TMI Blog1982 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... for share in the firm and 31st March, 1968, for other incomes. There was a firm constituted under the partnership deed dated 3rd March, 1961, by name, M/s. G. S. Atwal Co. (Asansol) with eight partners of whom the assessee was one. There were certain disputes between the partners in the year 1967, particularly with the 8th partner, Sri Piara Singh Atwal. He served a notice dated 18th September, 1967, for the dissolution of the firm. In view of that, the firm was dissolved by a dissolution deed dated 23rd December, 1967, with effect from 23rd September, 1967. Under the dissolution deed a sum of Rs.90,000, besides a car, was paid towards the share of the 8th partner, Sri Piara Singh Atwal, in full settlement in the distribution of the assets of the firm. The remaining assets of the firm belonged to the remaining 7 partners. After the dissolution of the firm, the remaining 7 partners agreed to carry on the business under a partnership deed dated 1st February, 1968, in the same name of the firm, that is, M/s. G. S. Atwal Co. (Asansol). Under this, partnership deed, all the assets of the old firm, except the plant and machinery, became the assets of the new firm. Clause (5) of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from capital gain had to be considered in this year. He was further of the opinion that the assessee had not furnished the cost of acquisition of the assets in the bands of the partners. He found that the written down value of those assets as on 30th September, 1967, amounted to Rs. 7,45,850. On the basis of the assessee's share of 13 per cent. in the firm, he determined the cost of acquisition by the assessee at Rs. 96,961. As the value of shares allotted to the assessee by the limited company amounted to Rs. 4,65,000 he determined the difference of Rs. 3,68,039 as income from capital gains from the sale of long-term capital assets. The assessee went up in appeal before the AAC. The AAC upheld the order of the ITO. The assessee preferred a further appeal before the Appellate Tribunal and made respective submission. The Appellate Tribunal carefully considered the rival submissions. The Tribunal found that the plant and machinery, which was a capital asset of the assessee, had been transferred to M/s. G. S. Atwal Co. (Engineers) Pvt. Ltd. during the previous year and any profit arising out of the aforesaid transfer of the capital asset was deemed to be the income of the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous owner " could not be substituted. Since the assessee had not obtained any depreciation, the written down value of the assets on the date of the dissolution of the old firm could not be taken as the cost of acquisition to the assessee. It was held, therefore, that the Revenue authorities were in error in taking the written down value of the assets on 30th September, 1967, at Rs. 7,45,850 as the cost of acquisition of the assets and computing the capital gains on that basis, The Tribunal, therefore, directed the ITO to recompute the capital gains taking the cost of acquisition of the assets, as indicated in its order. Upon these facts, the question, as indicated hereinbefore, has been referred to us. It is necessary in order to answer this question to briefly refer to the scheme of the sections dealing with capital gains. But, before we do so, we may hurriedly refer to certain definitions to which our attention was drawn. Section 2(vii) provides the definition of " assessee ". Section 2(xxxi) defines a " person " and it includes, inter alia, II an individual as well as a firm ". Our attention was also drawn to s. 67 of the Act which provides for the mode of computing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement thereto. Section 49 deals with cost with reference to certain modes of acquisition. It provides that where the capital asset became the property of the assessee, inter alia, under cl. (iii)(b) on any distribution of assets on the dissolution of a firm, body of individuals or other association of persons, the cost of acquisition should be deemed to be the cost for which the previous owner of the property acquired it as increased by the cost of any improvement of the asset, incurred by the previous owner or the assessee, as the case might be. The Explanation to that section provides as follows : "Explanation In this sub-section the expression previous, owner of the property in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section. " Section 50 is a special provision for computing the cost of acquisition in the case of depreciable assets. Section 50 is as follows : " 50. Where the capital asset is an asset in respect of which a deduction on account of depreciation has been obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of the property by the assessee. Section 50 specifically provides for computing cost of acquisition in the case of depreciable assets where the capital asset is an asset in respect of, which a deduction on account of depreciation has been obtained by " the assessee " in any previous year. Therefore, the section makes it quite clear that in order to reduce the cost of acquisition to the written down value, the depreciation must be obtained by the assesses and not by the Previous owner. Now, the assessee in this case, indisputably, did not obtain any depreciation, but, the firm undoubtedly got it. But the previous owner and the assessee are not synonymous in the scheme of ss. 49 and 50. Though s. 50 is subject to the provisions of ss. 48 and 49, that must be in the sense that after acquisition if the assessee had obtained depreciation and got the written down value reduced and thereafter the assessee got it transferred then the cost of acquisition should have been taken as the written down value because the depreciation had been obtained by the assessee itself. In that sense, s. 50 was subject to the provisions of ss. 48 and 49. In the present case, there is no dispute that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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