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TMI Blog2009 (11) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 45(4) of the Income-tax Act since the assessee firm has distributed the revaluation reserve to the exiting and retiring partners during the year under consideration." 2. The assessee is a partnership firm. We are concerned with the AY 1998- 99. While completing the assessment the Assessing Officer observed that the land and building belonging to the firm were revalued and a revaluation reserve account had been created which was shown in the liabilities side of the balance sheet in the financial year ending 31-3-1996. In the financial year relevant for the AY 1998-99 the revaluation reserve was credited to the partners' capital accounts. From the accounts, the Assessing Officer further noted that revaluation reserve of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a distribution of "capital assets" in specie in order that the sub-section is attracted. In the present case, there is no distribution of capital assets in specie. The land and building continued to remain with the firm even after the crediting of the revaluation reserve to the capital accounts of the partners. This is proved by page 28 of the paper book which is the fixed assets schedule of the firm as on 31-3-1998. The land and building are shown therein as the first two items. Thus there is no distribution of any capital asset. It is only the appreciation in the market value of the land and building that was credited to a revaluation reserve account and was then transferred to the partners' capital account. The revaluation reserve ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appreciation in the market value of the assets. This judgment is therefore not an authority for what the revenue contends in the case before us. In CIT v Southern Tubes (2008) 306 ITR 216, a judgment of the Kerala High Court cited by the revenue, one of the partners took over the land and factory building on dissolution of the firm and continued the business and this was held to be a transfer in terms of section 45(4). Again this is not a case of crediting the partner's account with the appreciated value of the capital asset but was a case of handing over the asset in specie to the continuing partner. A case of crediting the account of the partner with the revaluation reserve account came up before the Mumbai bench of the Tribunal in G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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