TaxTMI 
TaxTMI 
2016 (3) TMI 1128
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing income of Rs. 39,12,761/-. The case was taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee firm constituted by Deed of Partnership on 01.01.2001 underwent a 50% change in constitution vide Deed of Retirement-cum-Admission dated 01.09.2008 whereby two partners holding 50% of the share of profit, i.e. (i) Smt. Vijaya Tilokchand Talera and (ii) Shri Manish Tilokchand Talera retired from the firm and were replaced by Shri Ashish Ashok Sakhala and Smt. Shweta Pritish Sakhala with each holding 25% of the profits and loss in the firm. In view of this change in constitution, the assessee firm, in accordance with the regulations of MIDC, since it held leasehold rights in a fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act and accordingly completed the assessment under section 143(3) of the Act vide order dated 26.12.2002, wherein the income of the assessee was determined at Rs. 76,91,011/-. 3. On appeal, the learned CIT(A) held that the provisions of section 45(4) of the Act are not applicable for A.Y. 2010-11, the year under consideration, as there was no retirement of any partner during this period. Regarding the assessment/addition of Rs. 37,80,250/- under section 45(4) of the Act, on account of transfer of leasehold rights by the assessee firm to the retiring partners, observing that the leasehold rights in this said property continued to be vested with the assessee firm even after change in its constitution and that no consideration of any kind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts that the Deed of Assignment was registered on 1711212009 and the value adopted by the Authority was Rs. 75,56,000/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's appeal ignoring the facts that the change in constitution for firm was considered as relinquishment of rights by one partner in favour of another and such relinquishment was considered as transfer of capital asset as interpreted in the case of CIT v/s. A.N. Naik Associates (2004)136 Taxman 107 (Bom). The appellant prays that the order of the CIT(A) be set aside and matter be decided according to law. The appellant craves leave to amend or alter any ground or add new ground which may be nece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant is correct. The provisions of Section 45(4) are not applicable for A.Y. 2010- 11 as there is no retirement of any partner during this period. 6.1. Regarding addition of Rs. 37,78,250 made u/s 45(4) of the I.T. Act on account of transfer of lease rights by the appellant firm to its retiring partners, appellant firm has argued that there was no transfer of any capital asset from the firm to its retiring partners as the capital asset i.e; leasehold rights were still with the appellant firm even after the change in constitution of firm and the firm transferred.. the outstanding capital balance standing to the credit of retiring partners to their unsecured loan accounts on retirement. No consideration of any kind or in any form was gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt of that are filed. No compensation is paid to the retiring partners. Copy of the balance was filed. No partner had any individual lease rights in the land. Even after the change in constitution the lease rights are still with the appellant firm i.e. Vaibhav Industries. Value of Lease rights continue the same as on 01.04.2008 and 01.04.2009. c) The contention of the assessee is correct that the Income taxable under the provisions of Section 45(4) should be taxable under the head 'Income from Capital Gains' and indexed cost of acquisition of capital asset should be deducted from the full value of consideration computed u/s 48 for determining income, chargeable under the head 'Income from Capital Gains' and cannot be ta....