TaxTMI 
TaxTMI 
2018 (6) TMI 470
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....e of hearing. 3. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in not allowing Exemption u/s 54EC for Long Term Capital Gain amounting to Rs. 9,00,000/-. 4. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in not allowing unabsorbed Depreciation and Business loss brought forward from earlier years. 5. The appellant hereby prays that the additions made by the Income Tax Officer may kindly be deleted. 6. Appellant craves to add, alter, amend or modify any of the above grounds of appeal till the final disposal of appeal. The assessee had further raised before us, vide an application dated 22.02.2013 the following additional grounds of appeal : (i) The learned commissioner of income tax (Appeals) ought to have quashed the order of the A.O as the said order was against the principles of natural justice since no reasonable opportunity was given before passing the order and moreover the order was passed without considering the facts of the case in proper perspective. (ii) The learned commissioner of income tax (Appeals) failed to consider the holdin....
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....ur indulgence has been sought by the assessee for adjudication of certain issues involving question of law based on the facts available on record, therefore, in the backdrop of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. National Thermal Power Co. Ltd. (1998) 229 ITR 383 (SC), the same are admitted. 3. Briefly stated, the facts of the case are that the assessee had filed his return of income on 31.08.2005, declaring total loss at Rs. 1,61,829/-. Assessment under Sec. 143(3) of the act was completed on 11.07.2007, determining total loss at Rs. 1,51,829/-. Subsequently, proceedings under Sec. 263 were initiated by the CIT-19, Mumbai and the latter vide his order dated 25.11.2009 set aside the order of the A.O and directed him to finalize the assessment afresh. The A.O while framing the assessment in compliance to the directions of the CIT made the following additions/disallowances: (i) The A.O observed that the assessee was a partner in a registered partnership firm i.e. M/s Printpals. The said firm stood dissolved on the death of one of the two partners on 16.05.2003. The surviving partner, i.e the assessee, on the refusal of the legal heirs of the deceased p....
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....ld on 04.07.2004, therefore, the assessee had held the same only for a period of one year and two months. The CIT(A) on the basis of his aforesaid observations concluded that as the sale of the aforesaid assets resulted into STCG in the hands of the assessee, thus the A.O had rightly held that the assessee was not entitled for exemption under Sec. 54EC in respect of the said amount of STCG. The CIT(A) on the basis of his aforesaid deliberations dismissed the appeal. 4. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The Ld. A.R. taking us through the facts of the case submitted that the assessee was a partner in the firm i.e. M/s Printpals since 01.04.1974. It was submitted by the Ld. A.R. that the firm as on 04.05.1984 had acquired the ownership of an Industrial unit No. 307, 3rd Floor of Wadala Udyog Bhawan, 8, Naigaum Cross Road, Wadala, Bombay. The aforesaid partnership firm due to certain retirements/deaths of some of the partners was finally left with two partners in the year 2001. On 16.05.2003 one of the partner expired and the firm stood dissolved due to operation of law. As the legal heirs of the deceased partner decl....
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.... through the order passed by the CIT under Sec. 263 of the Act. The Ld. A.R. referring to the order passed by the A.O under Sec. 143(3) r.w.s. 263, submitted that the A.O had clearly traversed beyond the directions given by the CIT in his order under Sec. 263 of the Act. The Ld. A.R. taking us through the 'Agreement' dated 04.05.1984 on the basis of which the property under consideration was acquired by the firm i.e. M/s Printpals, submitted that as the assessee who at the relevant point of time was a partner of the firm, and as such a party to the said agreement, was thus duly entitled for claiming the period of holding of the said property from the date of the aforesaid agreement, viz. 04.05.1984. The Ld. A.R submitted that in the backdrop of the aforesaid facts, it could safely be concluded that the property which was held by the firm since 04.05.1984, was as a matter of fact held by the partners. In support of his aforesaid contention the ld. A.R relied on the judgment of High Court of Madras in the case of CIT Vs. M.K Chandrakanth & Ors (2002) 258 ITR 14 (Mad). It was further submitted by the Ld. A.R that as the partnership firm finally stood dissolved on 16.05.2003, therefore....
