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2011 (1) TMI 266 - AT - Income TaxShort term capital gain - Retirement of partner from the partnership firm - Value of net assets taken over by the retiring partners is more than their credit balance in capital account - As per there was a transfer of capital asset viz., good will by the firm to the retiring partners. He also held that goodwill has no cost of acquisition and therefore brought to tax a sum of Rs. 68,79,284 being the value of goodwill shown as assets taken over by the retiring partner - AO taxes the same as capital gains of the firm on retirement of two partners - Held that: - The capital asset transferred on retirement of a partner from the firm is the right as a partner. The firm settles such right by giving away assets of the firm which includes its stock-in-trade. The stock-in-trade in that event looses its character as stock in trade and becomes a capital asset which is used as a mode of settlement of the claim of the retiring partner by giving it at a value to the retiring partner. - Decided against assessee. Dis allowance of labour charges - The assessee had claimed as deduction a sum of Rs. 51,73,783 on account of labour charges for making ornaments - CIT(A) restricted the addition made by the AO from 10% to 2% - Order of CIT(A) sustained Software expenditure - amount paid to SMB Inc., for their efforts in trying to develop tailor-made software for the Assessee’s business. Finally the software could not be developed and the amount was paid to SMB Inc. for the time they spent in developing the software and that no software in fact was purchased or owned by the Assessee. - Held as revenue expenditure and allowed in favor of assessee.
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