Case Law Details
RELEVANT PARAGRAPH
16.48.1 There is no dispute to the position that the profits or gains or benefits arising to the assessee from said transaction in question has been assessed under the head “business” by the AO in the light of the view that stock in trade was sold or transferred by the assessee company to a firm at an appreciated price. It was the claim of the assessee itself that the stock in trade held by it was contributed to a firm in which the assessee became a partner, and in the light of the stand so taken by the assessee, the AO brought the surplus to tax under the head “business”. In the light of the stand taken by the assessee that the land transferred to a partnership firm was stock in trade at the time when the same was contributed to a firm, the AO has treated the transaction of making over the land of the assessee to a firm to be in the nature of trading or commercial transaction rejecting the assessee’s claim that it was not liable to be taxed as no sales had taken place. However, when an argument has been advanced supported by various decisions when a partner contributes its personal assets of whatever character to a firm towards its capital contribution when he becomes a partner, the asset involved in the transaction would partake the character of capital asset at that material point of time. The learned standing counsel for the revenue advanced an alternative argument based on same set of facts but on different conclusions of law drawn from those facts that in case the contribution of land by assessee partner to a firm is accepted to have been made towards its capital contribution in a firm and the land involved in the said transaction of capital contribution to a firm is held to be of a “capital asset in nature” at the time when the same was contributed as capital contribution, the profit or gain arising from the
transfer of a land by the assessee to a firm may be taxed under section 45(3) of the Act inserted with effect from A.Y. 1988-89. This alternative argument is, in our view, undoubtedly arising from the same set of facts, and in respect of same item of income arising from the same transaction, which have been considered in the assessment made by the AO. Further, the provisions of section 2(14), 2(47) and 45(3) of the Act were very much relied upon by the AO while assessing the item to tax as is clear from the respective orders of the authorities below and from the submissions of the assessee made before the authorities below as well as before us. It is not the new source of income or new item of income that is sought to be taxed by the revenue at this stage. It is the same income assessed by the AO that is now sought to be taxed under section 45(3) of the Act in the light of the legal inferences drawn from same of set of facts, as against the business profit assessed in the assessment made by the AO. The subject matter of appeal has not been really changed. The change is only with regard to the correct head of income under which it is to be assessed under the Income Tax Act. Thus, the contention of the assessee in this regard that the department has no right to take an alternative plea to tax the profits or gains arising from transfer of land by assessee to a firm by way of capital contribution as per provisions of section 45(3) of the Act is not found convincing.
16.48.2 Further, the answer to a question that whether the land in question had a character of capital asset or stock in trade at the time when the same was contributed as capital to a firm in which the assessee became a partner is based on a legal conclusion to be drawn from same set of facts. The relevant provisions of law contained in section 2(14), 2(47) and 45(3) were very much relied upon by the department authorities below to bring the item to tax though the tax has been imposed by the AO and the CIT(A) under the head “business profit”. This makes it clear that the department has not made out a new claim for the first time before the Tribunal by way of an alternative argument made before us.
16.48.3 It is not the case where any enhancement of income is sought for by the Revenue. It is also not the case where any benefit already granted to the assessee is sought to be taken back by the department. The only point raised by the Sr. Standing Counsel for the revenue is that in case the surplus arising from the transaction is not found to be assessable under the head “business”, the same may be taxed under the head “capital gain”, and in that situation the tax liabilities of the assessee would not increase. All the facts to decide the question as to whether the surplus in question is asses sable under the head “business” or “capital gain” are available on record, which has been considered by the authorities below and which has been referred to by the assessee. The AO as well the assessee both have admitted the fact that the land was contributed as capital contribution by the assessee in the capacity of a partner. The subject matter involved in this issue is also not being changed in as much as in the light of the facts available on record and that were considered by the authorities below and also relied upon by the assessee, the same very transaction of contributing the land by a partner to a firm as its capital contribution is the sole basis to decide the alternative contention raised by the revenue. By allowing department to raise this additional plea, we do not think that we traverse beyond the subject matter of dispute between the parties involved in this case. This alternative plea raised by the revenue does not altogether changes the complexion of the case, and only change sought to be made is to determine the correct head of income on same set of facts. The various decision relied upon by the ld. counsel for the assessee are, therefore, not applicable to the present case in as much as those cases were rendered either in the situation where new facts were considered, benefit already granted to the assessee were sought to be withdrawn, the subject matter of the appeal was completely changed and the assessment was sought to be enhanced.
