TMI Blog1996 (5) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... stood belonged to Shri Munuswamy Mudaliar and his three sons, Sri M. Ranganathan, Sri M. Ramachandran and Sri M. Govindaswamy. The sons of Sri Munuswamy Mudaliar who were brought in as partners on 3-1-1981 were the husbands of the lady parnters. The persons who joined the firm bringing in cash of Rs. 25,000 on 3-1-1981 were the following : 1. Shri Govinda Prasad 2. Shri Murilal Sonthalia 3. Shri Pawankumar Sonthalia 4. Dr. C. L. Lohia. Though the land belonged to Shri Munuswamy Mudaliar and his three sons, the factory building, plant and machinery etc. were owned by the firm comprising of the three lady partners. When the land was brought in by the partners, it was valued at Rs. 1 lakh and credit was accordingly given in the account of those four partners. On the eve of reconstitution on 3-1-1981 the assets of the firm such as factory building, shed, machinery, furniture etc. were revalued and the difference in value was credited to the accounts of the three lady partners. The firm was dissolved on 23-1-1981 and the four partners, Shri Govinda Prasad, Shri Murilal Sonthalia, Shri Pawankumar Sonthalia and Dr. C.L. Lohia took over the assets of the firm and also the land. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to deduct the cost of the assets from the sale price to arrive at the capital gains. The Departmental Representative explained that what the firm transferred for Rs. 6.35 lakhs were only four items of assets which had been previously used in the business carried on by the firm. It was pointed out that those were depreciable items being building, machinery, electrical fittings and furniture, on which depreciation had been granted in the earlier years. Drawing our attention to the provisions of section 50 of the Income-tax Act, 1961, the learned DR. submitted that for the purpose of computing capital gains the cost of acquisition of depreciable assets was to be taken as per section 50 and accordingly WDV of the assets as defined in clause (6) of section 43 should have been taken as the cost of acquisition. Shri Sachan submitted that in giving the direction to assess the capital gains at Rs. 2,05,556, the above provisions had been lost sight of and the CIT(A) had considered the cost of assets at Rs. 4,29,444 as shown in the assessment order. The learned D.R. pointed out that in the assessment cost of the assets was taken at Rs. 4,29,444 because there was profit under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in law as the CIT(A) had given a finding that this was a case of transfer of the whole undertaking. However, the counsel was not in a position to pursue that argument to ask for the deletion of the capital gains as the assessees were not in appeal before us. Still Shri Devanathan maintained that in any case the assessees might not be burdened with further liability by recomputing the capital gains applying the provisions of section 50. 6. After going through the facts of the case and giving careful consideration to the contentions of both sides, we are of the view that Revenue should succeed in this appeal. The CIT(A) has held that in this case the Assessing Officer was correct in assessing the capital gains in the hands of the assessee. That finding has become final. Neither the Department not the assessee has challenged that finding. In this appeal the Department has challenged the computation of the capital gains only. As rightly pointed out by the D.R., for the purpose of computing the capital gains on the transfer of depreciable assets the provisions of section 50 are applicable. There cannot be two opinions on the applicability of section 50 in computing the capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he under-taking, still the assessment of capital gains on the transfer of the four items of assets for Rs. 6.35 lakhs appears to be in order. In the case of Syndicate Bank Ltd. referred to by the assessee's counsel, the Karnataka High Court observed : " If there is a transfer of a whole concern and no part of the agreed price is indicated against different and definite items having referred to their valuation on the date of sale, the agreed price cannot be apportioned on capital assets in specie. What is sold in such a case is not individual items of property forming part of the aggregate, but the capital asset consisting of business of the whole concern or undertaking. What arises for consideration from the point of view of taxation is only the gain in respect of that transaction and nothing else. " If the price attributable to different assets cannot be ascertained, the Court held that, then no capital gains could be assessed in respect of individual assets. From the transaction under consideration it cannot be said that there was a price fixed for the whole undertaking. As already stated, sale value has been fixed for different assets like land, buildings etc. and stock. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the firm including land and buildings, plant and machinery, furniture, fixtures, stocks of finished goods and in progress and the goodwill to Thomas Stephen Co. Ltd. of Quilon through its manager, A. Karunakaran, for a sum of Rs. 1,52,600 ". It is relevant to point out that in that case also the Assessing Officer had assessed the profit under section 41(2) separately and in computing the capital gains, he deducted the cost of the assets without applying the provisions of section 12B (i.e., section 50) and it was the Appellate Asstt. Commissioner who modified the assessment, deleting the profit under section 41(2) and enhancing the capital gains to that extent (vide page 253). The Madras High Court upheld the computation on the ground that section 12B was applicable to all kinds of transfer of assets. In the circumstances of the case, we hold that the CIT(A) is not correct in directing to compute the capital gains by deducting the cost of the assets from the sale price of Rs. 6.35 lakhs, without applying the provisions of section 50. The order of the CIT(A) is modified to the extent that capital gains arising on the transfer of these assets which are depreciable assets, ..... 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