TMI Blog2016 (8) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... rted by the revenue by bringing any contrary material on record, we do not see any reason to interfere in the order of ld. CIT (A). The same is hereby upheld. This ground of the revenue’s appeal is rejected. Addition on account of agriculture income - Held that:- In respect of proving the earning of agricultural income, ld. Counsel for the assessee stated that the assessee had duly filed evidence of ownership of the land but he expressed his inability to furnish the evidence with regard to earning of agricultural income. In our considered view, the assessee made the claim of agricultural income but burden of proving the same is on the assessee. The assessee could not discharge the burden of proving by placing any supporting evidences. In the absence of supporting the evidences before the authorities below and also before this Tribunal, we are unable to accept the contention of the ld. Counsel for the assessee. Hence we reject this ground of the assessee. The appeal of the assessee is dismissed. - ITA No. 388/JP/2014, ITA No. 352/JP/2014 - - - Dated:- 11-8-2016 - Vikram Singh Yadav (Accountant Member) And Kul Bharat (Judicial Member) For the Revenue : Raghuvir Singh D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d short term capital gain. 4.1. The ld. D/R submitted that the ld. CIT (A) was not justified in deleting the addition. He submitted that the AO had made addition on the basis that the assessee had purchased a piece of land at Norangabad, Alwar which was converted for industrial use. Subsequently the assessee has sold 1/8th piece of this land on two occasions to Shri Praveen Kumar Jain son of Shri Jugmandir Lal Jain and Shri Chandra Prakash Jain son of shri Jugmandir Lal Jain for a consideration of ₹ 17,00,000/- each for which the Stamp Valuation Authority had adopted the value at ₹ 17,09,704/- each portion. The AO computed the capital gain on this transaction at ₹ 29,21,631/-. However, the ld. CIT (A) deleted the same on the basis that in fact no transfer took place as the property remained in the books of accounts of the firm in which the seller and buyer are the partners. He submitted that there is no mention of such fact in the Sale Deed. Therefore, the ld. CIT (A) was not justified in deleting the addition. 4.2. On the contrary, the ld. Counsel for the assessee submitted that the old partner and new partner continued to carry on the business of the firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 300 that the whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done, whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share. The property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. Property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm. When a partner brings in his personal asset into a partnership firm as his contribution to its capital, an asset which originally was subject to the entire ownership of the partner becomes now subject to the rights of other partners in it. When his personal asset merges into the capital of the partnership firm a corresponding credit entry is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the partnership capital, transformed into an interest shared with the other partners in thatasset. Qua that asset, there is a shared interest. During the subsistence of the partnership, the value of the interest of each partner qua that asset cannot be isolated or carved out from the value of the partner s interest in the totality of hte partnership assets. And in regard to the latter, the value will be represented by his share in the net assets on the dissolution of the firm or upon the partner s retirement. 5.14 Hon ble Supreme Court has further observed in the said decision......... What is the profit or gain which can be said to accrue or arise to the assessee when he makes over his personal asset to the partnership firm as his contribution to its capital? The consideration, as we have observed, is the right of a partner during the subsistence of the partnership to get his share of profits from time to time and after the dissolution of the partnership or with his retirement after a deduction of liabilities and prior charges. When his personal asset merges into the capital of the partnership firm a corresponding credit entry is made in the partner s capital account in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarging the debts and liabilities due by the Firm. Upon dissolution the firm ceases to exist; then follows the making up of accounts, then the discharge of debts and liabilities and thereupon distribution, division or allotment of assets takes place inter se between the erstwhile partners by way of mutual adjustment or rights between them. The distribution, division, or allotment of assets of the erstwhile partners, if not done by the dissolved firm. 5.16 However, the Income Tax Act recognizes the firm as a distinct assessable legal entity apart from its partners. Sub-sections (3) and (4) of Section 45 were introduced by Finance Act, 1987, which came into effect from 01.04.1988. In sub-section (3) what is sought to be taxed is the profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals. After such transfer, he is or becomes a partner or member, by way of capital contribution or otherwise. Then the said capital contribution shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale deed executed by the partner for part transfer of land rights in the names of incoming partners in the ratio of their profits/losses in the firm and has accordingly proposed to treat the same as transfer by the appellant gains to be taxed as short term capital gains. The appellant has stated that once this fact has been established that the asset continues to exist in the books of the firm and there was no dissolution of the firm, therefore, the question of imposing capital gains on transfer of part share in the assets in the name of new partners does not arise. 5.19 The old partner (which is the appellant himself) and the new partners continued to carry on with the business of the firm. There was no dissolution of the firm or at any rate there was no distribution of capital assets on 29.03.2010 or on 08.04.2010 when one of the partners retired from the partnership firm and his share was taken up by the four new partners. What was given to the retiring partner is cash representing the value of his share in the partnership. No capital asset was transferred on the date of retirement under the deed of retirement dated 08.04.2010. At the time of admission of new partners in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings and copy of ledger accounts, bank statements were also filed by the appellant before the AO. The consideration received was credited to the partner s capital account in the firm and the account of the retiring partner was settled by making payment due to him as per the balance outstanding in the capital account. 5.22 Therefore, I find no justification in the action of the AO in invoking the provisions of section 50C of the IT Act for the purposes of levy of capital gains tax in the bands of the appellant, whereas the fact that the asset was still being shown by the firm in the books of accounts of the firm and in the returns filed has remained uncontroverted and is not denied. After considering the material placed on record and the legal position arising out of these facts, I hold that there would be no liability to capital gains tax in the hands of the appellant and accordingly, delete the addition of ₹ 29,21,631/- made by the AO on this account. On the above finding, it is evident that ld. CIT (A) has verified the fact that the capital asset remained in the books of account of the firm. It is also a fact that the capital asset was introduced into the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of appellate proceedings, it is submitted by the appellant that no amount was paid on account of purchase consideration as the property was transferred by the appellant himself as GPA holder of the earlier partner Sh. Kundan Lal Badshah, in favour of the appellant. This was done to secure the legal rights in the immovable property of the firm. Accordingly, no consideration was paid for this deed. Further, the deed has been executed by the appellant himself in his name. Therefore, no consideration could have been paid by the appellant to himself. However, as regards the addition of ₹ 9,91,110 which was made on account of registration expenses, the appellant has filed a copy of the bank statement showing cash withdrawals made and which has been used for meeting these expenses. 6.7 AO has accepted the position as regards the purchase consideration is concerned and not made any adverse comments on this issue in the remand report. Considering the submissions made in this regard, the discussion on this issue in the ground no.2 above and material available on record, addition of ₹ 10,00,000/- made by the AO on account of purchase consideration is deleted. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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