16.48.4 In this connection, a reliance was placed by the Revenue upon the decision of Special Bench of Income Tax Appellate Tribunal,
Mumbai Bench “C” (SB) in the case of Sumit Bhattacharya Vs. ACIT (2008) 112 ITD 1 (Mum)(SB), where the Special Bench has taken a view that the Honourable Bombay High Court in the case of Commissioner of Income Tax V. Gilbert & Barker Manufacturing Co., U.S.A. [1978] 111 ITR 529 (BOM.) has held that the Tribunal is competent to change the head of income even at the instance of the respondent when all the relevant facts are already on record as long as both the parties are heard on that issue. This decision of Special Bench in the case of Sumit Bhattacharya vs. ACIT (supra) and Honourable Bombay High Court in the case of Commissioner of Income Tax Vs Gilbert & Barker Manufacturing Co., U.S.A. (supra) are directly on the issue that arises in the present case before us. In the case of Commissioner of Income Tax Vs Gilbert & Barker Manufacturing Co., U.S.A. (supra), which has been relied upon by the Tribunal in the case of Sumit Bhattarcharya Vs. ACIT (supra), the High Court has held as under:-
“xxx xxx xxx xxx
The Tribunal would have the discretion to allow any party to the appeal, may be the appellant or the respondent, to raise a new point or a new contention provided two things are satisfied. First, that for urging such a new point no new facts are required to be brought on record and the point is capable of being disposed of on the facts which are already on record and, secondly, an opportunity is given to the other side to meet that point that is being allowed to be raised for the first time in appeal. In the instant case, it cannot be disputed that all the facts that were required for determination of the point as to whether the income returned should be assessed under the heading
“Business income” or not were already on record before the Tribunal and no further investigation of any other facts was necessary and it was on the basis of facts which were already on record that the respondent wanted to canvass the point before the Tribunal that the income returned by it should be assessed under the heading “Business income”.
Secondly, the aspect whether a particular income returned by the assesses should be brought to tax under one or the other heading of income should not be regarded as such a new point as to make the other side taken by surprise, especially when all the facts necessary for that purpose are already on record and in the instant case the department was given full opportunity by the Tribunal to meet the contention that was being permitted to be raised by the respondent for the first time in appeal. In our view, therefore, there was no question of placing the appellant in a worse position, which seems to be the implication of the question as framed. The Tribunal, in our view, was justified in permitting the respondent to agitate before it its contention that its income was assessable under the heading “Business income” and, accordingly, the first question is answered in the affirmative.
16.48.5 The Special Bench in the case of Sumit Bhattacharya Vs. ACIT (supra) has observed and held as under(extracted from head-note):-
“It is well-settled that the Tribunal is competent to change the head of income even at the instance of the respondent when all the relevant facts are already on record and as long as both the parties are heard on that issue. In the instant case, it was the alternate contention of the revenue that in the event the Tribunal came to the conclusion that the amount in question was not taxable under the head `Income from salaries’, the Tribunal might also adjudicate on the question whether or not the impugned amount be held as income from other sources.]
The Supreme Court in the case of Emil Webber Vs CIT [1993] 200 ITR 483/ 67 Taxman 532 has held that merely because an employment-related income/ benefit cannot be taxed under the head `Income from salaries’, such a benefit cannot go outside the ambit of taxable income and such an income can be taxed under the head `Income from other sources’.
