{"id":200947,"date":"2010-12-23T00:00:00","date_gmt":"2010-12-22T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/b-raghurama-prabhu-estate-vs-joint-commissioner-of-income-tax-on-23-december-2010"},"modified":"2016-07-10T05:18:35","modified_gmt":"2016-07-09T23:48:35","slug":"b-raghurama-prabhu-estate-vs-joint-commissioner-of-income-tax-on-23-december-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/b-raghurama-prabhu-estate-vs-joint-commissioner-of-income-tax-on-23-december-2010","title":{"rendered":"B Raghurama Prabhu Estate vs Joint Commissioner Of Income Tax on 23 December, 2010"},"content":{"rendered":"
Karnataka High Court<\/div>\n
B Raghurama Prabhu Estate vs Joint Commissioner Of Income Tax on 23 December, 2010<\/div>\n
Author: V.G.Sabhahit And B.Manohar<\/div>\n
\" \" 5 '+570 008.\n\n {I3Y SR1 5P3.R. INDRA KUMAR, ADV. ,)\n\n \n\nIN THE HIGH COURT OF KARNATAKA AT BANGALORE\nDATED THIS THEEJWDAY OF DECEMBER, go. V\nPRESENT .1  % :3'\n\nTHE HONBLE MR.JUSTICEI    \nAND .v & '  '_ %   _ 2\nTHE HONBLE    \n\nI.T.A NO. 13'-\u00a7l;VVV2_Q_(};_QV\n\nI.T.A Nos. 135\/2000, i.3V6g2OwQQ,' vV13\"7\/:\"3?.O00, 138\/2000,\n139\/2000, 140\/2000, 144,.I_'2000',' 46\/2000 8:\n\nIT.A.NO. 134g::'040\u00a7;.%,i-   \n\nB. RAGr:VIURA;viA*VpI3A13HUVEsf1'A'I:?..\nEXECUTRDC. 'sis\/1T;M.. _KAVERI' BAI\nNo.38, F1RsT--1vmI1x;   \nYADAVAGIRL \" _ '_ 2 \" . \nMYSORE ---- 570 Q20. \n   ...APPELL.ANT\n\n  [BY 'ski I\u00a7iii,i\u00bb:g;RNI FOR M\/S. KR. PRASAD, ADV.,]\n\nAM)'\n\n _JOIN'I\"\"~COMIVII$f\u00a7SIONER OF INCOME TAX\n\n(ASSESSMENT), SPECIAL RANGE,\n\n.. .RESPONDENT\n\n\n\n \n\nK)\n\nITA. NO. .13-4\/2000 IS FILED UNDER SECTION 2'6__0--A\nOF TIIE INCOME TAX ACT. 1965} AGAINST THE ORDER D.'_I'.\n\n31.07.2000 IN ITA Nos. 949, 952, TO \n959\/SANG\/I998 FOR THE ASSESSMENT YEA_R\"\"'19V9\u00ab5_~\u20ac}6 \nPRAYING TO EEXCLUDE THE ENTIRE SRA_R--E-  '\nAPPELLANT IN THE SUM OF RS. 92 CRORES,VFROM:' THE \" -9.,\nTAXABLE INCOME OP THE APPE3_LIA~~IN'T AND4\"ExCwDE\"'._.\nTHE ENTIRE SHARE OF THE APPEI,I.AN'I* \u00ab--IN~_ITI\u00bb1EV._Si--IM OE j\nRS. 9,57.57,007 FROM THE INCOME OF'~\"FPIE~.AI7PELL>ANT'~.\n\nOR EVEN IF INCLUDABLE AS ALREAD3? TAx,.