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2013 (9) TMI 476 - AT - Income TaxCapital gain - Sale of property - defunct firm / dissolution of firm - Whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed - Held that:- The core issue before us is whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed and our answer is no as per the document on record. We find that the said property remained to be the property of the dissolved firm and it was sold by the assessee firm on 27-03-2003. The law is well settled that the firm in the eyes of law is not a separate legal entity but ultimately the rights or vested in the partners only. The Indian Partnership Act provides the effect on the dissolution of the firm by incorporating the different provisions like Sections 46, 47, 48, 49 and 50 etc. In fact the assessee’s case is supported by the sale deed of the said property dated 29-03-2003 in which the assessee firm is shown as seller no. 1 alongwith the partners. It is seen that the Assessing Officer has wrongly applied Sec. 2(47) (v) of the Income-tax Act by observing that the partners by executing the deed of dissolution have become absolutely owners one of the share of the property. Both the parties below have misinterpreted the provisions of law and by discarding the factual aspect taxed capital gain in A.Y. 2001-02. We therefore hold that the Assessing Officer was not justified to bring to tax the capital gain in hands of the assessee firm in the A.Y. 2001-02. We further hold that the property was sold by the assessee firm in the A.Y. 2003-04 and so far as the present property is concerned the said was not transferred to the partners at any time. As transfer contemplates the transferring the title and interest in the said property. - Decided in favor of assessee.
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