MDLR Builders (P) Ltd. Vs DCIT (ITAT Delhi)
Conclusion: When a retiring partner took only money towards the value of his share on retirement and when there was no distribution of capital asset/ assets going to the partners, there was no transfer of capital asset and consequently no profits or gains was chargeable u/s. 45 (4).
Held: AO taxed short term capital gain on account of transfer of shares in the partnership firm by assessee company to M/s. V Limited. According to AO, the partnership share in a firm was a capital asset within the meaning of section 2 (14) and their transfer was transfer of capital asset within the meaning of section 2 (47).The contention of assessee that no capital gain arose on sum received by a partner on retirement from the partnership firm was not accepted by AO on the ground that assessee had applied an unsuccessful technique to transfer his capital gain into its account from partnership firm without giving any tax. It was held when assessee in the capacity of retiring partner took only money towards value of its share and no capital asset was distributed there was no transfer of capital asset and, therefore, assessee was not liable to any capital gain tax on account of sum received by it as a partner on retirement from partnership-firm.
FULL TEXT OF THE ITAT JUDGEMENT
The above two appeals filed by the respective assessees are directed against the separate orders dated 27.11.2018 of the CIT(A)-26, New Delhi relating to A. Y. 2008-09. Since identical grounds have been taken by the respective of assessees in these appeals, therefore, these were heard together and are being disposed of by this common order.
ITA No.8214/Del/2018 (MDLR Builders India Ltd.)
2. Facts of the case, in brief, are that the assessee is a company dealing in real estate land trading and development. A search was conducted at the office premises of the company on 31.01.2008. Accordingly notice u/s. 142 (1) was issued on 11.07.2009 and again on 17.09.2009 with a questionnaire. However, the assessee did not file any return of income in response to the statutory notices. Since the assessee was not responding to the statutory notices issued u/s. 153A, 142 (1) and 143 (2), the Assessing Officer completed the assessment u/s. 144 of the Act on 21.12.2009 determining the total income at Rs.110,12,38,532/-.
3. The assessee moved an application before the CIT (Central)-II, New Delhi under the provisions of section 264 on 14.06.2010. The CIT (Central)-II, New Delhi vide order dated 16.03.2012 disposed of the application of the assessee with a direction to the Assessing officer to reframe the assessment afresh after making required enquiries, investigation and verifications.
4. The Assessing Officer thereafter issued notice to the assessee asking for various details. However, a perusal of the assessment order shows that there was no proper compliance from the side of the assesse. Therefore, the Assessing Officer proceeded to pass the order again u/s. 144 of the IT Act on the basis of information collected from third party enquiries during initial assessment and documents seized at the time of search.
5. The Assessing Officer noted that the assessee company has sold its share in the partnership firm M./s. Trishul Industries to M/s. Vatika Ltd. and its promoter Shri Anil Bhalla during the year. M/s. Trishul Industries holds 11 acres of land along the NH-8 and has license to set up and operate a resort cum hotel at this site. The details of acquisition and transfer of partnership share in the firm M/s. Trishul Industries has been narrated by the Assessing Officer which is as under :-
a) On 15.06.05 M/s. MDLR Estates Private Ltd, M/s. MDLR Builders P. Ltd (M/s. MDLR Group companies) and Shri Gopal Kumar Goyal (CMD of MDLR Group of companies), entered into an “agreement to sell” with the existing partners of M/s. Trishul Industries, i.e. Shri Ravi Shankar, Shri S.C, Babber, Shri Satish Chandra Babber and Shri RL Kukreja for transfer of partnership share of the firm to MDLR Group of Companies as mentioned above. Total Payment of Rs.19.2 Cr was made to four partners in lieu of transfer of partnership shares by them. Rs.9,50,00,000/- was paid by M/s. MDLR Estates Pvt Ltd and Rs.9,50,00,000/- was paid by M/s. MDLR Builders Pvt. Ltd.
b) On 25.10.06 a deed of retirement was signed between the above mentioned parties which formalized the agreement to sell signed on 15.06.05. As per the deed of retirement the original four partners retired from the firm and the place of business also changed to the registered office of MDLR Group of companies. By this deed of retirement the MDLR group took full control of the firm. The partnership shares were held as given below:-