Therefore, even if the amount received by the assessee on redemption of share appreciation rights was held to be not taxable under the head `Income from salaries’, this fact, by itself, would not take the same outside the ambit of taxable income. Since, in such an
eventuality and following the Supreme Court’s judgement in Emil Webber’s case (supra), the said amount would be taxable under the head `Income from other sources’. Therefore, even if it was held that the amount in question was received from a person other than the employer of the assessee, and that in order for an income to be taxed under the head `Income from salaries’ it is a condition precedent that the salary, benefit or the consideration must flow from employer to the employee, the amount received by the assessee on redemption of stock appreciation rights would still be taxable – though under the head `Income from other sources’. The plea raised by the assessee that the amount in question could not be taxed as `income from salaries’ was thus irrelevant. [Para 51]”
16.48.6 In the instant case before us, all the facts required for deciding the point as to whether the surplus arising from the transaction can be assessed under the head “capital gain” or not are already on record. No further investigation of any new fact is necessary. The provisions contained in section 45(3), on the basis of which the income can be assessed under the head “capital gain”, has been considered and deliberated upon by both the authorities below, and assessee has also furnished its comments upon the applicability of provisions contained in section 45(3) before the authorities below as well as before us. In the course of hearing of this appeal, a query was also raised by the Bench to both the parties to explain as to whether the income in question can be assessed under the head “capital gain”, and both the parties have advanced their arguments. As held by the Honourable Bombay High Court in the case of CIT vs. Gilbert & Barker Manufacturing Co. (supra), the question whether a particular income should be brought to tax under one or other head cannot be considered to be entirely new point. The assessee has been given full opportunities to meet the alternative contention raised by the department before us. In the case of the Sumit Bhattacharya Vs. ACIT (supra), the Special Bench had taken a view that the income, which was assessed by the AO under the head “salary”, could be taxed under head “income from other sources”, and the issue was decided accordingly by the Special Bench. In this respect, a reliance may also be placed upon the decision of Honourable Bombay High Court in the case of B.R. Bamasi Vs. Commissioner of Income-tax [1972] 83 ITR 223 (BOM.), where new ground before the Tribunal during arguments by the assessee in answer to appeal was permitted. The decision of Honourable Supreme Court in the case of Hukumchand Mills Ltd. Vs. CIT (1976) 63 ITR 232 (SC) has held that the power of the Tribunal in dealing with appeals are expressed in Section 254(1) in the widest possible terms, however, with a restriction of its jurisdiction to the subject matters of appeal.
16.48.7 Further, having regard to the actual controversy involved in the present appeal, in response to the Bench’s suggestions, and noting, the Honourable President vide his order dated 06.03.2009, after hearing both the parties, has directed this Special Bench to decide the appeal in its entirety without confining itself to the question earlier framed in the present case, in accordance with the law and in the light of the facts of the case including the High Court’s direction as so agreed by both the parties. Therefore, the alternative plea raised by the revenue to the effect that the surplus arising to the assessee may otherwise be held be assessable under trade, and the surplus received by the assessee from a liquidator in the distribution of assets of the company, was, thus, held as business income assessable in assessee’s hands, and not as a profit from investment. In this case, the assessee made a fresh claim by contending that the shares held by it as stock in trade seized to be its stock in trade on the conversion of the company from a public company to a private company of which the assessee was holding shares as stock in trade, though, in the present case before us, it is the conduct of the assessee itself that he decided to contribute the land in question as capital in a partnership firm in which assessee became a partner, and it is not the case of realisation of any money by the assessee in lieu of land in question held by it as stock in trade before the same was contributed as capital to a firm.
Conclusion
16.49 Applying the propositions laid down by the Honourable Supreme Court in the case of Sunil Siddharthbhai Vs. Commissioner of Income Tax (supra) to the facts of the present case and in the light of the view we have expressed above, we hold as under:-
i. When the assessee made over the said land in question to the partnership firm as his contribution to its capital, what right the assessee has acquired, during the subsistence of the partnership firm, is to get its shares of profits from time to time, and after dissolution of the partnership or on his retirement from the partnership firm, to receive the value of the share in the net partnership asset as on the date of dissolution or retirement after deduction of liabilities and prior charges.
ii. When the land in question being the personal asset of the present assessee was contributed by the assessee partner to a firm towards its capital, the assessee reduced his exclusive right in the land in question to shared rights in it with other partners of the firm, and to that extent to which the assessee’s exclusive interest in the said land is reduced to a shared interest, there was a transfer of interest in the land notwithstanding, the fact whether the land in question was being held by the assessee as its stock in trade or capital asset or otherwise before the same was contributed to a firm towards capital.
iii. Having regard to the nature of right acquired by the assessee in consideration of his making over his land to a firm as its capital contribution to get his share of the profit from time to time during the subsistence of the partnership, and after the dissolution of the partnership or with his retirement from the partnership, to get the value of his shares in the net partnership asset as on the date of the dissolution or retirement after deduction of liabilities and prior charges, as understood in the general law, the land brought in by the assessee became the property of the firm, which would vest in all the partners, and in that sense, every partner has an interest in the property of the partnership, and during the subsistence of the partnership, no partner can deal with any portion of the property as his own, and the assessee’s exclusive right in the said land has reduced to shared right in it. This position is undoubtedly applicable to all nature of assets whatsoever, brought in by any partner to firm towards its capital contribution.
