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2019 (1) TMI 1551 - AT - Income TaxTaxability of capital gain in firm - revaluation of asset being land held by the partnership firm - reference to third member - money equivalent to enhanced portion of the assets revalued paid to retiring partners constitute capital asset within the meaning of section 2(14) - Transfer of capital asset by way of distribution of capital asset either on dissolution or otherwise within the meaning of section 45(4) r.w.s 2(14) - HELD THAT: - There was only a reconstitution of partnership firm on their retirement without there being any dissolution and the land properly acquired by the partnership firm continued to be owned by the said firm even after reconstitution without any extinguishment of rights in favour of the retiring partners. The retiring partners did not acquire any right in the said property and what they got on retirement was only the money equivalent to their share of revaluation surplus (enhanced portion of the asset revalued] which was credited to their capital accounts. There was thus no transfer of capital asset by way of distribution of capital asset either on dissolution or otherwise within the meaning of section 45(4) read with section 2(14) of the Act. I also hold that the money equivalent to enhanced portion of the assets re-valued does not constitute capital asset within the meaning of section 2(14) and the payment of the said money by the assessee-firm to the retiring partners cannot give rise to capital gain under section 45(4) read with section 2(14) . I accordingly agree with the view taken by the Id. judicial Member and answer both the question referred under section 254(4) in the negative and in favour of the assessee.
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