--'I+IAS 'I3E;E'N\nPAID NO FURTHER AMOUNT SE D_EMANDED_AND-..ETC. \n\nIT.A. NO. 135 g 2000\n\nBETWEEN\nSMT. M. PUSHPALATI-IA,    '\n\nNO37, \"PANCHA'\\.\/--'A'FI7'\nGOLULAM ROAD, _ _ . \nJAYALAKSHI\\\u00a7iPI';RAMI;.,_  \nMYSORE A I2  <i__  ' '\n\n --------      ...APPELLANT\n{BY SRI I\u00a7U'LKARN1 POR I'a\u20ac{R':.I\u00a7.R. PRASAD, ADVS. ,)\n\nAND\n\nJOINT COMM;i"SS_ISOI~I.ER "OP"II\\ICOI\\\/I_E -A. 'At\n\n_ {ASSES3.SME3NT). SPECIAL. RANGE.\n\n MYSORE +j~57'0_OO8. """ "\n\n'{"E:y'*SRI'  KUMAR, ADV. ,)\n\n...RESPONDENT\n\nITA  'I35\/2000 IS FILED UNDER SECTION 260~\u00abA\n\n . 013' THE INCOME TAX ACT. 1961 AGAINST THE ORDER DT.\n\n"-J'3_1'.07t.I2000" IN ITA NOS. 946, 952, TO 957 &\n .959\/BANG\/1998 FOR THE ASSESSMENT YEAR 1995-96\n'I?RAYIN-'I: TO EXCLUDE THE ENTIRE SHARE OP THE\n ___"A'PPl'\u00a7ZLLANT IN THE SUM OF RS. 92 CRORES FROM THE\n'i'lI)<Z-ABLB2 INCOME OP TIII: APPEI.LAN'I' AND EXCLUDE\n\n\n\n ...ww.......mm\u00bbw\u00abmaa\n\nIT.A. NO. 137 g 2000\n\nBETWEEN\n\nSR1. M. JANARDI---LANA RAO,\nNo.38, FIRST MAIN ROAD.\nYADAVAGIRI.   ..\nMYSORE670 020. A\n\n[BY SR1 KULKARNI FOR M\/S. K, R. PRASAI3, ADIV--;'.;} I V' '\nAND 'V\n\nJOINT COMMISSIONER ,OE,_IN'c.OME~.'IAxRA-._\n(ASSESSMENT), SPECIAL"~RANG.E. ;   \nMYSORE-- 570008.      \n  -_ _   ':.[.'RESPONDENT\n[BY SR1 ER. INORA KUI\\\/fAR,_,AI")V'.\u00ab,]   I \n\nITA N'O..VV.13.?',.\u00a720O'O' ISFILED UNDER SECTION 260--A\nOF THE ,IN--COMgE '}*21';;T\u00a7\u00a3.A'(ifI";\\. IQSFRRAYINO TO EXCLUDE\nTHE ENTIRE SF\u00a3\ufb02,.RE'QB"-THE AP'_PEI.LANT IN THE SUM OF\nRS. 92 <:.RO-RES 'FIf<O_4IvI\u00bbT.TI4.E"-- TAXABLE INCOME OF THE\nAPPELLANT AND'EXC1L[JDE"TI4\u00a3E ENTIRE SHARE OF THE\nAPPELLANT\u00b0'IFN"THE SUM OF RS. 9,57,57,00? FROM THE\nINCOME OF THE APPELLANT OR.  IF INCLUDABLE3 AS\nALREAEY TAX IIAS..I3EEI\\j; PAID NO FURTHER AMOUNT BE\n\n"  AND ETC'. "" "\n\n  \n\n  - \n<\/pre>\n
” ” ”  ‘Sim. ‘TM. IIEII ALATHA,<\/p>\n
2987\/ I~,TEI\\\/IPLE ROAD,<\/p>\n
-\u00bb ._ – “Viv MOHALLA.\n<\/p>\n
_ MYSORE–57o 002.\n<\/p>\n
. . .APPEI.L,.\/XNT<\/p>\n
}_~  i<\/p>\n
(BY SR1 KULKARNI FOR MR. KR. PRASAI). ADVS.,)
\nAND<\/p>\n
JOINT COMMISSIONER OF INCOME} TAX
\n(ASSESSMENT). SPECIAL RANGE.\n<\/p>\n
MYSORE W 570 008.   –\n<\/p>\n
[BY SR1 ER. INDRA KUMAR, ADv._)  <\/p>\n
ITA NO. 138\/2000 IS EII,EO’UNOEH.SECTIOIsI 260–A
