TaxTMI 
TaxTMI 
2018 (7) TMI 1409
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....e sale was made by the owner of the property ; who happened to be a partner of the firm ?" There are also other questions of law raised with respect to violation of the principles of natural justice and the assessment on rent from audito rium being treated as income from house property. The learned senior counsel submits that the ground raised on violation of the principles of natural justice is on the valuation report of the property not having been supplied to the assessee by the Assessing Officer. The said question has been remanded in which a huge escalation of value has been made, which is now challenged in first appeal. The other question regarding assessment of income as house property is said to be on a negligible quantum which can be ignored. We hence decline to express our opinion on the said questions raised in the appeal. 2. It is the submission of the learned senior counsel that the petitioner, along with his family members, had formed a partnership firm; more in the nature of a family arrangement, the terms of which are seen from annexure-A. One of the partners, the first signatory in the document did not have money to contribute and hence offered a land and buildin....
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....cates that the partnership firm created by deed dated February 17, 1997 (annexure-A) was engaged in the business of letting out the auditorium as also gardening and nursery carried on in the premises of the auditorium. The firm created in 1997 was dissolved in the year 2007 not by a specific deed but by volition of the parties. The property alleged to be all along belonging to one of the partners was sold by annexure B on December 20, 2006. It is the release of such properties to one of the partners which has resulted in the assessment for short-term capital gains; employing the provisions of section 45(4) of the Act. 7. The managing partner, who is the appellant herein appeared before the Assessing Officer. On the issue of capital gains, it was contended that the land and building belonged to Moosakutty and when it was brought into the partnership there was paid an amount of Rs. 6 lakhs to Moosakutty. Subsequently when the partners wanted to dissolve the partnership and Moosakutty expressed a desire to sell the property, the same was given back to Moosakutty on payment of Rs. 6 lakhs to the partnership. Moosakutty sold the property and later the firm was dissolved and the assets ....
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.... capital assets on the dissolution of a firm would be regarded as transfer. The effect then was that the profits or gains arising from the transfer of the capital assets by a firm to a partner on dissolution or otherwise would be chargeable as the firm's income in the previous year in which the transfer took place and for the purpose of computation of capital gains, the fair market value of the asset on the date of transfer was deemed to be the full value of the consideration received or accruing as a result of the transfer. 10. The learned senior counsel would argue that there was in fact no partnership and it was only a family arrangement, the like of which have been considered in Maturi Pullaiah and Kale (supra). Having gone through both the aforesaid decisions, we cannot comprehend how the dictum laid down would apply in the present case. Both the said decisions are with respect to the requirement of registration of a family settlement or arrangement. It was found that there need be no registration for an arrangement or settlement within a family, which issue was considered under the Hindu Law. We are unable to find any application to the dictum, in the instant case of a p....
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.... cannot be brought under the said provision. There was no contract which can be taken cognizance of for the purpose specified in section 53A and hence there would be no assessment of capital gains tax for the amounts, which remained a hypothetical income and not one which accrued in the hands of the assessee. Again, we are unable to place any support on the decision to decide this case. 13. In the present case, there is no relevant question raised of registration or non-registration. Admittedly, a partnership deed was entered into as per annexure A, which is not registered, which would not in any event change the character of the partnership and make it a family arrangement. The terms of the partnership is clearly seen from annexure A. There were six partners, one of whom was Moosakutty who owned the land. The capital of the firm comprised of Rs. 25 lakhs, as contributed by five other partners equally and the land and building required for the auditorium was contributed by the partner, Moosakutty. There is nothing seen from annexure A as to any money having been passed between the firm and Moosakutty for transfer of the property. The immovable property by annexure A became the pro....
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.... The clear terms in the partnership deed speaks otherwise, and we cannot permit the petitioner-assessee to detract from what has already been occasioned, i.e., the bringing of the land with or without the building into the common stock of the partnership. The sale effected admittedly was of the land and building. 16. It is also to be noticed that the partnership was dissolved only on December 31, 2006, that too by volition of the partners and not evidenced by any deed. Annexure B is the sale deed of December 20, 2006, which is a sale of the land and building by Moosakutty to a third party. Hence, the sale was made even prior to the dissolution of the partnership, as claimed by the parties. Hence, the property having been brought into the common stock of the firm, short-term capital gains was definitely assessable on its sale, when the partnership was subsisting. The fact that only Moosakutty executed the sale deed if at all creates a cloud on the title of the purchaser, which can be challenged only by the other partners. It could then be a collusive attempt to evade tax, specifically capital gains tax, as assessed. 17. Moosakutty, by no stretch can be said to have retained his ex....