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2023 (3) TMI 849 - AT - Income TaxTaxability in the hands of partners v/s firm - Undisclosed profit on sale of 20 flats - transfer of capital asset by firm to partners - Addition in hands of firm - transfer of flats to partners by way of unregistered MOU - whether flats were sold by the firm and not by the partners ? - HELD THAT:- We find that the assessee had transferred 20 flats by way of unregistered MOU to its partners and claimed that said transfer does not give rise to any income and consequent income cannot be assessed in the hands of the partnership firm. There is no merit in the arguments advanced by assessee, that transfer of flats to partners by way of MOU does not give rise to any income in the hands of the firm, because as per provisions of section 45(4), transfer of capital asset by firm to partners is a transfer which need to be dealt in accordance with law. Assuming for a moment, what was transferred by the assessee firm is not a capital asset, but stock in trade, when the assessee has treated asset as stock in trade, then sale of said asset to partners is as good as sales to outsiders and the assessee needs to consider profit derived from sales in the hands of the firm. Thus to this extent the findings of the facts recorded by CIT(A) that transfer of flats to partners by way of unregistered MOU does not give rise to any income in the hands of the firm and reasons given by the CIT(A) to reach said conclusion is not correct. Whether is there any tax impact on transfer of flats by the firm to its partners, more particularly when the firm is enjoying the benefit of exemption u/s. 80IB(10)? - Since, the assessee is enjoying the benefit of deduction u/s. 80IB(10) of the Act, we are of the considered view that, whatever profit computed by the AO in the hands of the firm, consequent to transfer of 20 flats to partners by way of MOU dated 08.10.2009, is also eligible for deduction u/s. 80IB(10) of the Act and thus, we direct the AO to compute profit towards transfer of 20 flats to its partners and further, allow benefit of deduction u/s. 80IB(10) of the Act to entire profit derived from transfer of flats to its partners. In this case, although we do not appreciate the findings of the ld. CIT(A) in allowing relief to the assessee on the aspect of taxability of income in the hands of the firm, but yet the assessee is entitled for deduction u/s. 80IB(10) of the Act on entire profit and further, the CIT(A) has allowed deduction claimed u/s. 80IB(10) of the Act to entire profit, in our considered view, there is no error in the reasons given by the ld. CIT(A) to delete additions made by the AO towards profit derived from transfer of flats to its partners. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.
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