iv. The position of law which arises when a personal asset is brought in by a partner into a partnership as his contribution to the partnership capital and that which arises when on dissolution of the firm or on retirement of a partner, share in the partnership asset passes to the erstwhile partner, are different to each other in as much as, in the case of dissolution or retirement of any partner, it is the realisation of pre-existing right and that is why it has been held that there is no transfer though when a partner brings his personal asset in to the partnership firm as his capital contribution to its capital, an exclusive interest of a partner in his personal asset before the partner enters the partnership reduced to a shared interest. Therefore, the proposition laid down by the Honourable Supreme Court in the case of Malabar Fisheries Co. v. Commissioner of Income-tax [1979] 120 ITR 49 (SC), which was a case where on dissolution of partnership firm, a partner realised or received his interest in the partnership, has been distinguished by the Honourable Supreme Court in the case of Sunil Siddharthbhai Vs. Commissioner of Income-tax (supra). Therefore, the meaning of “transfer of property” given by the Honourable Supreme Court in the case of Sunil Siddharthbhai Vs. Commissioner of Income-tax in the cases where partner bring this personal assets to a firm towards capital contribution is applicable to all kinds of assets brought in by the partners to a firm towards its capital contribution, and not only to a capital asset held by the partner before the same was contributed in he partnership. The analogy of reducing of exclusive interest of a partner, to shared interest in case partner brings in his personal asset into the partnership firm as his contribution to its capital is equally applicable to all kinds of assets belonging to a partner, and that is why the Honourable Supreme Court in the case of Sunil Siddharthbhai Vs. Commissioner of Income Tax (supra) has used the expression “personal asset” while laying down a law that “it is apparent, therefore , that when a partners brings in his personal asset into a partnership as his contribution to its capital, an asset which originally was subject to the entire ownership of the partner becomes now the subject to the right of other partners in it xxx xxx xxx. Therefore, what was the exclusive interest of a partner in his personal asset is, upon its introduction into the partnership firm as his share to the partnership capital, transformed into an interest shared with the other partners in that asset. Qua that asset, there is a shared interest xxx xxx.”
(see at page 518 and 519 of the Report). The Honourable Supreme Court has also used the expression “personal asset” while deciding the issue whether there is a transfer of property when the individual property of a partner is contributed to a firm towards capital contribution by observing that “Therefore, when a partner brings in his personal asset into the capital of the partnership firm as his contribution to its capital, he reduces his exclusive rights in the asset to shared rights in it with the other partners of the firm” (see at page 517 of the report). In this view of the matter even without applying of section 2(47), we may hold that there was a transfer of property when any personal asset of whatever character of a partner is brought into a partnership firm by the partner as his contribution to its capital in as much as the exclusive interest of a partner in that property or asset is, upon its introduction into the partnership firm as his share to the partnership capitals Page transformed into an interest shared with the other partners in that property or asset.
v. If we look carefully to the judgement in its entirety in the case of Sunil Siddharthbhai Vs. Commissioner of Income-tax (supra), it would be clear that whatever may be the character of the property in the hands of a partner before the same is brought in by the partner to a firm, when the partnership is formed, there is a transfer of a capital asset either in the general sense of the term “transfer of property” or within the meaning of section 45 of the Act. The Honourable Supreme Court in that case was concerned with two appeal of two different assesses. In Civil Appeal No. 1841/1981, the assessee made over certain shares of limited company which were held by him as his capital asset to a firm as his contribution to the capital of the partnership firm. In Civil Appeal No. 1777/1981, the assessee introduced his share holdings in the partnership firms as his capital contribution. The partnership firm credited the accounts of the partners with the market value of the shares. In Civil Appeal No. 1841/1981, it has been specifically observed by the Honourable Supreme Court that shares were held by the partner as his capital asset, but in Civil Appeal No. 1777/1981 nothing is mentioned about whether share holdings by the partner was held as capital asset or as trading asset. While deciding the issue whether there was transfer of shares, the Honourable Supreme Court decided the issue by observing that “we hold that when the assessee brought the shares of the limited companies into the partnership firm as his contribution to its capital, there was a transfer of a capital asset within the terms of section 45 of the Income Tax Act” From the said observation and decision of Honourable Supreme Court, it cannot be said that the asset brought into a firm by a partner as capital contribution should be held by him as capital asset even before the same was contributed in order to treat the contribution of asset by a partner to a firm as a transfer of capital asset within the terms of section 45 of the Income Tax Act. Further, the