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2015 (9) TMI 321 - AT - Income TaxValidity of the re-assessment proceedings u/s.147 - Commissioner of Income Tax (Appeals) sustaining the order of the Assessing Officer who had made addition by invoking the provisions of section 45(4) and treating the settlement of an asset in favour of the retiring partner as capital gain - CIT(A) confirmed re-assessment order and additions thereon - Held that:- It is pertinent to mention here that the transfer of the asset is by the firm which is a “legal entity” to the retiring partner another distinct legal entity being an “individual”. Therefore, it is crystal clear that capital gain will arise in the hands of the transferor viz. the assessee firm and not the transferee viz. the retiring partner Mrs. Aruna Visvewar. Section-45(4) of the Act mandates the assessee firm to be liable for capital gain tax arising out of the transfer of its asset to the retiring partner even in the circumstance when the partnership is reconstituted on retirement of a partner. Further, the loan taken by the assessee firm for purchase of the asset which is transferred cannot be factored because the loan does not alter the cost of the assets purchased or the value of the asset transferred to the transferee. Therefore we do not have any hesitation to confirm the order of the Ld. CIT (A) as well as the order of the Ld. Assessing Officer. - Decided against assessee.
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