\nOF THE INCOME TAX ACT, 195_1\\_PRAY_1NG THA’_I’ POP THE
\nREASONS STATED THEREIN THIS A..HON-‘BLE COURT MAY
\nBE PLEASED TO EXCLUDE ‘TI\u00abiE2.j_EN’I’IE_’%E”SH,ARE OF THE
\nAPPELLANT IN THE SUM OF RS192 _.CVR.QRES FROM THE
\nTAXAELE INCOME OF’ .THE fAPPAE.LIAI$1T’I’AI\\ID EXCLUDE
\nTHE ENTIRE SHARE-OF]THE_;APPEL1i5\u00abNTj’1N THE SUM OF
\nRS. 9,57,57,00?   INCOME OETHE APPELLANT
\nOR EVEN IE “II~\u00e9C_LLIDABLE\u00ab.._ASV_ALREADY TAX HAS BEEN
\nPAID NO EURTHEH;AMOUNT]’E.E’OEMANIJED AND ETC.<\/p>\n
I.T.A. NO. V1v–39;\/2OOO*f’V-~  <\/p>\n
BETWEEN<\/p>\n
SRI- MAURESH
\n 890\/ I ,”  PRASAD<\/p>\n
MYSOI{E+57O ‘Q04, <\/p>\n
HAPATAN SAS’I:IgY ROAD,
\nIIAXSIIMIPOHATI\/I’,  _ ‘<\/p>\n
. . .APPELLANT<\/p>\n
IBKSR1 XULHARNI FOR MR. K.R. PRASAD, ADVS.,}<\/p>\n
 .II’O’IN*I? COMMISSIONER OF INCOME TAX
\n{ASSESSMENT}, SPECIAL RANGE,<\/p>\n
” ‘ <\/p>\n
(3<\/p>\n
IVIYSORE — 570 008.\n<\/p>\n
…RESPONDENT<\/p>\n
[BY SRI ER. INDRA KUIVIAR. ADV.)<\/p>\n
[TA NO. 139\/2000 IS FILED UNDER
\nOF THE INCOME TAX ACT, 1961 PRAYING THAT ‘
\nREASONS STATED THEREIN THIS I-IONBLEHCOIJRTT\/IAY  _
\nBE PLEASED TO EXCLUDE THE  SI’IARf}P_OI*””THE  I<\/p>\n
APPELLANT IN THE SUM OF Rs. 92 CRORES -FROM THE<\/p>\n
TAXABLE INCOME OR THE APPELLANT ;fExcLUDE’ ” TI–.-IE’
\nENTIRE SHARE OF THE APPELLANTTN THE SEj1\\\/I”O’E’ Rs}.<\/p>\n
9,57,57.007 FROM THE INCOMEOF “IHE APPELLANT OR
\nEVEN IF’ INCLUDABLE As ALREADY TAXTHAELBEEN PAID
\nNO FURTHER AMOUNT BE DEMANDED ANDETC. 1<\/p>\n
IT.A. NO. ]40g2000<\/p>\n
BETWEEN
\nSMT. M. vATsA1,A.SII_ENOY’,””‘T1’:, _ _
\n38, FIRST     ~
\nYADAVAGIRI,__.   ”  ” 1.   \u00bb
\nMYSOREm57Q o.2_0_, <\/p>\n
 –. ‘ . =     .._APPELLANT
\n[BY sRI KuI,IIARN~I,,ADfV_ ”\n<\/p>\n
AND I
\n“‘JOINT:I:OIAMI.ss1ONER”OE INCOME TAX
\n IASEESEMENTJ’; \u00abSPECIAL RANGE,
\nI\/IYEORE “-.5’70’~QQ8,
\n     …RESPONDENT<\/p>\n
(BY. ‘INDRA KUMAR, ADV.,]<\/p>\n
ITA T40’\/2000 IS FILED UNDER SECTION 260–A OF<\/p>\n
” [INCOME TAX ACT, 1961 PRAYING THAT FOR THE
\n 4 REASONS STATED THEREIN T I-IIS HONBLE COURT MAY
\n” IJLF.ASI*II) TO EXCLUDE T HE ENTIRE SHARE OF THE
\n ‘–APPF;3LI,AN’I’ IN THE SUM OF’ RS. 92 CTRORES FROM THE
\n TAXABLI3 INCOME O17 TI-IE APPELLANT ANI)EXCI.UDEI TIIE<\/p>\n
ENTIRE SHARE OF THE APPEI,I.ANT IN TIIE SUM OIWRS.
