital assets to partnership firm - levy of capital gains.

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....se assets which is mostly far in excess of the cost of acquisition of the assets in the hands of the individuals. The question whether capital gains tax could be levied on the individual partner in such cases was under consideration of the board for quite sometime. The Ministry of law have also been consulted in the matter. 2. Section 45 of the I.T.Act, 1961 provides inter-alia that any profits o....

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....uld appear that any profits or gains arising from the transfer of a capital asset shall be chargeable to tax under the head capital gains such transfer would also include the extinguishment of any rights in such assets. 5.In the case of CIT Vs.sarabhai which dealt with a similar question relating to the contribution in the form of shares towards capital of a partnership firm the following tests w....

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....gh court examined the definition of the term transfer as appearing in sec.2(47) and held that when a partner brings his own asset into the firm there is an extinguishment of his exclusive right over the property and therefore there is transfer within the meaning of sec.2(47). 6. As to the second question referred to in para 3 above namely whether there is consideration for such a transfer it may ....