TMI Blog2017 (3) TMI 1879X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that ld CIT (A) has rightly deleted the addition therefore we confirm the order of ld CIT (A).- Decided against revenue. - I.T.A No. 2260/Kol/2013 - - - Dated:- 15-3-2017 - Sri Aby. T. Varkey, JM And Dr. Arjun Lal Saini, AM For the Appellant : Shri G. Mallikarjuna CIT, DR. For the Respondent : Shri J.P. Khaitan, Sr. Advocate Shri S. Jhajaria, FCA. ORDER Per Dr. A.L. Saini, AM This is an appeal by the Revenue against the order dated 23.05.2013 of CIT(A)-I, Kolkata relating to AY 2008-09. 2. The Assessee is a company. For AY 2008-09, the Assessee filed a return of income declaring total income at ₹ 1,10,388/-. The Assessee along with M/S. Command Constructions Pvt. Ltd., M/S. Blue Heaven Griha Nirman Pvt. Ltd., and M/s. Orchid Griha Nirman Pvt. Ltd., were partners in a partnership firm by name M/S. Salarpuria Soft Zone. The income declared by the Assessee was on account of share of exempt profit from the partenership firm M/S. Salarpuria Soft Zone. The return so filed was processed u/s.143(1) of the Income Tax Act, 1961 (Act) on 12.10.2009. The assesse has shown, mainly, income from share of profit transferred from partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- after taking into consideration the stamp duty and registration cost. The said three companies had purchased the said land with the object of developing an industrial park. Each of the said three companies accounted for the said land so purchased as work in progress and reflected it under Current Assets in the balance sheet. 6. On January 9, 2006, the said three companies and another company called assesse company (Wellgrowth Griha Nirman Pvt. Ltd.) executed a deed of partnership in terms of which the said three companies transferred the said land to the partnership firm M/s. Salarpuria Soft Zone as their capital contribution. The fourth assessee company was to arrange the entire finance required for the development of the said land. Each of the said three companies had a 10% share in the profit/loss and the assessee company s share was 70%. The partnership business was deemed to have commenced on and from April 1, 2005. A supplemental deed of partnership was executed on March 13, 2006 between the four partners which inter alia, provided that the said firm can avail loan/credit facilities from commercial banks/financial institutions by mortgaging/charging its movable and im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income chargeable to tax. The AO in the reassessment proceedings held that: - (a) Bringing of land into the said firm by way of inventory as part of the project without crediting the partners capital accounts and without bringing it as fixed assets cannot be considered as capital contribution by the partners during the financial year ended March 31, 2006. The land was contributed by the said three companies during the previous year ended March 31, 2008 relevant to the assessment year 2008-09 for a sum of ₹ 314,29,74,600/- (value of the land on revaluation as on 31.3.2008) by way of capital contribution when it was converted into fixed assets from inventory by the said firm. (b) Section 45(3) of the Act was applicable in respect of such transfer made during the previous year relevant to the assessment year 2008-09. The revalued figure of ₹ 314,29,74,600/- recorded in the books of account of the said firm as on March 31, 2008 was to be deemed as the full value of consideration received or accruing as a result of transfer of the capital asset by way of capital contribution. The revaluation amount of ₹ 289,13,56,904/- was the profit which accrued to the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the total income of the firm is exempt in his hands. What is taxed in the hands of the partner is only the amount of interest, salary, bonus, commission or remuneration which has been allowed as a deduction in the assessment of the firm in terms of section 40(b) of the Act. If the revaluation by the firm resulted in any taxable income, such income had to be considered in the hands of the firm alone and the partner s share in such income would be exempt in his hands. Even if the case made out in the recorded reasons is taken as correct, the AO could not have formed the belief that any income in respect of which the partner was chargeable to tax had escaped assessment in his hands. The AO himself was quite aware of this position as is apparent from the observation made by him in paragraph 7.2 of his order. Even if one proceeds on the basis that the revaluation of assets by the firm gave rise to taxable income, such income can onty be considered in the firm s assessment. That the firm did not disclose any income on account of revaluation and did not pay any tax on such income does not confer jurisdiction upon the partner s Assessing Officer to reopen the partner s assessment on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zance to the issue fact that this assesse company alongwith other all of the partner companies and their partnership firm has adopted the means of colourable transaction, in collusion with each other, to achieve the purpose of avoiding taxes. 6. The Ld. CIT(A) has erred in law and on the facts circumstances of the case by holding that the provisions of section 45(3) of the I.T. Act,1961 is not applicable wherein short term capital gain had been added in the hands of three other partner companies of this assesse Viz. M/s Blue Heaven Griha Nirman Pvt. Ltd [AACCB3287F], M/s Orchid Griha Nirman Private limited [AAACO7148L) and M/s Command Constructions Private Limited [AACCC5075A] who had transferred their land to the partnership firm as their capital contribution. 7. The appellant craves leave to amend, modify and alter any grounds of appeal during the course of hearing of this case. 15 The Ld AR for the assesse has submitted before us that the issue under consideration are fully covered by the order dated October 19, 2016 passed by the A Bench of Hon`ble Tribunal Kolkata in ITA No. 2269 /Kol/ 2013 ( Orchid Griha Nirman Pvt. Ltd) involving the same assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 45(3) of the Act or otherwise and that on revaluation of its fixed assets by the firm (of its land and building) there was no income that accrued or arose in the hands of the partners and the addition of ₹ 37,03,36,187/- on account of alleged revaluation profit is not sustainable and was rightly deleted by the CIT(A). 31. In the result, the appeal by the Revenue is dismissed. This way, the ld AR for the assesse has submitted before us that reopening the assessment U/s 147/148 was without any tangible material therefore,, the said reopening of the assessment U/s 147/148 was bad in law, as rightly held by the Hon`able Tribunal in the ITA No. 2269 /Kol/ 2013 ( Orchid Griha Nirman Pvt. Ltd) (supra). As rightly pointed out that even assuming that income accrued and arose in the hands of the firm consequent to revaluation of the assets by the firm, the income that might accrue in the hands of the partner would be in the nature of share income from the firm . In terms of Sec.10(2A) of the Act, partner s share in the total income of the firm is not to be included in the total income of the partner. Therefore, looked at from any angle, the AO could not on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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