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TMI Blog2024 (6) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... -stored. Accordingly, this appeal has come before us for hearing. 3. Originally, the appellant/assessee filed Ground of Appeal in Form No. 36 but subsequently filed 'Revised Grounds' through a separate application dated 13.10.2023. It is submitted that the Revised Grounds are merely reframed by changing the language and no additional ground has been raised. With the consensus of both sides, the Revised Grounds were taken for adjudication. These grounds read as under: 1. That, the Ld. CIT (A) has erred in law in confirming addition of Rs. 2,53,98,000/- made by Ld. AO by treating the amount received by appellant in respect of transfer of his interest in the property inherited by him viz., share in his father's interest in the partnership firm M/s. Bhagirath and Brothers, which devolved upon him as a result of death of his father on 12.6.1990, treating such right as transfer of his share in the immovable property belonging to the partnership firm and subjecting it to the capital gain in spite of the admitted factual position that the property in question belonged to the partnership firm of M/s. Bhagirath and Brothers and further, invoking the provisions of section 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of will (Point No. 1, Page No. 5 of assessment-order). After death of father, when the assessee wanted to leave family and the matter prolonged for a long time between assessee and his brothers, the assessee decided to give up his share in favour of family members and executed sale-deed. Thus, it was a mere devolution of property-cum-forced sale to family members. With these twin-submissions, the assessee claimed before AO that neither the impugned transaction would be taxable nor the deeming provision of consideration u/s 50C would apply. Additionally, the assessee also made a submission that the consideration received under sale-deed had been re-invested in certain properties, therefore the assessee would be entitled to exemption u/s 54/54F which would also reduce taxable gain to Rs. Nil. The AO considered assessee's reply in Para 6 to 9 of assessment-order and upon consideration rejected the same. He observed that the assessee received impugned property from his father in individual capacity. He noted that the assessee also made sale in individual capacity which is evident from sale-deed wherein the assessee's individual name and PAN have been mentioned and there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the calculation of assessee's share, we may mention that the partnership firm owned 1.86 acres of land (1 acre = 43,560 square feet, therefore 1.86 acres = 81,021 square feet) and 20,000 square feet of construction. Therefore, 1/3rd share of assessee's father comes to 27,007 square feet of land and 6,666 square feet of construction and assessee's 1/6th share in father's share comes to 4,501 square feet of land and 1,111 square feet of construction. The assessee, described as "Seller" in the sale-deed, sold his share, namely 4,501 square feet of land and 1,111 square feet of construction to his 3 brothers described as "Purchaser" in the sale-deed [The CIT (A) has in advertently mentioned 2 brothers in place of 3 brothers]. Ld. AR that the sale-deed itself clearly mentions the status of property i.e. the property was actually owned by firm M/s Bhagirath & Brothers and not by assessee's late father. The assessee's father only had 1/3rd undivided share in the property of firm which upon his death devolved upon 6 legal heirs (including assessee). Ultimately, the assessee executed sale-deed to transfer/relinquish his own undivided share in father's 1/3rd undivided share in the property o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the course of the business of the firm; and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm." Then, Ld. AR invited our attention to a commentary given by an author on aforesaid section 14, filed at Page No. 34 of the Paper-Book, reading as under: "7. No part of property of the firm or a definite share belong to any partner individually - It may be said that the rule adopted by English Courts is that real estate intended by the partners to constitute a part of the partnership property or treated by them as belonging to the partnership is regarded in equity as converted in to personality for all purposes and also for the settlement of the claims of the partners inter se. The law in India is not different. Secs. 14 and 15 of the Indian Partnership Act, 1932, speak about what would constitute the property of a firm and declare that such property shall be held and utilized for the purpose of the partnership thereby indicating that so long as the partnership continues no part of the assets of a partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he partnership may be taken to be an interest in the immovable property belonging to the firm. Many of cases, both English and Indian, undoubtedly held such interest of partners not to be immovable property. But that view is not consistent with the Indian concept of realty and ownership, or the view of the Judicial Committee referred above. Thereafter, Ld. AR relied upon decision of Hon'ble Supreme Court in Addanki Narayanappa and Another Vs. Bhaskara Krishtappa and 13 others (1966) SCC Online SC 6 : (1966) 3 SCR 400 : AIR 1966 SC 1300; we quote below the paras referred by Ld. AR during hearing: 1. In this appeal by special leave from a judgment of the High Court of Andhra Pradesh the question which arises for consideration is whether the interest of a partner in partnership assets comprising of movable as well as immovable property should be treated as movable or immovable property for the purposes of s. 17(1) of the Registration Act, 1908. 