\n9,57,57,007 FROM THE INCOME OF THE APPEIJLANT OR<\/p>\n
EVEN IF INCLUDABLE AS ALREADY TAX HAS EEI:N’RA–I_D-..<\/p>\n
NO FUR’IH}E3R AMOUNT BE OEIVIANDED AND  A    :-<\/p>\n
IT.A. NO. 14452000<\/p>\n
BETWEEN<\/p>\n
JOINT COMMISSIONER OF INCOME TAX
\n(ASSESSMENT), SPECLAL RANGE;-~~ ‘
\nOPP- STERLING THEATRE,
\nVISVESWARANAGAR.<\/p>\n
\n\nMYSORE M 570 008. I \n  _    I  ...APPELLANT\n<\/pre>\n
{BY SR1 ER. INDRA KUMAR, .;AD\\\/;;}   ”\n<\/p>\n
A__l\\iQ<\/p>\n
ARATIII SI~IEI\u00a7IOI*,<\u00ab..V  ~ <\/p>\n
38, 18'!' MAIN ROAD;\n<\/p>\n
YADAVAOIRI, ., _  ”\n<\/p>\n
MYSORE,
\n‘ …RESRONDENT<\/p>\n
[BY SR1 KOIIKARNI  PRASAD, ADVS.,)<\/p>\n
,I7I\u00a7”AINO. 14?}:\/–2000 \u00abIS FILED UNDER SECTION 260-A<\/p>\n
” CE’ Tf{E\u20ac’II’JCOIVIE TAXHCT, I961 AGAINST THE ORDER DT.
\nv.O3I,.O:?_,2o00VI IN-., ITA NOS. 946\/I3\/I998 FOR THE<\/p>\n
ASSESSMENTYEAR 1995436 PRAYING TO WHETHER, ON
\nTHE =EACTS”AND}CIRCUMSTANCES OF THE CASE, THAT
\nPART “OF TIIE-“AI:>REI,I.ANTE ORDER OF THE VICE<\/p>\n
I  PRESIDENT’ -EIRECTINO THE RECOMRUTAITON OF<\/p>\n
CAPITAL .. GAINS BY THE ASSESSING AUTHORITY IN<\/p>\n
i;j’\u00abRESPECT-O’I\u00ab” GOODWILL. TRADE MARKS, TRADE NAME
\n ‘AND COPY RIGHT, IS SUSTAINABLE IN LAW CONSIDERING
\n‘-TI;IE’vRQSITION THAT TI-IIS IS ONLY THE OPINION OF THE
\n =V.–IC\u00a3}PR’\u00a3\u00a53SII)ENT ALONE AND DOES NOT RIEJPRESENT
\n“*-TIIE OPINION OF THE IVIAJORITY OF TIIE Two JUDICIAL<\/p>\n
MEMBERS WHO HAVE NOT CONSIDERED AND
\nADJUDICATED SUCH ISSUES’? AND ETC. ‘I <\/p>\n
I.T.A. NO. 145\/2000<\/p>\n
BETWEEN<\/p>\n
JOINT COMMISSIONER OF INCOME \u00ab I
\n(ASSESSMENTS), SPECIAL RANGE,  – =
\nOPP. STERLING THEATRE,
\nVISVESWARANAOAR,<\/p>\n
MYSORE W 570 008. .\n<\/p>\n
  — .APEELLANT
\n(BY SR1 ER. INDRA KUMAR, ADR\/”.’;)’A    <\/p>\n
AND
\nM.PUS\u00a7IPAI.A’I’IjIA–.l     <\/p>\n
No.38, 1ST MAIN     ”\n<\/p>\n
YADAVAGIRL ”      <\/p>\n
\nMYSORE.   ” A  I  ‘ …RESPONDEN’I’<\/p>\n
(BY SR1    K_.R I-ERASAD, ADv.,I
\nITACNVO’; 145\/2(\u00a7;O{5″I;’3:CA”I?’I{;ED UNDER SECTION 260~A<\/p>\n
OF THE INCOME TAX A C’T,._”_.I96I AGAINST THE ORDER DT.
