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2016 (11) TMI 1064 - AT - Income TaxTaxability of capital gains in the hands of the assessee firm - retiring partner - valid transfer - Held that:- The partnership firm, that is, the assessee did not transfer any right in the capital asset or any of the asset of the partnership firm in favour of the retiring partner and neither it ceases its hold on the property of the firm. Its right in the property of the firm was still intact and has not been extinguished at all. Even the retiring partner did not acquire any right in the property, albeit it has only surrendered its right and interest in the partnership firm. Here when the retiring partner took cash and also further cash in lieu of agreed constructed area from the stock in trade of the firm, it did not relinquishing its interest in the immovable property. What it relinquished was its share in the partnership firm. Therefore, there is no transfer of a capital asset within the scope of section 45(4), because to attract Section 45(4), there should be a transfer of a capital asset from the firm to the retiring partners, by which the firms ceases to have any right in the property which is so transferred. There is no transfer of any capital asset of the assessee firm to its retiring partner and hence no capital gains chargeable to tax arises in hands of the assessee firm and section 45(4) has no application on the facts of the present case. - Decided in favour of assessee
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