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2020 (8) TMI 561 - AT - Income TaxCapital gain computation - transaction under consideration is between the members of AOP - addition by invoking the provisions of Section 50C - Introduction of development rights by way of capital contribution under section 45(3) - HELD THAT:- Provisions of section 45(3) provides that when a person transfer his capital asset to a firm or a body of individual or to AOP by way of capital contribution for becoming a partner/ member therein, then for the purposes of section 48 of the Act, the amount recorded in the books of account of the assessee firm or AOP, the value of the capital asset shall be deemed to be full value of consideration received or accruing as a result of the transfer of capital asset. As per the deeming fiction an amount recorded in the books of account thereby the full value of consideration for the purpose of section 48 Provisions of section 45(3) of the Act is a charging provision having two limbs joined by conjunction “AND”. The first limb is a charging provision which levies capital gain tax on gains arising from contribution of capital asset in the AOP by a member and second limb is an essential deeming fiction for determining the value of consideration without which the charging provision would fail. We also noted that the provisions of section 50C of the Act also deeming fiction deems only the value of consideration for the purpose of calculating capital gains in the transfer of capital asset from one person to another. In view of the above, we are of the view that the provisions of section 50C of the Act are not applicable in the instant case and provision of section 45(3) of the Act will be applied. Hence, we reverse the orders of the lower authorities and allow the appeal of the assessee on this issue.
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