\n31.97.2000 IN ‘ITA NOS. 952\/B\/1998 FOR THE<\/p>\n
 ASSIEESMENT YEAR 1995-96 PRAYING TO  ON<\/p>\n
 TI~IE’-FACTS AND CIRCUMSTANCES OF THE CASE, THAT
\n‘r_PART OE.TI;IE, APRELLANTE ORDER OF THE VICE<\/p>\n
‘P_RESID.ENT ~ DIRIECTINO THE RE~CO1\\\/EPUTAITON OF<\/p>\n
C’APETAL”” G_AI_NS’*’EY THE ASSESSING AUTHORITY IN
\nRES:\u00e9_ECT_OE_OOODWILL, TRADE MARKS, TRADE NAME<\/p>\n
I _ AND COPY RIGHT, IS SUSTAINABLE IN LAW CONSIDERING<\/p>\n
 POSITION THAT THIS IS ONLY THE OPINION OF THE<\/p>\n
 ‘–VICEAPRESIDENT ALONE AND DOES NOT REPRESENT
\n  ‘THE OPINION OF THE MAJORITY OF THE TWO JUDICIAL<\/p>\n
 _ \u00bbMEM’BERS WHO RAVE NOT CONSIDERED AND
\n ..__”ADJUDICATED SUCH ISSUE :2 AND ETC.<\/p>\n
9<\/span>
\nI.T.A. NO. I46\/2000<\/p>\n
BETWEEN<\/p>\n
JOINT COMMISSIONER OF INCOME TAX
\n{ASSESSMENT}, INCOME TAX OFFICES
\nSPECIAL RANGE,<\/p>\n
OPP. STERLING THEATRE.\n<\/p>\n
VISVESWARANAGAR.\n<\/p>\n
MYSORE M 570 008.   ..\n<\/p>\n
{BY SR1 E.R. INDRA KUMAR, ADV.,}
\nAND<\/p>\n
M. SURESH RAO.\n<\/p>\n
38. I37′ MAIN ROAD,<\/p>\n
YADAVAGIRI,  .0 _ ._   AA
\nMYSORE.\n<\/p>\n
{BY SR1 KUI,KAIa\u00a7NI}.AI>V, ,:\u00a7_rQR[IvIR,”I{;_I2_, PRASAD, ADVS. ,)<\/p>\n
ITA NO. S’I.*I\u00bb5\/2000 .1S~.FILED UNDER SECTION 26()~A
\nOF THE INCOME “1’A:’X_ACT;–A.C1 SS1 AGAINST THE ORDER OT.
\n31.012000 “IN  ‘N0S’;\u00ab.I~” 953\/E\/I998 FOR THE
\nASSESSMENT_YEAR_1995:9″f3′ PRAYING TO “WHETHER, ON
\nTHE FACTS AND CIRCUMSTANCES OF THE CASE, THAT<\/p>\n
 PART,.{OI\u00ab’~ THE ‘ “AI?PE1,LANTE ORDER OF THE VICE~
\n ‘PRESI.D’ENT  DIRECTINS THE RE-COMPUTAITON OF
\n‘~,CAI>ITAI,._ GAINS BY THE ASSESSING AUTHORITY IN<\/p>\n
‘I2_ESp_ECT’*I\u00abOE “G_O’QDWI1,L. TRADE MARKS, TRADE NAME<\/p>\n
AND”COPYfRIOIIjI’.” IS SUSTAINABLE IN LAW CONSIDERING
\nTHE POSITION THAT THIS IS ONLY THE OPINION OF’ THE<\/p>\n
A _VICE?.PRESIDvEN’F ALONE AND DOES NOT REPRESENT<\/p>\n
 OPINION OF THE MAJORITY OF THE TWO JUDICIAL<\/p>\n
 WHO HAVE NOT CONSIDERE’D AND
\n  ‘AD-JUDICATED SUCH ISSUE ‘2 AND ETC.<\/p>\n
  I <\/p>\n
I.T.A. NO. 147\/2000
\nBETWEEN<\/p>\n
JOINT COMMISSIONER OF INCOME TAX
\nIASSESSMENII,<\/p>\n
INCOME TAX OFFICES, SPECIAL RANQE.\n<\/p>\n
OPP. STERLING THEATRE.\n<\/p>\n
VISVESWARANAOAR,   ,    – =
\nIVIYSORE — 570 008. V  ‘-.,..ARREL,LAN’I” ‘<\/p>\n
{BY SRI ER. INDRA KUMAR, <\/p>\n
AND .<\/p>\n
\n\nVATSALA SHENOY ,  ,\n\n38, 15'I\"I\\\/IAIN ROAD,   V\n\nYADAVAGIRI,     _  -  '\n\nMYSORE.     _ ___-..._.._._.;RESPONDEN'F\n<\/pre>\n
(BY SRI _KULI{ARN”_I’EOR* Iv: ADV.,)<\/p>\n
ITANO’ ‘II*45k”.\/,20I\u00a7fOV’1S:”EII.ED IINDER SECTION 260~A OF
\nTHE INCOME ‘ITAXu”AC”I’, “1_9’6–1 ‘AGAINST THE ORDER DT.<\/p>\n
31.07.2000-,IN\u00ab.ITA N.GSl~V954,7-‘B,\/I998 FOR THE ASSESSMENT<\/p>\n
YEAR 1.99596 PRAYING,*I’O”‘*iWHE’rRER. ON THE FACTS AND
\nCIRCUMSTANCES – OR  CASE. THAT PART OF THE
\nI”.PPEI.I_:f ‘-ITE   ‘I.”f{E VICE-PRESIDEMI’ DIRECTINO THE<\/p>\n
C.-.-,… ._.– …….-…\n<\/p>\n
.~’v.RE–C()K{!PUTA’I’iON ‘DE’..___(_3APITAI, GAINS BY THE ASSESSING<\/p>\n
