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TMI Blog2016 (5) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in income of Rs. 60,36,500/-. 3. In the course of assessment proceedings, two issues were raised. First issue was about the nature of income arising on sale of under construction project. The Assessing Officer concluded that income arising on sale of the project is in the nature of 'business income' as against 'capital gains' claimed by the Assessee. Second issue was about the taxability of the impugned income of Rs. 60,36,500/- in the correct hands. It was the case of the AO that the income is chargeable to tax in the hands of the partnership firm i.e. assessee. On the other hand, the assessee claimed that the partners have offered the income for taxation in their hands. 4. The dispute was carried to the ITAT. The ITAT in its combined order dated 28/11/2008 in ITA No.278/PN/2001 and others, after analysing the facts concerning the above issues decided in the first issue in favour of the Assessee. The ITAT held that the under-construction work is a 'capital asset' in the facts of the case and accordingly chargeable to tax under the head 'capital gains' on its transfer. As regards the second issue, the matter was kept open and remanded back by the ITAT to the file of the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings which incidentally took on three different occasions and different dates still the appellant has not been able to furnish any such details which could justify the claim made. The first assessment u/s 143(3) was completed on 28.03.2000 and the last set aside assessment u/s 143(3) was completed on 24.12.2009 and for the past nine years the appellant has been seeking an opportunity to present their view point and explanation which as contended has not been provided. The appellant has been harping on the issue of taxability of the income in the hand of the partners, but the details and evidences brought on record do not support the stand taken by the appellant. The appellant has not been able to conclusively prove as to whether the firm was dissolved or not and even the sale deed despite indicating that the Naiks were owners of the work-in-progress also indicate that they were partners of the firm which had developed the project. In the appellant's submission before the ITAT which has been included and filed during the present appellate proceedings, it has been mentioned that in A.Y. 1993-94 the investment was distributed among the partners by crediting investment accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite any such division. 4.11 In the case of Gandamal & Sons Vs ACIT (2007) 101 ITD 368 ITAT Pune, the AO. applying sec. 45(4) adopted the market value of house property and after allowing deduction for cost of building and deduction u/s 48 determining the LTCG, the assessee case was that, since partners continued to hold the building as joint owners, there was no transfer and section 45(4) was not applicable, the ITAT Pune held that capital gain arises to firm u/s 45(4). The Hon. ITAT held that the land was purchased with the funds of the firm and it was shown in the balance sheet of the assessee year to year till it was distributed in connection with the dissolution of the firm. Section 14 of the Partnership Act, clearly provides that any property obtained by the means of partnership from time to time during its continuation whether by way of purchase or by employment in the business, is the partnership property unless contrary is established. Land was used for the purpose of the firm and, therefore, the onus to prove that it belonged to the partners lied on the assessee. Thus the onus does not get discharged by merely mentioning that land belonged to partners and distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained earlier in Sec. 47 meant that the distribution of capital assets on the dissolution of the firm etc, were not regarded as 'transfer'. The Finance Act, 1987 w.e.f. 1st April 1988 omitted this clause, the effect of which is that distribution of capital assets on the dissolution of a firm would henceforth be regarded as transfer. Therefore, instead of amending Sec. 2(47) the amendment was carried out by the Finance Act by omitting sec. 47(ii), the result of which is that distribution of capital assets on the dissolution of a firm would be regarded as 'transfer'. 4.14 Thus, in view of the above mentioned facts and material on record it can be seen that the appellant has not been able to furnish any further evidence or proof in support of the claim made and the grounds of appeal raised. Even the details with respect to the issues raised by the ITAT for which specific directions were issued has not been complied with by the appellant. The appellant has not filed any further details with respect to either the discontinuation of business, transfer of assets from the firm to partners and also with respect to any agreement entered into between the parties. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove fact and the ratio of the judicial citations mentioned above, and the express provisions of the statute, l hold that the capital gains which arose from the sale of the WIP of the firm would have to be assessed in the hands of the firm and not in hands of the individual partners as claimed by the appellant under the head income from capital gains and not under the head "income from business' as worked out by the A.O. The grounds of appeal no.1, 2 and 3 raised by the appellant are accordingly decided and the appeal is partly allowed." 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before us by raising the following Grounds of Appeal reproduced hereunder :- "1. In the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in holding that the Capital Gain was assessable in the hands of the Appellant/Assessee. 2. In the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the partners in individual capacity had paid the Capital Gain taxes. By taxing the same transaction in the hands of the appellant firm amounts to taxation of the same income t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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