TMI Blog1993 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... nt' of one of the partners, is the firm dissolved ? (3) Whether, on the facts and the circumstances of the case, on retirement of the assessee, her right in the land which was brought in as an asset got extinguished within the meaning of section 2(47) of the Income-tax Act ? (4) Whether, on the facts and the circumstances of the case, without any other material on record except the affidavit dated March 13, 1972, can it be said that the assessee was doing business in buying and selling land ? Additional question : (5) If it is held that the firm is genuine, whether on the facts and in the circumstances of the case the sum of Rs. 9,92,504 or any part thereof received by the applicant on the dissolution of or retirement from the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of sale and purchase of lands. The assessee had a 50 per cent. share in the said firm and other 50 per cent. share belonged to the limited company. In terms of the deed of partnership, the assessee brought in the said land as her share of capital contribution in the partnership firm which was valued at Rs. 10,00,000. At that time, the other party did not bring in any capital but it was agreed that it might contribute capital as and when required. Such an occasion, however, did not arise. Though the above firm was to carry on the business of sale and purchase of land, no dealings in land were conducted by the said firm. On the other hand, within three months of its formation, on March 28, 1973, the assessee expressed her desir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at she was carrying on any business of dealings in land. The Tribunal did not feel inclined to act on such an affidavit of the assessee without any material whatsoever to support the statement made therein. Considering all the facts and circumstances of the case, the Tribunal came to a definite finding that the assessee had transferred the land to the company for Rs. 10 lakhs for which she received the amount of consideration in the form of shares. According to the Tribunal, in view of the definition of "transfer" as given in section 2(47) of the Act, the fact that the transfer took place without a formal deed of conveyance was of no consequence. Hence this reference at the instance of the assessee. Mr. Pardiwalla, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal sharing of profit and loss between herself and the company. " After discussion a resolution was passed to that effect. On March 28, 1973, the chairman informed the board the desire of Smt. N.G.Agarwal to retire from the partnership and the chairman further informed that it should be accepted and a resolution was passed to the effect that Nayantara Agrawal was allowed to retire from the partnership firm and that Shri Purushottam R. Kejriwal was allowed to sign the deed of dissolution. It may be clarified that the chairman, G. N. Agarwal, is the husband of the assessee and Kejriwal is the brother of the assessee. Shri Purushottam R. Kejriwal has admitted the execution of "the so-called deed of dissolution". It may further be ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of dissolution and it became the property of the other partner, i.e., the company, for a consideration of Rs. 10 lakhs which was paid to the assessee in the form of shares. In that view of the matter, we do not find that the Tribunal committed any error in not acting upon the affidavit of the assessee dated March 13, 1972, which evidently is not supported by any material whatsoever. We are of the clear opinion that the Tribunal was right in holding that the firm was not genuine and that there was a transfer of capital asset from the assessee to the limited company within the meaning of section 2(47) of the Act which was subject to capital gains tax under section 45 of the Act. It may be appropriate to mention that the facts set out above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re." The proper way to construe a taxing statute, while considering device to avoid tax, as observed by the Supreme Court in McDowell and Co.'s case [1985] 154 ITR 148, at page 160, is not to ask whether the provision should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and to consider whether the situation created by the devices could be related to the existing legislation with the aid of emerging techniques of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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