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2009 (11) TMI 968 - ITAT AHMEDABAD

2009 (11) TMI 968 - ITAT AHMEDABAD - TMI - ITA No.354/Ahd/2003 - Dated:- 20-11-2009 - S/SHRI R.V.EASWAR, VICE-PRESIDENT AND P.K. BANSAL, ACCOUNTANT MEMBER) Revenue by : Shri Rajeev Agarwal Assessee by : Shri Aseem Thakkar O R D E R PER R.V.EASWAR, VICE-PRESIDENT: The only ground taken by the department in this appeal is as follows: 1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 1,79,49,012/- made by the AO being long term .....

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valuation 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 ₹ 1,79,47,012 had been distributed to the partners in the following manner: Siddarth D. Patel : 43,07,283 Daxaben D. Patel : 43,07,283 Dilipbhai S .....

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assessment holding that section 45(4) was not attracted to the case. Hence the present appeal by the revenue. 4. The contentions of both the sides have been considered. Under section 45(4) which was introduced by the Finance Act, 1987 w.e.f. 1-4-1988, the distribution of capital assets by a firm on dissolution or otherwise will be treated as a transfer by the firm and the fair market value of the assets as on the date of transfer shall be deemed to be the full value of the consideration received .....

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ie. 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 .....

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f the current market value is that the asset account is debited with the increase in the value and the revaluation reserve account is credited. The asset as well as the appreciation in its market value belong to the partners since under the law of partnership the firm is only a compendious name to describe the partners and they are the real owners of the assets belonging to the firm. When the appreciated value of the asset is credited to the account of the partner, he only gets his share in the .....

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