JUDGMENT
S. Ananda Reddy J.
1. This appeal by the assessee directed against the order of the Income-tax Appellate Tribunal in I.T.A. No. 1922 of 1995 dated August 17, 2000, for the assessment year 1991-92. The assessee was a regis-
tered firm. The said firm was dissolved on August 31, 1990, and upon the dissolution, one of the partners took over the assets at book value of Rs. 2,17,555. The Assessing Officer applied the provisions of Section 45(4) of the Income-tax Act, 1961, and held that the fair market value of the property so transferred was Rs. 5,36,100 as determined by the District Registrar, Ranga Reddy District. The difference between the amount determined by the District Registrar and the amount of written down value (book value) of the asset in question was added in the hands of the assessee-firm as short-term capital gains, which was to the extent of Rs.3,18,545. The assessee-firm carried the matter in appeal to the Commissioner (Appeals). The Commissioner (Appeals) did not agree with the contention of the assessee-firm and hence confirmed the addition made by the Assessing Officer. The matter was carried in further appeal to the Income-tax Appellate Tribunal, which also did not agree with the contention of the assessee. Hence, the present appeal.
2. Learned counsel for the assessee contended that the Income-tax Appellate Tribunal as well as the Departmental authorities have fallen in error in putting an interpretation of Section 45(4) of the Income-tax Act so as to take the value determined by the District Registrar as the market value and in computing the capital gains thereon. Learned counsel relied upon a decision of the Supreme Court in the case of CIT v. George Henderson and Co. Ltd. and contended that the value of the consideration must be the consideration received by the firm and not something else and according to learned counsel, in view of the said judgment of the Supreme Court, the written down value which was received by the firm is to be taken as the full value of the asset and, therefore, there is no provision for taking any other value. The said value should be the fair market value of the asset.
3. The matter was heard at length at the admission stage. After hearing learned counsel we do not find that there is any substantial question of law arising out of the order of the Income-tax Appellate Tribunal. The facts are not in dispute. The firm was dissolved on August 31, 1990, and upon dissolution of the firm one of the partners, viz., Shri Sitaram Sarada, took over the assets at the book value of Rs. 2,17,555. It is also not in dispute that the assets were transferred in favour of the said partner and the District Registrar, Ranga Reddy District, determined the fair market value for the purpose of stamp duty at Rs. 5,36,100. The contention of the assessee is only that the consideration that was received by the assessee-firm should be treated as the fair market value. In support of his contention, he relied upon the decision of the Supreme Court in CIT v. George Henderson and Co. Ltd . In the said case, the Supreme Court was considering the provisions of Section 12B of the Indian Income-tax Act, 1922. In the said provision, there is no reference to the fair market value. The
reference in the said provision was to the full value of the consideration for which the sale, exchange or transfer of the capital asset is made and according to the apex court, the full value of the consideration is the consi deration that was actually received by the transferor and there was no provision to substitute any other value in the place of the consideration actually received by the transferor. The position is totally different under Section45 of the Income-tax Act, 1961. For convenience, the relevant provision is extracted, which is as under :
“45. (4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a cooperative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer lakes place and for the purposes of Section48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.”
4. A perusal of the abovesaid provision clearly shows that on distribution of capital assets as a result of the dissolution of the firm for the purpose of Section48, the fair market value of the asset on the date of such transfer shall deemed to be the full value of the consideration received or accruing as a result of the transfer. This deeming or fictional fair market value was not there in Section12B of the Indian Income-tax Act. What is fair market value was also defined in Clause (22B) [of Section2) which is as under :
“(22B) ‘fair market value’ . . .
(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and
(ii) where the price referred to in sub-Clause (i) is not ascertainabie, such price as may be determined in accordance with the rules made under this Act.”
5. In view of the above, it is clear that the value of the capital asset, on transfer, as a result of the dissolution of the firm, should be the fair market value and not the written down value or any other value. The contention of the assessee was negatived by the Tribunal observing that the reverse interpretation was sought for by counsel for the assessee stating that the value received by the firm should be the fair market value, which was not accepted ; fairly so. In fact, a similar issue was considered by the apex court in the case of A L. A Firm v. CIT , wherein it was held that (headnote) : “There can be no manner of doubt that, in taking accounts for the purpose of dissolution, the firm and the partners, being commercial men, would value the assets only on a real basis and not at cost or at their other value appearing in the books. The real rights of the partners cannot be mutually adjusted on any other basis.” In the above decision, the apex court has clearly held that upon dissolution of the firm,
the assets have to be valued at the market value for the purpose of determining the capital gains, if any, under Section48 of the Income-tax Act. Though the apex court rendered the said decision without even reference to Section 45(4), that is actually applicable to the present facts of the case. Apart from that, the provisions of Section 45(4) themselves are very dear that it is the fair market value of the asset on the date of transfer, on dissolution of the firm that should be taken as the full value of the consideration received or accruing and, therefore, the authorities as well as the Income-tax Appellate Tribunal were right in computing the market value, as determined by the District Registrar, which was not even disputed. As the-fair market value is proper and appropriate, no substantial question of law arises out of the order of the Income-tax Appellate Tribunal.
6. Hence, the appeal is dismissed.