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TMI Blog2010 (10) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer on account of short term capital gain amounting to Rs. 2,88,00,255." "3. On the facts and in the circumstances of Your appellant's case and in law the Learned Commissioner of Income-tax (Appeals) has erred in not accepting the plea of your appellant in respect of matter to be referred to Valuation cell for the purpose of valuation of the alleged property." "4. On the facts and in the circumstances of Your Appellant's case and in law the Learned Commissioner of Income-tax (Appeals) has erred in not taking cognizance in respect of arguments put forward by your appellant towards 4.1 That the alleged valuation report dated 1-4-2000 includes cost of land also which is not owned by the firm and not considering the fresh valuation report submitted by your appellant. 4.2 Not taking into consideration facts submitted by your appellant in respect of depreciation claimed by the newly formed Pvt. Ltd. Co. namely New Gujarat Tin Circle Depot Pvt. Ltd. 4.3 In respect of plea made by your appellant to call data from Sub-Registrar which is authenticated body for valuation of every property." 4. The brief facts of the case are that the Learned Assessing Officer noticed that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after re-valuation was credited to the partners capital account. The re-valuation of factory building is at Rs. 3,22,65,000. Later on the new company New Gujarat Tin Circle Depot Pvt. Ltd., has claimed depreciation on this value. The Learned Assessing Officer therefore, concluded that fair market value of factory building should be Rs. 3,22,65,000. The partners have withdrawn these assets from the firm and introduced this as capital in another firm. Therefore, there was a transfer and capital gain is leviable on the difference of Rs. 2,88,00,255. 7. On appeal, before the Learned Authorised Representative of the assessee submitted that the Learned Assessing Officer should have referred the case to District Valuation Officer for determination of fair market value for computing the capital gain. It was argued that amount of Rs. 3,22,65,000 includes value of land which remained with the partners. It was submitted that the Learned Assessing Officer has not taken cognizance of fresh valuation report submitted before him. It was also submitted that the Learned Assessing Officer has relied on the decision in the case of Hiralal Lokchandani v. ITO [2007] 290 ITR (AT) 258 (Cuttack) (SB) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee have altogether different facts and therefore, are not applicable to the case of the assessee. The case of Hiralal Loklchandani (supra) relates to purchase of rough diamonds. The Tribunal in that case held that the valuation report submitted by the assessee should be considered by the Learned Assessing Officer and the Learned Commissioner of Income-tax (Appeals).The Tribunal observed that the Learned Commissioner of Income-tax (Appeals) had no power to admit additional evidence. In the case of the assessee a Valuation report was available on record from the partners of the assessee-firm for the very same asset by a registered valuer. By several other events the value of the asset was again reconfirmed. The same value was taken by the new private limited company for its book purpose. Shares to that extent were issued. Depreciation was claimed. In such circumstances, there was no further need to value the asset again because it would be more convenient to the assessee. The Learned Commissioner of Income-tax (Appeals) accordingly concluded that the fair market value of the factory building at the time of the transfer was Rs. 3,22,65,000 and therefore the working out of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of this property at Rs. 3,22,65,000. Therefore, the appeal of the assessee has no merit and the same should be dismissed. 15. We have heard the rival submissions and perused the materials available on record. In the instant case the assessee is a partnership firm carrying on business of Printing of Tin plates. The undisputed facts in the instant case are that two partners of the assessee-firm namely Abbasi H. Tinwala and Abbedin H. Tinwala withdrew Ratanpur factory building from the assessee firm at its written down value Rs. 34,64,745 on 1-4-2000. The said two partners contributed the said Ratanpur factory building to another partnership firm namely M/s. New Gujarat Tin Circle Depot on the very same day i.e., 1-4-2000. The assessee in its return filed in pursuance to notice under section 148 claimed that the market value of Ratanpur factory building was Rs. 36,24,000 on 1-4-2000 and therefore, the short term capital gain to be included in the assessee firm's total income was Rs. 1,59,255 only. The Learned Assessing Officer observed that as per valuation report earlier submitted by the assessee the value of Ratanpur factory building was Rs. 3,22,65,000 and he rejected the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer." A reading of the above provision shows that profit arising on transfer of a capital asset by way of distribution of capital asset on dissolution of the firm or otherwise is chargeable to tax. Thus, the contention of the Learned Authorised Representative of the assessee that as in the instant case the distribution of Ratanpur factory building to the partners of the assessee firm was not on account of dissolution of the firm and therefore, not chargeable to tax also cannot be upheld. The word "otherwise" in our opinion covers a situation where the capital asset of the firm is distributed to its partners otherwise than on dissolution of the firm. Moreover, the assessee in the return of income filed in response to notice under section 148 dated 20-2-2006 admitted that short term capital gain arises on transfer of Ratanpur Factory building. The assessee in the letter dated 21-3-2006 addressed to the Learned Assessing Officer also contended that capital gain arises on transfer of Ratanpur Factory building (Paper book page-10). The admitted facts wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Assessing Officer has not got the fair market value of the said property determined by a Departmental Valuer. The Learned Assessing Officer adopted the fair market value of the property on the basis of a valuation report which was got prepared by the assessee firm by a registered valuer on 1-4-2000. 21. On the other hand the assessee contended before the Learned Assessing Officer that the fair market value of the Ratanpur factory building was Rs. 36,24,000 only which was supported by the valuation report dated 28-2-2006 of a Registered Valuer. A copy of the said valuation report is placed at page Nos. 62 to 72 of the paper book. We find that in the said valuation report the Registered Valuer has estimated the cost of construction of the said factory building and not its fair market value as on 1-4-2000. Moreover, it is observed that the said Ratanpur factory building along with land appurtenant thereto were contributed by the partners in a new partnership firm namely M/s. Gujarat Tin Circle Depot on the very same day for Rs. 3,22,65,000 and the same value agrees with the fair market value as opined in the Registered Valuer's report dated 1-4-2000. The break up of Rs. 3,22,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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