Case Law Details
National Company Vs ACIT ( (Madras High Court)
Conclusion: Section 45(4) would not be attracted on the retirement of the two partners and consequential allotment of their share in the assets in the assessee-firm as there was no element of transfer of interest in the partnership assets by the retiring partner to the continuing partners.
Held: Assessee-company was converted into a partnership firm. At the time of retirement of two partners and admission of a new partner during the relevant year valuation of assets and liabilities of firm took place. It was held there was only a reconstitution of the partnership firm by retirement of two partners and admission of another partner. The partnership firm continued. It must also be noted that the assets of the firm originally belonged to the father of the retiring / continuing partners and there was only a division of the assets on retirement in accordance with their entitlement on the shares in the partnership. Assessee company was originally a sole proprietorship concern started by Mudaliar. It was in the business of construction and assets had been acquired even at that particular point of time. The two daughters and two sons-in-laws of Mudaliar were subsequently admitted as partners and on division of the assets, one daughter and one son-in-law were allotted a share which they were otherwise legally entitled to out of the holdings Mudaliar. There was no element of transfer of interest in the partnership assets by the retiring partner to the continuing partners. Thus, the provisions of Section 45(4) would not be attracted on the retirement of the two partners and consequential allotment of their share in the assets in the assessee Firm.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The Assessee has filed T.C.A.No. 365 of 2009 under Section 260-A of the Act challenging the order of the Income Tax Appellate Tribunal dated 12.12.2008 whereby the Tribunal had allowed the Appeal of the Revenue which had been filed challenging the order of the Commissioner of Income Tax (Appeals) – VI, Chennai, dated 16.03.2007 relevant to the Assessment Year 2004-2005.
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