A’O’I’HIOR1TY’AIN”I’RESPECI’ OP’ OOODWILL, TRADE MARKS, TRADE<\/p>\n
I”.I\\IAI\\\/II~;’–._ AND. gCOPY RIGHT, IS SUSTAINABLE IN I.AW<\/p>\n
CONSIDERING\u00bbTEI\u00ab:’*I3OSIfrION ‘I’I~IA’I’ THIS IS ONLY THE) OPINION<\/p>\n
OF .T’E.E\u00abVICE-..PRES’IDENT ALONE AND DOES NOT REPRESENT<\/p>\n
THE’ VOPINIQNTLOF’ THE IVIAJORITY OE ‘I”HEJ TWO JUDICIAL
\nM.EMB'”ERS._jWRO HAVE NOT CONSIDERED AND ADJUDICATED<\/p>\n
 SIICE ISSUE AND ETC.\n<\/p>\n
S’ ‘IC\u00ab*I.iI–IESE I.T.A.s HAVING BEEN HEARD AND RESERVED<\/p>\n
A   ON FOR PRONOUI\\ICEMENT ‘I.’HIS DAY. SABI-IAI-IIT J..\n<\/p>\n
–_ 4 fDE’I~ IIVERIJID ‘I’}~iE F’OI…I,(.)WI NC}: —<\/p>\n
11<\/span><\/p>\n
JUDGMENT V
\nI.T.A.Nos.134\/2000, 135\/2000, 136\/2000. 13.:e,\u20ac200’0,<\/p>\n
E38\/2000. 139\/2000. 140\/2000, 144\/2000,;5..a%L5}?20.00…_f’0.<\/p>\n
14?\/2000 and 146\/2000 arise ou._t_..mf_eon;:ihonigguiiige-lent.V’ <\/p>\n
passed by the Income Tax Appellate  i3a.Ii\u00a7a-!.orej_’<\/p>\n
Bench, Bangalore. {hereinafteriioalied
\n952 to 957 8: 959\/Bang\/1998 “i’i:;arv\u00a519\u00e95–1996)
\ndated 31.07.2000  _   disrnissed the
\nappeais and confirmed._V:._Ehe”V._\ufb02  by the<\/p>\n
Commissioner of  ( J). The appeals<\/p>\n
ITA No.:144i\/20.00,  anefizie\/2000 are filed by the
\nRevenuextbeingi  observations made by the<\/p>\n
Vice-President of  A”L’_\u00a31bu’ha1 regarding calculation of the<\/p>\n
 *   ‘I’he”s”e’ aopeals along with the other five appeals<\/p>\n
 filed’ by ifieiventie against the order of the Tribunal was<\/p>\n
disphosedv’oi5f_hy’vVcon1mon order dated 19.12.2002. Being<\/p>\n
‘oaggrievedebyhf the said order of the division bench of this court<\/p>\n
 ‘:fdated_.’}9i:12.2002 cm1Appeais Nos_4232. 4242, 4234. 4233.<\/p>\n
—   and 5322\/2005 were filed. Similarly. ITA Nos.69~<\/p>\n
7’0\/200} are \ufb01led by the revenue being aggrieved by the
\norder passed by the income Tax Appellate Tribunal in Appeal<\/p>\n
Nos.946, 952 to 957 and 959\/Bang\/1998 dated <\/p>\n
for the assessment’. year 1995-1996. The  _<\/p>\n
Court has passed common order o1iM28.O1.2t3G5..:along with <\/p>\n
other appeals filed against. the lncolrie ‘l’;_:1-X  .0<\/p>\n
aside the order passed by thi-s__ coulit in   <\/p>\n
140\/2000 and remitted the  to this fresh
\ndisposal in accordance’  leulv   thelllsulbstantial
\nquestions of law.  obe(1.i\u20acp_ee   of the Hon’ble
\nSupreme Court   substantial
\nquestieilislllloli”    in these appeals after
\nhearingvlthe  for the parties:\n<\/p>\n
  on  facts and in the circumstances
\n._of  the Tribunal was right in holding
\n l_th:at–..the Capital gains arising out of the sale of
\n‘.’7ft’h.evllassets of the firm was assessable in the
\nhands of out going individual partners of the
\neistwhile firm’?\n<\/p>\n
 R<\/p>\n
iii)<\/p>\n
Whether. at any point of tinie. any association of<\/p>\n
persons eompriseci of ‘7 outgoing partners had<\/p>\n
come into e.x:ist.enee which can be said to<\/p>\n
become owner of the assets of the firn_t\u00a7”ar1’ci..’_’1i–a_ci  <\/p>\n