Honourable Supreme Court referred to its own observation in the case of Addanki Narayanapa Vs. Bhaskara Krishanappa (supra) with approval where this Court explained that “whatever may be the character of the property which is brought in by the partner when the partnership is formed”, which goes to show that when any property of whatever character held by a partner is brought in to a firm by the partner, it becomes the property of the firm, and what a partner is entitled to is his share of profits, if any, in the profit of the partnership firm, and upon the dissolution of the partnership, a right to share in the money representing the value of the property after meeting all the liabilities and expenses. Further, while stating the words of caution by the Honourable Supreme Court in the said case, they have used the words “if the transfer of the personal asset by the assessee to a partnership in which he is or becomes a partner is merely a device or ruse for converting the asset into money, which would substantially remain available for his benefit without liability to income tax on a capital gain”, which goes to show that whenever the matter of transfer of assets by a partner to the partnership firm by way of capital contribution was under their Lordship’s consideration, their Lordships used the words “transfer of personal asset by the assessee to a partnership in which he is or becomes a partner” but when question had arisen whether it is an attempt to avoid liability to income tax, their Lordships has used the words “liability to income tax on a capital gain” or “evading tax on a capital gain”. This goes to show that in order to decide whether there was an attempt on a part of a partner to avoid liability to income tax on capital gain, what is to be seen whether the transfer of any personal asset by the partner to a firm in which he is or becomes a partner is merely a device or ruse for converting his personal asset into money, and it is not necessary that there should be a transfer of capital asset only initially held by a partner to a firm. This proposition about avoiding liability to income tax on capital gain by way of transfer of asset by a partner to a firm is applicable to all classes of assets transferred by a partner to a firm. It thus makes it clear that whatever may be the nature of the asset initially held by a partner before the same is contributed by him as capital contribution to a partnership firm, it shall assume the character of a capital asset at the time when it is contributed to a firm as capital contribution and any surplus arising there from is chargeable to tax as capital gain. Therefore, from this angle also, we hold that the decision of Honourable Supreme Court in the case of Sunil Siddharthbhai Vs. Commissioner of Income-tax (supra) is applicable not only to the cases where any capital asset of a partner is transferred by a partner to a firm as his capital contribution but, it is applicable to all kinds of personal assets of the partner transferred by him to a partnership firm as capital contribution, and in all such cases the liability of income tax on capital gain would arise.
vi. There is no quarrel as to the proposition that no income chargeable to tax would arise on mere revaluation of the closing stock at a market value more than the cost to the assessee as in such a case the profits shown on revaluation is only notional. We do not find any difficulty in accepting this contention raised by the learned counsel for the assessee in the light of the decision in the case of Sir Kikabhai Premchand Vs. Commissioner of Income Tax (supra), Chainrup Sampatram Vs. Commissioner of Income Tax (supra), Commissioner of Income Tax Vs. Hind Construction Ltd.(supra), Commissioner of Income Tax Vs. Birla Gwalior Pvt. Ltd. (supra) and Sanjeev Woollen Mills Vs. Commissioner of Income Tax. However, facts are different in the present case. It is not the case where increase in the value of land can be said to be notional. In the present case, the asset has been valued at market rate, which is more than the cost to the assessee, and it has been contributed to a firm as capital contribution in which the assessee became a partner, and the market value was credited in the capital account of the assessee in the books of the firm, and similar amount is credited in the books of the assessee and surplus has been shown as income in the profit and loss account out of which the dividend was also paid. Therefore, decisions rendered in the context of the fact where mere revaluation of asset was made in books without anything more are not applicable to the facts of present case.
vii. The contribution of land by the assessee to a firm as its capital contribution may in itself cannot be called as “sale”. But the same does not mean that it is also not a “transfer” because, in such a case what was the exclusive interest of the assessee in the said land has, upon its introduction into the partnership firm as its share to the partnership capital, transformed into an interest shared with the other partners in or upon that land. When one talks of the partnership firm’s property or firm’s assets all that is meant is property or asset in which all partners have a joint or common interest. Accordingly, upon introduction of land by the assessee into the partnership firm as its shares to the partnership capital, the land so contributed becomes the property of the firm and the partnership property will vest in all the partners and in that sense every partner has acquired an interest in the property of the partnership firm. Therefore, the assessee’s exclusive right in the said land has reduced to a shared interest, and to that extent, there is a transfer of land from assessee to a firm.
