9911796707
TMI Blog2014 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... ed executed on 09/08/1985 for a total consideration of Rs. 7,50,000/- The said premises was a commercial/industrial premises and was being used for business purposes under the name and style of 'Fulara Mills' by the erstwhile owners. 2.1 A partnership deed was executed on 5/8/1985 and on 27/09/1985 consisting of the following as partners Shri Om Prakash Bansal, Shri Hari Ram Gupta, Shri Vinay Kumar Bansal, Shri Sandeep Bansal, Shri Sanjeev Gupta, Shri Rajeev Gupta and Shri Sanjay Gupta to carry on the business of Oil Mills under name and style of Hari Om Oil & General Mills. 2.2 The immovable property No 123/810 Fazalganj, Kanpur purchased jointly by the assessees, Shri Vinay Bansal, Shri Sandeep Bansal, Shri Sanjiv Gupta, Shri Rajiv Gupta and Shri Sanjay Gupta was introduced by them towards their capital in the firm. Clause 4 of partnership deed dated 27/09/1985 reads "that the parties of the 3rd part, party of the 4th part, party of the 5th part and party of the 6th part and party of the 7th part have contributed their respective shares in premises No. 123/810, Fazalqanj, Kanpur as their share capital in this partnership firm and further capital shall be contributed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/12/1987. The assets and liabilities were taken stock off and were valued at the market price. The firm was dissolved. Balance Sheet on the date of dissolution was drawn up. The assets were distributed and demarcated amongst the partners. As a result of the dissolution, all the three partners got 1/3rd share each in the said property. This property was sold by all the co-owners/partners i.e. Shri Om Prakash Bansal, Shri Vinay Bansal and Sandeep Bansal for a consideration of Rs. 3,03,00,000/- through sale deed dated 18/11/2008 in favour of My Car Pvt. Ltd. The individual assessee has computed the long term capital gain of his proportionate share as under: Sale Consideration (i) Land acquired in 1987 3,03,00,000/- Value 2822.45 sq.m. @ Rs. 326=9,20,119x582/150) 35,70,062/- (ii) Land acquired in 1987 Value 202.03 sq. [email protected] =6,612x582/150 25,655/- (iii) Construction cost Rs. 25,76,046 =25,76,046x582/150 99,95,058/- (iv) Improvement during F.Y.93-94 =1,23,258x582/244 2,94,001/- (v) Improvement during F.Y.95-96 =1,52,770x582/281 3,16,413/- Total indexed cost of acquisition 1,42,01,189/- Net long term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question was introduced by the assessees after its purchase in 1985 as their capital in the partnership firm. The property ceased to be individual property of the assessee and became property of the partnership firm. It was only on dissolution of the firm in 1987, the said property became individual asset of the assessee. It was further contended that the Assessing Officer has not been able to appreciate the fact that the assessee became the owner of the property not in the year 1985 but in December, 1987 when partnership firm Hari Om Oil & General Mill was dissolved. He also placed reliance upon the arbitration award through which the disputes between the retiring and continuing partners in respect of settlement of accounts were settled. The CIT(A) re-examined the issue in the light of the provisions of sections 45(4) and 49(iii)(b) of the Act and circular No. 495 dated 22 September, 1987. Being convinced with the explanation of the assessee, the CIT(A) accepted the computation of capital gain offered by the assessee and deleted the addition. For the sake of reference, relevant portion of the order of CIT(A) is extracted hereunder: ''I have considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed at Rs. 1,60,98,811/- and 1/3rd of the same i.e. Rs. 53,66,270/- was declared by each co-owner in his individual return. It has been claimed that a sum of Rs. 25,76,046/- was spent over the construction of the property during the year 1986-87 i.e. before dissolution on 31.12.1987. Thereafter Rs. 1,23,258/- during F.Y.1993-94 and Rs. 1,52,770/- during F.Y. 1995-96 respectively. The cost of acquisition of the property as on date of sale, was got determined by an Approved Valuer. The Approved Valuer Shri J.N. Dubey vide his report dated 12.12.2008, estimated the cost of acquisition of the said property on the basis of Cost Inflated Index at Rs. 1,42,01,189/-. After deducting the cost of acquisition of Rs. 1,42,01,189/- as estimated by the Approved Valuer net capital gains of Rs. 1,60,98,811/- was computed and declared in the ratio of 1/3rd each by the respective co-owner. The AO after considering the Approved Valuer's Report dt. 12.12.2008, chose not to accept the cost of construction of Rs. 25,76,046/- incurred during the year 1986-87, for want of evidence of the expenditure having being actually incurred and consequently the indexed cost of acquisition thereof as estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The AO has also not said so. The Approved Valuer's Report estimating the cost of acquisition as on date of sale at Rs. 99,95,058/- was well before the AO. If the AO had any doubt or suspicion in respect of the same he could have made an on the spot inquiry or at best could have referred the matter to the Valuation Cell for determination of correct cost of acquisition on the basis of cost inflated index. The AO did not examine the Approved Valuer also. Undoubtedly, it has to be accepted that the matter is quite old (relating to 1986-87) and the assessee is not expected to maintain the records of over last 20 years or more. It is also true, that suspicion howsoever grave cannot form part of proof. In such kind of matters, the Valuer's Report is the only evidence which has to be relied upon. I fail to understand as to how the AO can accept the Valuation Report in part and decline to accept the remaining part. Once if a valuation report is filed in evidence, the same has to be accepted in toto or has to be rejected in limine. Before rejecting any evidence, the AO has to record reasons as to why the said evidence is not acceptable. In this case, the AO has merely observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of the any improvement thereto. Section 45(4) states that the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm shall be chargeable to tax as the income of the firm of the previous year in which the said transfer takes place and for the purposes of section 48 the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received as a result of the transfer. Since the assessee received the property on dissolution of the partnership firm in December 1987, the FMV of the property as on the date of dissolution itself is to be taken as the cost of acquisition of the property to the assessee. The reason for inserting clause iii(b) in Section 49 has been explained by the CBDT in its circular No 495 dated September 22, 1987 as under: Capital gains on transfer of firms' asset to partners and vice versa: "24.3 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given a thoughtful consideration to the rival submissions and from a careful perusal of orders of the lower authorities, we find that the sole dispute before us is whether the cost of acquisition of the property is to be taken as on 09/08/1985 when the property was originally purchased by the assessees or as on December, 1987 when the respective shares of the property were distributed to the assessees on dissolution of the partnership firm. 5.1 The genuineness of the formation of the partnership firm and its dissolution was not disputed by the Revenue. Therefore, when the property was initially purchased and was contributed by the owners as their respective share capital in the partnership firm, the impugned property ceased to be the individual property/capital asset of all the three assessees as it became the capital or the property of the partnership firm. On the dissolution of the partnership firm through dissolution deed dated 31/12/1987, the assets of the firm were distributed and all the three assessees got their respective 1/3rd share each in the said property. The said property was later on sold through sale deed dated 18/11/2008 to M/s My Car Pvt. Ltd. for a total sale co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or (c) on any distribution of assets on the liquidation of a company, or (d) under a transfer to a revocable or an irrevocable trust, or (e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via) of section 47 ; (iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. Explanation.-In this sub-section the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
