Whether the assessee, a partner of the firm, is entitled to deduction u/s 48(2) while computing the long term capital gain for which the firm has already claimed deduction u/s 48(2)?

S M Sundaram Vs. CIT (Madras High Court)– Under section 48(1), the deduction in respect of the full value of the consideration received or accrued regarding the expenditure incurred wholly, etc. and cost of acquisition of asset and the cost of improvement are granted. This deduction has admittedly been granted from the capital gain in the hands of the partnership firm.

Sections 48(1) and 48(2) of the Act cannot be read separately. Unless an assessee gets benefit u/s 48(1), he cannot independently claim the right of deduction u/s 48(2). While Section 48(1) of the Act confers substantial right of deduction, what is done in Section 48(2) of the Act is granting further deduction. If the contention of the assessee is accepted, then the partner after obtaining his share as a long term capital gain from the firm, in the hands of which deduction has already been granted, will be again entitled to claim the rights that can never be the intent of the lawmakers; in the hands of the partner the amount of long term capital gain is entitled to apportionment under various heads. But, the question here is whether the deduction already claimed under Section 48(2) of the Act by the firm can be claimed by the partner once again in his hands in respect of his share of long term capital gains. The analogy made by Sections 80A(3) and 80T of the Act cannot be made applicable to the facts. After the Direct Tax Laws (Amendment) Act, 1989 came into effect from 1.4.1989 by which Section 80T of the Act came to be omitted, the taxing structure in respect of the firm and individual partner were different when compared to the legal position after the said date, namely 1.4.1989.

IN THE HIGH COURT OF MADRAS

T.C.(A). No. 982 of 2004

S M SUNDARAM

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