2015 (9) TMI 641

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....lue of the stock in trade of the appellant firm on the alleged dissolution of the appellant firm. 2. The learned Commissioner of Income Tax (Appeals) further erred in confirming the finding of the Assessing Officer that stock in trade was distributed amongst the partners on dissolution of the appellant firm and not withdrawn by the partners during the course of the running business of the appellant firm. 3. The learned Commissioner of Income Tax (Appeals) further erred in rejecting the legal position that the amended provision of Section 45(4) is applicable with effect from 01.04.1988 while the appellant firm was dissolved on 31.12.1981 by holding that the same is irrelevant. 4. The learned Commissioner of Income Tax (Appeals) furt....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e foregoing grounds, which are without prejudice to one another, at the time of hearing". 2. This is the second round of appeal, wherein, in the first round, the coordinate Bench of the ITAT had restored the matter to the file of the CIT(A) on technical ground. 3. The facts are that the assessee is a firm with 16 partners, belonging to 5 groups, who used to undertake development projects. Sometimes in 1982, disputes arose between the partners and the ongoing projects came to halt on 17.11.1982. The unsold stock of flats and land were distributed on 31.12.1982. The unsold stock of flats and land were taken over by a consortium of five new firms. The outgoing partners received monetary consideration at the revalued price, which came to ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....High Court in the earlier case of G R Ramachari & Co. vs Commissioner of Income-tax (41 ITR 142) has explained the legal provisions regarding the valuation of stock in trade on cessation of business. "The privilege of valuing the opening and closing stocks in a consistent manner is available only to continuing businesses and it cannot be adopted where the business comes to an end and the stock-in-trade has to be disposed of in order to determine the exact position of the business on the date of closure. The case of a firm which goes into liquidation forms a close parallel to the instant case. In such a case all the stock-in-trade and other assets of the business will have to be sold and their value realized. It cannot be controverted ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n which the closing stock had to be valued in the case of dissolved partnership in order to arrive at the true position of the profits of the partnership. Therefore, the valuation of the closing stock as adopted by the Tribunal was correct. Note: The case was decided in favour of the revenue. [Cases referred to -Chainrp Sampatram v CIT [1953] 24 ITR 481 (SC), Chouthmal Golapchand, in re AIR 1939 Cal. 559, CIT v Ahmedabad New Cotton Millls Co. Ltd. ILR 54 Bom. 213 and Sir Kikabhai Premchand vs CIT (1953) 24 ITR 506 (SC). The relevant observation is at page 146 and is reproduced as under: "It is obvious that when a business ceases, all its stock-in-trade has to be disposed of and brought to account in order to balance the books. T....