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2019 (8) TMI 1527 - AT - Income TaxLong Term Capital Gain arising on account of transfer of capital asset to the firm as capital contribution - appellant is a partner in a partnership firm with equal profit share ratio - provisions of Section 50C prevailing over the provisions of Section 45(3) - whether the transfer of asset by a partner to the firm constitutes a transfer? - HELD THAT:- Provisions of Section 45(3) of the Act was introduced in order to overcome the decision in the case of Karthikeya V Sarabhai, [1997 (9) TMI 2 - SUPREME COURT] which held that there is no liability to capital gains in the case of contribution of capital asset by a partner in a firm, since the value of consideration cannot be determined. It was further held that the credit entry made in the partner’s capital account in the books of partners firm does not represent the true value of the consideration. Therefore in the present case, the partnership firm viz., M/s. K G P Builders had recorded the consideration. Having regard to these facts, the transaction of introduction of land into the firm by the appellant fairly attracts the capital gains. Therefore we hold that the provision of Section 45(3) of the Act are squarely applicable to the facts of the present case. Hon’ble Jurisdictional High Court in the case of Pr.CIT vs. Dr.D. Ramamurthy, [2017 (9) TMI 1732 - MADRAS HIGH COURT] held that the value recorded in the books of the firm is conclusive as to the consideration received on transfer of asset by a partner to the firm. Therefore, the Hon’ble Madras High Court further held that the assessment has to be done on the basis of value of asset when the firm was constituted, not on the basis of revalued value of the assets. Applying the ratio to the facts of the present case, the value to be adopted by the AO is only ₹ 29,77,300/- lakhs which was recorded in the books of accounts of the firm as on date when the firm was constituted. Whether the provision of Section 50C of the Act are applicable to the case covered by the Section 45(3)? - Provisions of Section 45(3) of the Act, are special provisions as it deems value of consideration which otherwise is not computable under general law and it is applicable to the specific situations of introduction of capital by partner to the firm and whereas the provisions of Section 50C of the Act are general in nature applicable whether consideration is known and determinate. It is a rule of construction that the special provisions prevail over general provisions as per Latin Maxim. When there is a specific provision in the statute to deal with a particular kind of transaction then it would be squarely applied. Thus having regard to the principles enunciated above, it cannot be said that provision of Section 50C of the Act overrides the provision of Section 45(3) of the Act. - Decided in favour of assessee.
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