TaxTMI 
TaxTMI 
2013 (8) TMI 1200
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....ions of law. The submissions made and evidence produced has arbitrarily been brushed aside. 2. That the ld. C.I.T.(Appeals) has erred both on facts and in law in upholding the disallowance of Rs. 1,20,816/- being the alleged prior period expenses. The ld. C.I.T.(Appeals) has failed to appreciate that the liability on account of lease rental paid to DDA on conversion of lease hold land into free hold land, having been actually paid during the year, the same was allowable U/S 43B of the Act. 3. That the ld C.I.T.(Appeals) has erred both on facts and in law in summarily upholding the assessment of alleged long term capital gains of Rs. 5,80,04,265/- u/s 45(4) of the Act, alleged arose on revaluation of certain assets at the time of induction of two new partners to the partnership. The detailed submissions made have arbitrarily been disregarded. 3.1 That the finding of the ld C.I.T.(A) that the case of the assessee gets covered under the "or otherwise" clause of the provisions of section 45(4), is based on misreading and misinterpretation of the relevant provisions and is thus wholly unsustainable. 3.2 That the ld C.I.T.(Appeals) has failed to appreciate that provisio....
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....hat all these debts were very old and outstanding since long in the accounts of the assessee firm. The bad debts are allowable u/s 36(1)(vii) of the Income-tax Act, 1961. Bad debts or part of the debts are allowable when these were revenue in nature. The nature of the debt was not doubted by the revenue. The only apprehension casted was that assessee has not carried out any effort to recover the amounts. These debts were in respect of business carried out by the assessee which also continued during the relevant previous year. These debts have been taken into account in computing the income of the assessee in those relevant years. The assessee also submitted that the ledger account of all these persons against whom the debt was outstanding. We find from the paper book that in the case of J.S. Shaan, the amount was outstanding since March 1999. Similarly, in the cases of Prakash Kour, U.P. Chemicals & Sales Corporation, K.K. Ghai, Ved Prakash Ralhan, J.B. Lal, Ved Prakash Malhotra, the amount was outstanding since 1998. As held by Hon'ble Supreme Court in the case of TRF Limited vs. CIT, cited supra, after the amendment of section 36(1)(vii) of the Income-tax Act, 1961 w.e.f. 01.....
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....the year of Rs. 3,70,892/-. 6. In the ground no. 2, the issue involved is dismissing the claim of Rs. 1,20,816/- treated as prior period expenses. The ld. AR submitted that the assessee was given leasehold land by DDA in 19787 and starting paying lease rent every year since 1983. The assessee was depositing lease rent on its own estimate basis. During the year, the assessee applied for conversion of leasehold land right to freehold. The DDA office worked out the total dues to the tune of Rs. 1,20,816/- which has been paid by the assessee during the year. This liability was actually quantified by the leasing authority - DDA in this year only. Therefore, it has been crystallized only during this year. Since it has been crystallized during the year the assessee has made the payment and made the claim. Therefore, the CIT (A) was not justified in confirming the same. 7. On the other hand, ld. DR relied on the orders of the authorities below. 8. We have heard both the sides on this issue. We have also perused the relevant papers in the paper book. The facts of the case show that this outstanding dues of lease amount has been worked out by the DDA during the year when th....
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....cited supra, relied on by the Assessing Officer rather supports the case of the assessee. In that case, the assets of the firm were transferred to the retiring partner and in that context, the Hon'ble High Court has held that it was a transfer of assets by the firm to a partner and as such, it falls within the meaning of distribution of assets "otherwise". The facts of assessee's case are different as no asset of the firm has been transferred to any of the partners. The firm continues to be the owner of the assets. The firm has just added two new partners who had bought the capital which has been credited in their capital account. He further submitted that the other judgments relied upon by the Assessing Officer is of Suvardhan vs. CIT - 287 ITR 404 (Kar.). The ld. AR submitted that the facts of this case are also different. Therefore, the ratio of that judgment is not applicable to the case of the assessee. In that case, the business of the firm after dissolution was taken over by one of the partners. Thus, there was a transfer of assets by a firm to a partner. In that view, the Hon'ble Court has held that there was transfer of assets by the firm. The ld. AR further submit....
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....rket value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer." Sub-sections (3) & (4) to section 45 of the Act applicable to the year under assessment were inserted in the statue by the Finance Act, 1987 w.e.f. 01.04.1988. Prior to that, transfer of asset by a firm to a partner was not liable to pay the taxes on transfer of assessee. The implication of this amendment is that when a firm transfers any asset to a partner then the same will be liable to "capital gain" on the fair market value on the date of transfer. This transfer can be at the time of the dissolution of the firm when the assets were transferred to the partners or this transfer can be "otherwise" also when a partner is allocated any asset of the firm while leaving the firm. Thus, there has to be a transfer of an asset of the firm to the partner. In the absence of any transfer of any asset of the firm to the partners, the provisions of section 45(4) of the Income-tax Act, 1961 cannot be invoked. In our considered view, in the present case, there is no such transfer of asset and hence provisions of section 45(4) of the In....
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....nducted partners. But the ownership of the property does not change even with the change in the constitution of the firm. As long as there is no change in ownership of the firm and its properties merely for the simple reason that the partnership of the firm stood reconstituted, there is no transfer of capital asset. Likewise, if a partner retires he does not transfer any right in the immovable property in favour of the surviving partner because he had no specific right with respect to the properties of the firm. What transpires is the right to share the income of the properties stood transferred in favour of the surviving partners, and there is no transfer of ownership of the property in such cases. When a partnership is reconstituted by adding a new partner, there is no transfer of assets within the meaning of s. 45(4)." Moreover, the assessee's case is also covered by the decision of ITAT, Coordinate Bench in the case of Delhi Industries & Enterprises vs. ACIT reported in 150 TTJ (Del.) 765 wherein the ITAT has held as under :- "30. On an analysis of all these decisions and the details, we find that there is conflict of opinion between the various Hon'ble High Courts. The ....