TMI Blog2019 (8) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant fairly attracts the capital gains. Therefore we hold that the provision of Section 45(3) of the Act are squarely applicable to the facts of the present case. Hon ble Jurisdictional High Court in the case of Pr.CIT vs. Dr.D. Ramamurthy, [ 2017 (9) TMI 1732 - MADRAS HIGH COURT ] held that the value recorded in the books of the firm is conclusive as to the consideration received on transfer of asset by a partner to the firm. Therefore, the Hon ble Madras High Court further held that the assessment has to be done on the basis of value of asset when the firm was constituted, not on the basis of revalued value of the assets. Applying the ratio to the facts of the present case, the value to be adopted by the AO is only ₹ 29,77,300/- lakhs which was recorded in the books of accounts of the firm as on date when the firm was constituted. Whether the provision of Section 50C of the Act are applicable to the case covered by the Section 45(3)? - Provisions of Section 45(3) of the Act, are special provisions as it deems value of consideration which otherwise is not computable under general law and it is applicable to the specific situations of introduction of capital b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s 2348 of the Act amounting to ₹ 75,46,491/- through computation attached as Annexure to the Order though not specifically adjudicating the ground raised in this regard. 5. For that the Learned Commissioner of Income Tax (Appeals) erred in indirectly confirming the levy of interest u/s 234A of the Act amounting to ₹ 16,541/- through computation attached as Annexure to the Order though not specifically adjudicating the ground raised in this regard. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to delete the long term capital gains confirmed in the Order of the Commissioner of Income Tax (Appeals) and/or pass such other orders as the Hon'ble Tribunal may deem fit. 3. The brief facts of the case are as under: The appellant is an individual deriving income from business. The return of income for the assessment year 2015-16 was filed on 02.02.2016 disclosing total income of ₹ 13,65,210/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Non-Corporate Ward 15(1), Chennai (hereinafter referred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring ratio. Finally based on the market value of the land, the land was revalued and the same was credited to the respective partners account and the share of the appellant was determined at ₹ 23,94,41,006/-. Based on this valuation, the AO adopted this value as consideration for transfer of the asset to the firm and computed the capital gains by deducting the cost of acquisition, as increased by the cost of inflation index. Accordingly, the AO arrived the Long Term Capital Gain at ₹ 23,69,78,315/- and brought to tax. 4. Being aggrieved by the action of the AO, an appeal was preferred before the CIT(A) contenting that the provisions of Section 45(3) of the Act have no application to the facts of the present case, as the asset transferred to the firm as capital contribution is not capital asset. Without prejudice, it was argued that the value recorded in the books of firm is conclusive evidence of consideration received in respect of the capital contribution to the partnership firm U/s.45(3) of the Act. It is further contended that the provisions of Section 50C of the Act has no application to the cases covered by provisions of Section 45(3) of the Act, as the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of asset and accordingly worked out the capital gains by adopting the market value of the land as revalued subsequently by the firm in the books of accounts. While doing so, the AO adopted 50% of the revalued value of the entire land owned by the firm as the consideration and accordingly computed the capital gains. While doing so, the AO assumed that the revalued figure is the market value which is required to be adopted under the provisions of Section 50C of the Act. Accordingly, AO had impliedly applied Section 50C of the Act and assessed to capital gains. On appeal before the CIT(A), the Ld.CIT(A) upheld the applicability of provisions of Section 45(3) of the Act as well as Section 50C of the Act, however directed the AO to adopt the revalued value proportionate to the share of land contributed by the partner. 7.1 Therefore, the question that arises to be addressed is whether the transfer of asset by a partner to the firm constitutes a transfer? The provisions of Section 45(3) of the Act provides that profits or gains arising from the transfer of a capital asset by a person who is a partner to the firm by way of capital contributions shall be chargeable to tax in the year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provision of Section 50C of the Act are applicable to the case covered by the Section 45(3) of the Act. We had already discussed the rationale behind the introduction of Section 45(3) of the Act. The provisions of Section 50C of the Act, provides that for the purpose of computing the capital gains U/s. 48 of the Act, the higher of two values i.e., the actual consideration received and the value adopted for stamp duty purpose for the valuation of the property shall be deemed to be consideration received. From the mere reading of the provisions of Section 50C of the Act, it would suggest that the provisions are applicable in the cases where there is actual receipt of consideration. The term actual receipt implies that there should be physical flow of money. Therefore the provisions of Section 50C cannot be applied to the case of deeming the value of consideration like cases covered by provisions of 45(3). Therefore it is clear that provisions of Section 45(3) and 50C of the Act operates in different spheres. There is no overlapping. Further if we were to hold that the provisions of Section 50C of the Act overrides the provisions of Section 45(3) of the Act, it would result in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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