1986 (9) TMI 13

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....operty ceased to be a capital asset at the time when it became the property of the firm ? 2. Whether, on the facts and in the circumstances of the case, the conclusion drawn by the Appellate Tribunal that the property ceased to be capital asset and became the stock-in-trade of the co-owners is supported by any relevant and valid material and whether such conclusion of the Appellate Tribunal is not perverse ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in stating that the excess contribution over and above Rs. 6,00,000 in terms of value allowed to be withdrawn does not in any way suggest that there has been a sale ? 4. Whether, on the facts and in the circumstances of the....

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....e and her two sons throwing the property in to the partnership stock, their capital accounts were credited with a sum of Rs. 8,00,000 in agreed shares. The question that arose for consideration in the income-tax assessments was whether the assessee, as the co-owner of the property, was liable to be taxed on the difference between the cost of the property and the consideration credited to the assessee's capital account in the books of the partnership firm. A contention was urged before the Revenue that the property was converted into a business asset (stock-in-trade) prior to throwing the same into the partnership stock and consequently what was thrown into the partnership stock was stock-in-trade and not a capital asset. The assessee als....

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....lier point of time. Once it is held that the capital asset was thrown into the partnership stock pursuant to the partnership agreement dated July 16, 1979, there can be little dispute that the decision of the Supreme Court in Sunil Siddharthbhai v CIT[1985] 156 ITR 509 becomes applicable. In view of that decision, it must be held that there is a transfer within the meaning of section 2(47) of the Income-tax Act when the partners unilaterally threw the asset into the partnership stock. But then, the Supreme Court observed that the claim for levy of tax on the capital gains cannot be sustained. We may quote the following observations of the Supreme Court (p. 522): " When his personal asset merges into the capital of the partnership firm....