TMI Blog2004 (8) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000. However, the other partner offered a sum of Rs. 5 lakhs with certain conditions which was accepted by the assessee - Thus it is a case of dissolution of partnership firm and it did not result in any transfer of the assets - Tribunal was justified in holding that the transaction was not a transfer and no capital gains accrued - - - - - Dated:- 12-8-2004 - Judge(s) : R. K. AGARWAL., K. N. OJHA. JUDGMENT The judgment of the court was delivered by R.K. AGARWAL J. - The Income-tax Appellate Tribunal, Allahabad, has referred the following two questions of law under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act" for the opinion of this court: "1. Whether, on the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as partners to an end. Taking into account the nature of the business, it was considered by both the partners that it would be mutually beneficial if one of them took over the running business and paid to the other partners, the value of his share in terms of money. On the basis of this mutual understanding, the assessee first offered to purchase the half share of Shri Radhey Shyam Agrawal in the cinema building for Rs. 2,50,000. Accordingly, an agreement to sell was executed between the two partners on January 3, 1975. A cheque of Rs. 50,000 dated January 5, 1975, was given by the assessee to Shri Radhey Shyam Agrawal as earnest money. It appears that later Shri Radhey Shyam Agrawal has second thoughts and he made a counter offer to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remainder to be paid in terms of the above agreement was Rs. 4,75,000 on the payment of which the firm was agreed to be dissolved. Shri Radhey Shyam Agrawal could collect the aforesaid sum of Rs. 4,75,000 only by May 22, 1975. He paid the amount to the assessee on that date. With this the firm came to an end and as per the agreement dated February 23, 1975, referred to above, the assessee gave up all his rights in the movable properties of the firm and also agreed to let his half share in the cinema building be utilised by Shri Radhey Shyam Agrawal for running the cinema. A sale deed regarding the share in the immovable property could not be executed (nor was it executed till the date of the order of the Tribunal) as the permission of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and got rent for it from Shri Radhey Shyam Agrawal, which was also offered for assessment as E income from property year after year. The Tribunal has held that it was a case of dissolution and one partner takes over the assets of the other and offered to the other the price of his share and no transfer of assets took place and, therefore, liability to capital gains did not arise. Apart from it, the Tribunal also referred to clause (i) of section 47 of the Act which specifically excludes such transactions from the purview of capital gains. We have heard Shri Dhanjay Awasthi, learned counsel for the Revenue. Nobody has put in appearance on behalf of the assessee. Learned counsel for the Revenue submitted that as one of the partners had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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