4. Direct cases upon this point of the courts in India are few but before we examine them it would be desirable to advert to the provisions of the Partnership Act itself bearing on the interest of partners in partnership property. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttributable to the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm. The subject of dissolution of a firm and the consequences are dealt with in chapter VI, sections 39 to 55. Of these the one which is relevant for this discussion is section 48 which runs thus: "In settling the accounts of a firm after dissolution the following rules shall, subject to agreement by the partners, be observed: (a) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits. (b) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order :- (i) in paying the debts of the firm to third parties: (ii) in paying to each partner rateably what is due to him from the firm for advances as distinguished from capital; (iii) in paying to each partner rateable what is due to him on account of capital; and (iv) the residue, if any, shall be divided among the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive right over any property which he has brought in, much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated, his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges. It is true that even during the subsistence of the partnership a partner may assign his share to another. In that case what the assignee would get would be only that which is permitted by section 29(1), that is to say, the right to receive the share of profits of the assignor and accept the account of profits agreed to by the partners. There are not many decisions of the High Courts on the point in the few that there are the preponderating view is in support of the position which we have stated. 8. We may also refer to the decision of a Full Bench in Ajudhia Pershad Ram Pershad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the CIT (A) has also rightly upheld the AO's action. Ld. DR prayed that no interference is required with the orders of lower-authorities. 10. In rejoinder, Ld. AR submitted that the "Memorandum of family settlement" has been made on the very same day on which the sale-deed was made because nobody wants a time-gap in such matters. Therefore, no adverse inference should be taken based on date of execution. 11. We have considered rival submissions of both sides and perused the orders of lower-authorities as well as the material held in case file. The controversy before us is whether the AO was right in assessing capital gain in the hands of assessee? The admitted undisputed facts are such that (i) the assessee executed a registered sale-deed on 30.05.2011 in favour of his 3 brothers, (ii) the sale-deed was executed by assessee as "seller" in his individual name and individual PAN, and (iii) the assessee received a total consideration of Rs. 1,80,00,000/- from 3 brothers (Rs. 60,00,000/- from each one). There can hardly be any dispute on the point that if a person sells a property/right in divided or undivided property for a consideration, the resultant gain is taxable. But, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the two claims/contentions argued by Ld. AR before us as narrated in foregoing para 8(i) and 8(ii). The first claim is such that the assessee executed sale-deed as part of 'family settlement' and 'family settlement' is not taxable under Income-tax. We find that the assessee has never claimed before lower-authorities the factum of "family settlement" although the assessee claimed "partition of HUF". As stated earlier, the theory of "family settlement" has been pushed for the first time in the application under Rule 29 by mentioning "family arrangement or partition", "Family Settlement". Further, in the "additional evidences" filed under Rule 29, the assessee has filed "Memorandum of Family Settlement" alongwith "Partition-Deed" because the "Partition-Deed", as mentioned earlier, does not support assessee's stand. Further, the Ld. AR for assessee has also refrained from making any pleading qua 'partition of HUF' claimed by assessee before lower authorities. Instead, Ld. AR harped on 'family settlement'. We may mention that in the reply filed to AO, the assessee mentioned that it was a case of forced sale to his family members but there also the assessee did not talk of 'family set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale by assessee has been made and the assessee has received a hefty consideration of Rs. 1,80,00,000/- for transfer of his right, it would attract taxability and it is nothing to do with the provisions of section 14 of the Indian Partnership Act. The department is not asking to pay tax on any kind of 'notional' transfer, the revenue's case is such that the assessee has made an actual sale which is taxable. Needless to mention that the assessee is also claiming to have utilized the sale consideration of Rs. 1,80,00,000/- for making investments in newer properties (it is a different point that the assessee claimed exemption u/s 54/54F on the basis of those newer investments but the AO has disallowed exemption on a different premise). Therefore, we do not find any merit in the second claim of assessee argued by Ld. AR too. The same is hereby rejected. 15. In view of above discussions and for the reasons stated therein, the Ground No. 1 raised by assessee is found to be devoid of any merit and the same is hereby dismissed. Ground No. 2: 16. In this ground, the assessee challenges the addition of Rs. 33,23,700/-made by AO on account of unexplained cash deposits in bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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