TMI Blog1997 (5) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... imited company. In the assessment year 1984-85, it was a partner in the firm styled as M/s. Acme Film Services. Assessment year 1984-85 was the first year of business of the firm, namely, M/s. Acme Film Services, where the other partner was M/s. Jyoti Jain Investment and Finance Company Pvt. Ltd. The partnership firm was constituted with effect from 18-8-1983 by Deed of Partnership executed on the same date. Before this, the assessee had been carrying on the business under the name and style of M/s. Acme Film Services as sole proprietor since November 1977. The business consisting of exhibition of films in two pre-view mini theatres was carried out at Bombay. The registered office of the assessee-company as well that of M/s. Jyoti Jain Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were cited as would be evident from decision at page 4 of his order. According to Shri C.S. Aggarwal, this was one case where the decision was not appreciated fully and the income was brought to tax on the basis of certain observations which were not true in the case of the assessee. As per arguments advanced, the firm M/s. Acme Film Services has been treated as a genuine firm as is evident from the order of the Assessing Officer for assessment year 1985-86. Registration has been granted vide order dated 29-1-1988. The returned income has been accepted by the Assessing Officer. No steps have been taken till date to set aside that order. The observations of their Lordships of Supreme Court in the case of Sunil Siddharthbhai as appear on page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee's case was the one where the observations were applicable and as such, the capital gain was correctly levied. 4. We have carefully considered the rival submissions. We have also gone through the material placed on record to which our specific attention was drawn. We have also gone through the decisions as cited by both the parties. The issue in question is whether on the facts, on revaluation of assets contributed as capital to the firm by the partner, the capital gain has become chargeable in the hands of the assessee or not. For an answer to the aforesaid question, both parties have heavily relied on the decision of the Hon'ble Supreme Court in the case of Sunil Siddharthbhai. As stated earlier, while the learned AR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains resulted from the transfer of the shares held by the assessee to the partnership firm as his capital contribution, the cost of acquisition of the shares to the assessee being Rs. 1,49,819 and the market value of the shares being Rs. 1,60,279 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was a transfer within the meaning of clause (47) of section 2 of the Income-tax Act, 1961, of the shares contributed by the assessee as capital to the partnership firm in which he was a partner ?" The Hon'ble Gujarat High Court answered the questions in favour of the revenue and against the assessee. The matter came up before their Lordships of Supreme Court and it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on the partnership business or is nothing but a device or ruse to convert the personal asset into money substantially for the benefit of the assessee while evading tax on a capital gain. As to the genuineness of the firm, there is no dispute. Firm has been granted registration for assessment year 1985-86 under section 185 of the Act vide order dated 29-1-1988. This order is stated to have become final. As regards transaction being sham as is the case of the revenue, we find that their Lordships of Supreme Court have made reference to a few relevant indicia which to quote are:-- (a) Partnership is formed between the assessee and his wife and children or substantially limited to them. (b) Whether the personal asset is sold by the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to carrying on business more smoothly. There is no material placed on record to show that it was not so and that the capital contributed by the other party did not facilitate the business of the assessee. There is nothing on record to show that there was no need for the partnership firm for capital contribution. As recorded in the order of the Assessing Officer the second party M/s. Jyoti Jain Investment Finance Company Ltd. brought capital of Rs. 17,00,000 and as the initial contribution was to be at Rs. 8,50,000 each, the remaining amount of Rs. 8,50,000 was passed on to the other partner which is assessee in this case. The difference between the two cases is to the extent that while in the case of Sunil Siddharthbhai credit was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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