Case Law Details
CIT Vs Mansukh Dyeing and Printing Mills (Supreme Court)
Whether amount credited on account of revaluation of fixed assets and credited to the partners’ account is liable to be taxed u/s 45(4) of the Income-tax Act,1961?
The department has made a major win today in the above case when the Supreme Court held that upon revaluation of fixed asset, the credit which is made to the Partners’ capital account is liable to be taxed u/s 45(4) and approved the decision of the Bombay high Court in the case of CIT Vs A.N. Naik Associates and Ors(2004) 265 ITR 346(Bom).
The assets so revalued and the credit into the capital accounts of the respective partners can be said to be “transfer” and which fall in the category of “OTHERWISE” and therefore, the provision of Section 45(4) inserted by Finance Act, 1987 w.e.f. 01.04.1988 shall be applicable.
After detailed analysis of Section 45(4), it is observed and held that the word “OTHERWISE” used in Section 45(4) takes into its sweep not only the cases of dissolution but also cases of subsisting partners of a partnership, transferring the assets in favour of a retiring partner.
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