Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2019 (9) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (9) TMI 1271 - HC - Income TaxCapital gain u/s 45(4) in partnership firm on retirement of a partner - dissolution/reconstitution of partnership firm - valuation of the assets and liabilities of the firm and allottment of assets among the retiring and continuing partners took place - reconstitution of a Partnership Firm, the asset transferred to the outgoing partner or amount paid to him attracts capital gains tax liability in the hands of the assessee/Partnership Firm or not in terms of Section 45(4) - HELD THAT:- As M/S. NATIONAL COMPANY VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX BUSINESS CIRCLE – I [I/C] CHENNAI [2019 (5) TMI 354 - MADRAS HIGH COURT] there was only a reconstitution of the partnership firm by retirement of two partners and admission of another partner. The partnership firm continued. It must also be further noted that the assets of the firm originally belonged to the father of the retiring / continuing partners and there was only a division of the assets on retirement in accordance with their entitlement on the shares in the partnership. As pointed out earlier, the National Company was originally a sole proprietorship concern started by N.Munuswamy Mudaliar. It was in the business of construction and assets had been acquired even at that particular point of time. The two daughters and two sons-in-laws of N.Munuswamy Mudaliar were subsequently admitted as partners and on division of the assets, it can also be arguably pointed out that one daughter and one son-in-law were allotted a share which they were otherwise legally entitled to out of the holdings N.Munuswamy Mudaliar. We hold that the provisions of Section 45(4) would not be attracted on the retirement of the two partners and consequential allotment of their share in the assets in the Assessee Firm. We therefore answer the substantial question of law in favour of the Assessee and against the Revenue.
|