TaxTMI 
TaxTMI 
2003 (2) TMI 157
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....firm consisted of 13 partners of which, assessee was one of the partners. The firm carried on business as transporters and courier agents for more than two decades. There were disputes between various partners of the firm, divided into two groups, and the matter was referred to a mutually agreed arbitrator. Two group of the partners have agreed to resolve the differences amicably and accordingly, the arbitrators pronounced an award on 15th October, 1985,as a result of which, Jain group of partners (assessee is one amongst them) agreed to retire from the firm M/s. Indian Roadways Corporation w.e.f. the close of the business on 14-8-1985, in lieu of which, certain immovable properties were given to the Jain group in full and final settlement ....
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.... opinion that the book value shown in the partnership firm with regard to the said property should be adopted as the cost of acquisition. The Assessing Officer has, therefore, allowed deduction of Rs. 1,32,018 only as against the claim of deduction of Rs. 2,06,250 and accordingly arrived at the net capital gain of Rs. 1,07,197. 4. Aggrieved, assessee preferred an appeal before the CIT(A) contending, inter alia, that the market value on the date of retirement has to be taken as the cost of acquisition. However, Ld. CIT(A) was of the view that on retirement the assessee, in her capacity as a partner, receive the property in which she already had a pre-existing right; the rights in the capital assets owned by the firm were acquired by the p....
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....and certain assets equivalent to the share of the retiring partners were allotted to Jain Group. In the previous year relevant to the assessment year 1987-88, one of the properties was sold and capital I gain was computed after reducing market value of such asset, on the date of retirement, from the sale consideration. In the case of one of the co-owners i.e., Mr. Jaykumar Jain, Assessing Officer has not accepted the claim of the assessee but the CIT(A) agreed with the assessee's contention. 2. When an asset is distributed to a partner on retirement, the value of such asset shall be cost in the hands of the partners. The difference between cost of such assets in the hands of the firm and the market value on the date of retirement, if at ....
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.... by the ITAT Delhi Bench in the case of ITO v. Hansalaya Properties [1992] 41 ITD 290. Based on the aforecited decisions, the Ld. Counsel submitted that there is no difference between the HUF and the partnership firm with regard to the ownership of the asset prior to partition/retirement. In the case of a HUF, each member has ownership right in the properties owned by HUF. Similarly, in the case of partnership firm, each partner will have undivided interest in the property held by the firm. Therefore, on retirement of a partner the value of the property allotted to the retiring partner should be taken at the market value. It was also contended that in the instant case, the arbitrators have taken into consideration the market value of the pr....
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....erties to the retiring partners and continuing partners. At the time when the retirement took place, the statute did not provide for treating transfer of property from the firm to the retiring partners as a transfer within the meaning of section 45 of the Act. In fact, section 45(4) deals with such situations by deeming such event as a 'transfer', only with effect from 1-4-1988. Though under section 45(4), the Legislature used the expression 'distribution of capital asset on the dissolution of the firm......or otherwise.....'for the purpose of determining the cost of acquisition of the property by the partner the Legislature has covered the cases of dissolution of (and not retirement from) a partnership firm section 49(1)(ii)(b) conspicuous....