viii. When the assessee contributes its personal asset held by it to a firm as its contribution towards capital, the assessee cannot be said to have effected any trading or commercial transaction, but the transaction shall be considered to have been effected on capital field. Therefore, the nature and character of land contributed by the present assessee to a firm towards its capital contribution shall assume the character of “capital asset” at the time when it was contributed to a firm towards capital contribution.
ix. There is no quarrel as to the proposition that there is no transfer on mere conversion of stock in trade into capital assets and/ or on revaluation thereof in the assessee’s books and no income arising on such conversion. In other words, there could not be any actual profit or loss on withdrawal of stock in trade from a trading business and its conversion into capital asset. There was no deeming fiction to deem the conversion of stock in trade into capital assets as a transfer or to deem the fair market value as on the date of conversion as the cost of acquisition of the capital assets. However, a transfer does take place when any personal asset of a partner is introduced into a firm as his capital contribution, and the value of the asset recorded in the books of the firm shall be deemed to be full value of the consideration received or accruing as a result of the transfer of such asset contributed by the partner. Consequently, in the present case, there was no transfer of land held by the assessee as stock in trade when the same was merely revalued at a market value in its books and it was converted into capital asset and no profit or gain did accrue or arise to the assessee merely on its revaluation at a higher value more than the cost to the assessee in its books or on its mere conversation from stock in trade to a capital asset.
In such a case, the conversion of stock in trade into investment has to be at cost/ book value. Thus, the legal proposition that no man can make a profit out of himself or there could not be any actual or real profit or loss on withdrawal of stock from a trading business shall govern this type of cases. However, the position would be different in cases where on or after conversion of stock in trade into a capital asset either by implication of law or by act or conduct of the assessee, or otherwise, the asset is contributed to a firm as capital contribution by a partner at the value more than the cost to the assessee. In such a case, there is a transfer of asset being taken place and the value of the asset recorded in the books of the firm shall be deemed to be the full value of consideration received or accruing as a result of the transfer of
the asset. Therefore, in the present case, when the land in question was contributed by the assessee to a firm as its capital contribution, in which the assessee became a partner, a transfer of capital asset had taken place, and the amount recorded in the books of account of the firm as the value of the land shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land, and the profits or gains arising from such transfer of a capital asset by a person to a firm in which he becomes or is a partner by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place.
x. In the light of the view we have taken above, we, therefore, hold that the surplus arising to the assessee from the transaction of contribution of land held by it to a firm as capital contribution shall be asses-sable to tax as profit or gains under the head “capital gain” under section 45 of the Income Tax Act, and for that purpose, the amount of 11.50 crore recorded in the books of accounts of the partnership firm as the value of the land shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land as so provided under sub-section (3) of the section 45 of the Act, effective from the A.Y. 1988- 89.
xi. Even otherwise, the surplus arising to the assessee from the transaction of contribution of land as capital contribution to a firm in which the assessee became a partner shall be chargeable to tax in view of our finding given above that the transaction of transferring the land in question to the partnership firm is a device or ruse to convert the land in question into money substantially for the benefit of the assessee as the assessee has withdrawn substantial amount as observed and pointed out above in para 16.19 to 16.24 of this order, for its benefit as a part of its well designed and calculated colour able strategy to convert the land into money for its own benefit.
xii. without prejudice to the view we have taken above, we further hold that even in case it is otherwise held that the land contributed by the assessee to a firm towards capital contribution should be treated as stock in trade even during the course of making the transaction of transferring or contributing the land to the partnership firm as capital contribution, the surplus arising to the assessee from the said transaction of contributing stock in trade to a firm shall then asses sable under the head “business” in the view of the colour able device or ruse adopted by the assessee to convert stock in trade into money for its own benefit.
16.50 In the light of our finding that the transfer or contribution by the assessee of its personal land to the share capital of the firm represent a device or ruse for converting the land into money substantially withdrawn by the assessee from the firm for its benefit and even otherwise in view of our finding that the provisions contained in section 45(3) of the Act inserted w.e.f. assessment year 1988- 89, are applicable to the present case in this assessment year 1992-93 under consideration and in view of other findings we have given above, we hold that the earlier decisions of the Tribunal passed in the A.Y. 1985- 86 in the assessee’s case shall have no application to the present case. We, therefore, reject the claim of the assessee that the issue involved in ground no. 1.1 to 1.7 should be decided in the terms of earlier order of the Tribunal passed in the A.Y. 1985- 86.