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....trial unit No. 307, 3rd Floor of Wadala Udyog Bhawan, 8, Naigaum Cross Road, Wadala, Bombay, which was acquired by the assessee on the dissolution of the firm on 16.05.2003 on the death of the other partner, was not to be construed from the said date, but rather from 04.05.1984 i.e. the date on which the said asset was acquired by the firm, viz. M/s Printpals in which the assessee at the relevant time was a partner. The assessee had tried to impress upon us that the date of holding of the aforesaid property in his hands was to be reckoned from 04.05.1984, as a result whereof on the sale of the same on 04.07.2004, it would clearly be in the nature of sale of a Long Term Capital asset by the assessee. 7. We have given a thoughtful consideration to the aforesaid contention advanced by the assessee and are unable to persuade ourselves to accept the same. We find that Explanation 1 of Sec. 2(42A) contemplates the period for which any capital asset is held by an assessee. We find from a perusal of the aforesaid statutory provision, that it is nowhere provided that where an individual assessee takes over the business of a firm in which he was a partner, the period of holding of the asset....
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....dissolved firm was no more to include the period of holding of such asset by the firm, can be appreciated in the backdrop of a corresponding omission of Sec. 47(ii) from the statute, vide the Finance Act, 1987 w.e.f 01.04.1988. Before the introduction of Sec. 45(4), there was cl. (ii) of s. 47, which provided that the distribution of capital assets on the dissolution of a firm, etc. was not to be regarded as "transfer". It was thus during the subsistence of Sec. 47(ii), as there would be no transfer of an asset on the dissolution of a firm, hence Sec. 2(42A) r.w Sec. 49(1)(iii)(b) contemplated that the period of holding of the asset in the hands of an erstwhile partner of a dissolved firm was to include the period for which the asset was held by the firm prior to dissolution. However, with the striking off of Sec. 47(ii) from the statute by the legislature, and making available Sec. 45(4) on the statute, which contemplates that distribution of assets on dissolution of a firm is to be construed as a 'transfer', the applicability of Sec. 2(42A) r.w Sec. 49(1)(iii)(b) having been rendered as unworkable, was restricted by the legislature till A.Y 1987-88. Thus, to be brief and explicit....
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.... by bequest, its original cost to the assessee would be the real value of the machinery at the time when the assessee had acquired it, less the amount of expenditure necessary for completing the title. We are afraid that the said judgment also having been rendered in context of an issue not relevant to the case of the assessee before us, thus, would not assist its case. The additional grounds of appeal No. (ii) & (iii) raised by the assessee vide its application dated 22.02.2013 are dismissed in terms of our aforesaid observations. 7. We shall now advert to the contentions raised by the assessee before us on the basis of the original grounds of appeal. The Ld. A.R. had during the course of hearing of the appeal submitted that ground of appeal No. 4 was not being pressed. We thus dismiss the Ground of appeal No. 4 as not pressed. 8. We shall now advert to the ground of appeal No. 2 raised by the assessee before us. It is claimed by the assessee that the CIT(A) had upheld the additions made by the A.O without considering the facts of the case and ignoring the various documents produced and explanation offered by the assessee during the course of hearing of the appeal. However, the ....
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....at even if it was assumed that a transfer of the capital asset took place on the dissolution of the firm on 16.05.2003, in that case the capital gain tax liability on such transfer would arise in the hands of the firm, while for the continuing partner, i.e. the assessee would only be liable for payment of capital gain tax to the extent of the difference between the Fair Market Value of the property under Sec. 50C on 16.05.2003 and that on the date of actual sale i.e. 03.07.2004. Per contra, the Ld. D.R. relied on the order of the CIT(A). 11. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We may herein observe, that as held by us hereinabove while disposing off the additional ground of appeal No. 2, that in the absence of a specific provision to the effect that the period of holding of an asset acquired by a continuing partner on the dissolution of the firm occasioned by the death of a partner, is to be reckoned from the date of acquisition of the said asset by the firm, which as observed by us hereinabove is a separate entity under the Income Tax Act, 1961, the claim of the assess....