TMI Blog2014 (4) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... gold, to an outsider, definitely book value will not be the value at which the stock would be transferred - partners are members of the same family, their liabilities and assets would depend upon their share capital etc.- it is not open to them to say that one of the partners being head of the family is continuing Dona Gold business as a proprietary concern at their choice, at what value they transfer the entire closing stock they have transferred - there is no justification in the stand of the assessee in contending that only the book value of closing stock has to be taken into consideration - the Tribunal was justified in rejecting the appeals – Decided against Assessee. - ITA. No. 7 of 2014 - - - Dated:- 10-2-2014 - Dr. Manjula Chel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants, appellant/assessee firms were never dissolved, therefore, question of working out assets and liabilities would not arise. The decision in A.L.A Firm (supra) pertains to a situation of dissolved firm and profit was worked out for the purpose of distribution among the partners. In that view of the matter, the principle laid down in the said decision is not at all applicable to the facts of the present case. So far as factual situation to support the above contention, learned counsel for appellant submits, all partnership firms consist of only family members as partners. On account of various reasons, the firms decided to discontinue the business carried on by them in gold. Therefore, as all the partners, being members of one family, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellate Tribunal. The genesis for the present situation seems to be a search conducted in the business premises and residences of the appellants on 21/08/2007. According to them, subsequent to the search, from 05/12/2007, appellant firms discontinued their gold business and closing stock of gold was transferred to the proprietary concern belonging to one of the partners by name Mr. Sunny Jacob. It is also contended by the appellants/assessees before Commissioner as well as Tribunal that though no amount becomes taxable in the hands of partnership firms, proprietary concern doing business in gold will be liable to pay tax depending upon the profit and income earned from the same goods which are transferred from partnership firms to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firms discontinued their gold business. The question before us is whether closure of a business is relevant or dissolution of the firm is relevant. With reference to closing stock with the firm, irrespective of them continuing business in other items under the same name, so far as business in gold is concerned, it comes to an end. Therefore, closing stock or stock-in-trade has to be with reference to gold and not other business. Valuation of stock-in-trade at the closure or discontinuance of business has to be with reference to the items which are relevant for transfer. 7. We note from the entire judgment of A.L.A Firm (supra), their Lordships, while referring to the facts placed before them pertaining to A.L.A.Firm had an occasion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stock- in-trade is valued at market price, the surplus, if any, has to get reflected as the profits of the firm and has to be charged to tax. The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view were possible. For these reasons, we agree with the answer given by the High Court to the second question as well. The appeal fails and is dismissed. But we would make no order regarding costs. 9. The entire discussion of A.L.A Firm case refers to different situations depending upon continuance of business or discontinuance of business. If the business is continued, it is altogether a different situation. If business is discontinued, then value of closing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise. 11. In that view of the matter, we are of the opinion, the Tribunal was justified in rejecting the appeals. So far as observation of the Commissioner while passing orders under Section 263, we accept and agree with the challenge raised by the learned counsel for appellants that he should not have indicated a formula without leaving the matter open to the assessing officer how the assessment has to be proceeded with. So far as the formula referred to at paragraph 3 of the orders of the Commissioner, we direct the assessing authority not to rely upon said formula. In the light of the discussion above, he has to proceed with the matter by taking value of the closing stock at market rate at the relevant point of time. With the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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