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2012 (9) TMI 12 - HC - Income TaxNon admission of capital gain on transfer of right and title - Settlement of accounts - dissolution of partnership firm - reopening of assessment - Held that:- As decided in Additional C.I.T. Vs. Mohanbhai Pamabhai [1987 (2) TMI 59 - SUPREME COURT] when a partner retires from a partnership firm taking his share of partnership interest, no element of transfer of interest in the partnership asset by the retiring partner to the continuing partner was involved. As in the present case when the appellant was paid Rs.15.00 lakhs by Y.Kalyana Sundaram in full and final settlement towards his 50% share on the dissolution of the firm, there was no "transfer" as understood in law and consequently there cannot be tax on alleged capital gain - It is a recognized method of making up the accounts of the dissolved firm and the receipt of money by him is nothing but a receipt of his share in the distributed asset of the firm. The appellant received the money value of his share in the assets of the firm. He did not agree to sell, exchange or transfer his share in the assets of the firm. Payment of the amount agreed to be paid to the appellant under the compromise was not in consequence of any share, exchange or transfer of assets to Y.Kalyana Sundaram. As up to the assessment year 1987-1988, Section 47 (ii) excluded these transactions and from assessment year 1988-89, in the case of dissolution of a firm, only the firm is taxable on capital gains on dissolution under Section 45 (4) of the Income Tax Act, 1961 and not the partner - in favour of assessee.
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