1998 (2) TMI 23

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....d in the circumstances of the case, the Tribunal was right in holding that in computing the capital gains arising to the assessee by sale of machinery in question the cost of acquisition should be the revalued amount in the hands of the new firm, viz., Rs. 8 lakhs, and not the original cost in the hands of the predecessor-firm, viz., Rs. 10,68,017 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the disallowance of advertisement expenditure under section 37(3A) of the Income-tax Act ?" The question referred at the instance of the Revenue is : "Whether, on the facts and in the circumstances of' the case, the Appellate Tribunal was right in holding that the capital gain on the sale....

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.... asset as a consequence of a dissolution of another firm of which the assessee was a partner. The assets were received by the partners as individuals, who thereafter made that asset the asset of the new partnership firm constituted under the deed dated June 16, 1977. One of the items that was thus brought into the new firm was a bottling machine of German origin, which was shown in the assessee's books of account at the revalued figure of Rs. 8 lakhs, although that machine had been acquired by the firm in which the partners of the assessee had been partners at a cost of Rs. 10,68,017. The dissolved firm, at the time of dissolution of the firm had been allowed depreciation on the machine, and the written down value of the bottling machine wa....

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....issolution of the old firm. Section 50 would only apply to the cases where the "assessee" had obtained the depreciation. Having regard to the statutory provision, namely, section 50 of the Act, the answer to the question referred at the instance of the Revenue must be in the affirmative. As regards the related question raised by the assessee, the answer to that question also has to be in the affirmative. The Tribunal was right in holding that section 48 of the Act is to be applied and in rejecting the assessee's contention under section 49(1)(iii)(b) of the Act. The facts set out above clearly show that the assessee-firm did not receive the asset at the dissolution of the old firm but it had been received by the erstwhile partners of ....