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2017 (12) TMI 1677 - AT - Income TaxLong Term Capital Gain - transfer of land as capital contribution to a Limited Liability Partnership by invoking section 50C - capital contribution u/s 45(3) - determination of full value of consideration received or accrued as a result of transfer of capital asset - whether section 50C overrides provisions of section 45(3) when document of transfer is registered as per the provisions of Registration Act, 1908? - as stamp duty paid for registration of such document, the value determined by the stamp duty authority shall be replaced as full value of consideration as per the provisions of section 50C - HELD THAT:- A plain reading of provisions of section 45(3) makes it clear that it comes into operation only in special cases of transfer between partnership firm and partners and in such circumstances, a deemed full value of consideration shall be considered for the purpose of computation of capital gain as per which the amount recorded in the books of account of the firm shall be taken as full value of consideration. Though the provisions of section 45(3) is not a specific provision overrides the other provisions of the Act, importing a deeming fiction provided in section 50C of the Act cannot be extended to another deeming fiction created by the statute by way of section 45(3) to deal with special cases of transfer. Since the Act itself is provided for deeming consideration to be adopted for the purpose of section 48 of the Act, another deeming fiction provided by way of section 50C cannot be extended to compute deemed full value of consideration as a result of transfer of capital asset. We are of the considered view that the profits or gains arising from the transfer of a capital asset by a partner to a firm in which he is or becomes a partner by way of capital contribution, then for the purpose of section 48, the amount recorded in the books of account of the firm shall be deemed to be full value of consideration received or accruing as a result of transfer of a capital asset. The AO cannot import another deeming fiction created for the purpose of determination of full value of consideration as a result of transfer of a capital asset by importing the provisions of section 50C of the Act. Therefore, we reverse the finding of the CIT(A) and delete the addition made towards recomputation of long term capital gain on account of transfer of capital asset into partnership firm.- Decided against revenue Disallowance u/s 14A r.w.r 8D - Assessee has not disallowed expenditure incurred in relation to earn exempt income - HELD THAT:- We find force in the arguments of the assessee for the reason that the Hon’ble Delhi High Court in the case of CIT vs Cheminvest Ltd [2009 (8) TMI 126 - ITAT DELHI-B] has held that where there is no exempt income, disallowance contemplated u/s 14A shall not be worked out. In this case, the fact that the assessee has not earned any exempt income, has not been disputed by the revenue. Therefore, we are of the view that the AO was erred in disallowing expenditure incurred in relation to exempt income u/s 14A by invoking Rule 8D(2)(ii) & (iii) of I.T. Rules, 1962. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. - Decided against revenue
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