soid the same to the Association off-}?e\u00bbrsons43′?\u00ab.<\/p>\n
Whether on the facts ariti inthe  f<\/p>\n
of the case. it eaI1Vbe4__he1diT+_hat. the\u00bb’transier’:’;ot;”<\/p>\n
business of the firm goiI_1g coi-1e&ern’: irigfavour
\nof the Association of thi*”e’e_ ;)e’i~*soI1s was merely
\nrelinquishmentof’  heidibyfvotiier out going<\/p>\n
pa1’t;ner’s? ‘<\/p>\n
iv)?’ t’he.:’faCts_”VVofV the present case, the<\/p>\n
 ‘ irihunai’ in concluding that the capital<\/p>\n
gair1s’ arising_ out: of the sale of the business of<\/p>\n
 the firrn’~——–sVa going CO1\/lC\u20acI’I1 was liable to be
\n In the individual hands of the erstwhile
\n‘ pa_1’tiiie1’s, except the three. who as association of<\/p>\n
  persons have purchased the assets of the \ufb01rm?<\/p>\n
14<\/span><\/p>\n
V} Whether the sale of the assets of the firm was a
\nslump sale and if so, whether it was liable to<\/p>\n
capital gains tax’?\n<\/p>\n
Vi) Whether the Vice~President of the  <\/p>\n
committed an error of iaw in 1ayin_g;’dotttn’* it <\/p>\n
manner in which the eapita41’~–;gainS’ is ‘–to._ <\/p>\n
computed?\n<\/p>\n
vii} Whether in the   V the
\ncase, the ‘7\u00a3’riI\u00e9)’:mr.1\u00aba1  holtiing that the
\nincome earnect   of<\/p>\n
13 person.s for antjer1gqd..5_{.._234′:1:tays that is, 1:111<\/p>\n
  was..:asses.sah1e in the hands of those
\n 13 ;V)erso’1’ti:_s* <\/p>\n
2. The above V_suvbtS’tar1._tiai'”questions of law were explained<\/p>\n
 thetttttlearnevrj. cotins’ei”appeari.ng for the parties and the<\/p>\n
h’1et_arne”cIreotiriseltivappearing for the parties agreed that the<\/p>\n
above\ufb01were”xsortiir substantial questions of law that are<\/p>\n
 _  required. thg_be answered by this court.<\/p>\n
   it Vtttfhe materials facts of the case giving rise to the above<\/p>\n
“tsaityi substantiai questions of kaw are as follows:<\/p>\n
” “L <\/p>\n
I5
\n111 1939. late S.Ra.ghL11’aI1’1 Prabhu started the business<\/p>\n
of inaniifacrttiring beedies. Subsequentfy. his brotheif-ir1~1euV.<\/p>\n
Sri Madhav Shenoy also joined him in the business<\/p>\n
partner and thus 1VI\/ s.l\\\/Iangaiore Ganesha Beedi \\*J015iis__’_{‘i’or_” <\/p>\n
short ‘MG-BW’}. the \ufb01rm. came into existence w.it,_1\u00bb19′ <\/p>\n
28.03.1940. Thereafter, the said   <\/p>\n
time to time. The last reC0nstitL1t’.ioIi’–._0f Af.’1I”1’1″‘1 v.=,r\u00e9;sr 9′<\/p>\n
evidenced by a partnershig  etnd
\naccording to the averments rri\u00e9ide deed; “ti1e last
\nreconstitution of the fi1’ni’b$e_can1e .:Vief:fectix;%e_\u00bb..t’rcrn 06.06.1982<\/p>\n
and according to t.Eiev._deeL} firm Comprised<\/p>\n
of the i’0?i0wing’i  <\/p>\n
S1.No. Name otitlie  %age of share<\/p>\n
 1’   ” \u00bb _    1-arna Prabhu I 4 . 50%
\n02: A  it . ‘ii5I’;ti.einardhana1 Rao 7.65%
\n  ..   \u00a7\\.\/vIx.Ananda Rao 7.85%
\n     M.Vinoda_R2_,1o 7.50%<\/p>\n
   Mpushpazatha 12.50%<\/p>\n
W\/0 Subraya Baliga<\/p>\n
2,_, =-._{.\n<\/p>\n
16<\/span><\/p>\n
06. Heiiialatha I 2 . 50%
\nw\/o RaghL1nath Shenoy<\/p>\n
O7. M.S’u1~esh Rao 7.55%<\/p>\n
