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2017 (3) TMI 1313 - ITAT JAIPURAddition u/s 50C - valid transfer through a registered deed by the assessee (through its power of attorney holder) in favour of Shri Ratan Singh - Held that:- In the present case, the facts are on a stronger footing as the capital contribution is evidenced by a deed of partnership and the same would be considered as a transfer in relation to capital asset in terms of Section 2(47) read with section 45(3) of the Act. Therefore, we agree with the finding of the ld CIT(A) that the liability to pay tax on capital gains, if any, arises in the hands of the appellant, when the property (purchased by the appellant) was transferred to the books of the partnership firm. Thus, the capital gains, if any, in the hands of the appellant would arise in FY 2006-07 under the provisions of section 45(3) of the IT Act i.e. in the year when such property is transferred to the books of the firm as capital contribution. Hon’ble Bombay High Court in case of CIT vs. A.N. Naik Associates (2003 (7) TMI 46 - BOMBAY High Court ) wherein the Hon’ble Court have examined the provisions of Section 45(4) of the Act. It held that the expression “otherwise” used in section 45(4) has to be read with the words transfer of capital assets by a distribution of capital assets, if so read, it becomes clear even when a firm is in existence and there is a transfer of capital assets, it comes within the expression “otherwise” as the object of the amending Act was to remove the loophole which existed whereby capital gain tax was not chargeable. In the instant case, the firm continue to exist and the subject land has been transferred by the firm (as we have held above) in favour of one of the partners of the firm, Shri Ratan Singh. Therefore, it is for the Revenue to decide whether such transfer in favour of Ratan Singh is taxable in hands of the firm under section 45(4) of the Act or not. To that extent, the above findings of ld CIT(A) stand modified. In light of above discussion taking into consideration the entirety of facts and circumstances of the case, it is the firm in whose name the asset stood prior to the date of the transfer which has transferred the asset (and not the assessee) vide the sale deed dated 12.05.2009. Therefore, it is clear that the assessee cannot be brought to tax in respect of such transfer.
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