08. M.VIshw2u1ath R210 7.55%__;””‘ t<\/p>\n
09. 1\\\/E.Ramanatha Rao 2.500\/g_ ”\n<\/p>\n
10. Jagarzatih Shenoy .2′:E-0%  V t<\/p>\n
1 1. Vatsaia Shenoy
\nD\/o M.Janardhana_R_ao ‘ ‘  .\n<\/p>\n
12. M.Gopinath Sherzoythi <\/p>\n
13. A1’athiSheno3r….  * -L’; .””nt-..47.550’\/5″‘ <\/p>\n
D\/o M.Janardhana–.F{aio ;\n<\/p>\n
4. Clause (3)  the  for the<\/p>\n
durai.iorit._o1′ the  .. st’; “reads as “under:
\n“3. ” The d.u.rai=–s;on ofthc-“Partnnership shall befive<\/p>\n
“”- V’ ‘ ‘ “9 :’ 1\/1 {‘ 1′
\ngears in the -_fi.i.si instance; but uy rnutuai<\/p>\n
.\u00bb ijigVT\u00e9\u20acFnenlRffi(?.p_qi’f.;\u20acS hereto may extend the said
\n  if during the subsistence of this
\n   of the partners desire to retire
\nh_’;”ror11\u00abt’}.iej_ gaartnersftip he or she can do so. ifail the
\nEotlieri parizners agree to the said retirement.<\/p>\n
TL However, if all the other partners do not agree to
\n“the said retirement, the partner intending to reiire<\/p>\n
shall give six months’ notice in writing of his or<\/p>\n
s _’ ‘:\n<\/p>\n
;:x,–2 x
\ni.\n<\/p>\n
17<\/span><\/p>\n
her intention to retire and on expiration of the ._
\nperiod of the said notice the said Partner shall
\ncease to be a Partner and subjec to Para 14
\nfrom that date all his or her liabilities   is<\/p>\n
as a Partner of the firm shall come’ to an e’n’d;–‘–‘.: g ”<\/p>\n
5. Clause (16) of the partnership lEleet\u00a3~__lz1ad <\/p>\n
provisions for the manner in whieh the affairs”v_ofl’*~tl9ie”‘\ufb01rm
\nwere to be wound up afterjts dissC>1~nti0ri-;i__ It reaitisasvlunderz<\/p>\n
“16. If the Partnership   the going
\nconcern earned or;\/tinde’r zoflstlie Firm
\nMANGA;oR\u00a7t;ivisAryft:se(_BEtfDt’Won.t<:s and all the
\ntrade   the said business
\nby 'the.Asat.d  ritndemtzhlch the business of
\nthe  on shall vest in and
\nbelongto  offers and pays or two<\/p>\n
or rriorelPartr:ers._v  jointly o\ufb01er and pay the
\nfhlgltesl prleeltlierefor as a single group at a sale to
\n then heldvlasl among the Partners shall be
\nit   The other Partners shall execute
\nit   in 'favour of the purchasing Partner
\n ore-._'Pd,rttters at his\/her or their expense all such
\ndeed, instalments and applications and otherwise<\/p>\n
A aid him\/her or them for the registration his\/ her
\n"name or their names of all the said trade marks<\/p>\n
and do all such deed, acts and transactions as<\/p>\n
are incidental or necessary to the said transferee<\/p>\n
or asstgnee Partner' or Partners."\n<\/p>\n
6. Pursuant to Ciause 3 of the Partnership<\/p>\n
partnership stood dissolved by ef\ufb02ux. of time <\/p>\n
however. by mutual agreement 2.ifn’Io’ng; the .14p_art.1;eVrs.f;as’g<\/p>\n
provided in ciause (3) itself. the duratioirtzvas eigteiidediv <\/p>\n
further period of six n1onths’v–.ii’}i’\u00a7e.b, unto.  sand it<\/p>\n
therefore the firms .s*\u00bb90d i~~d’isefo1v’etii._ \\vitfh”i–.eft7eet from
\n06.12.1987. Thereafterf ‘the ferret;-s fair firm had to be<\/p>\n
wound up aftenfitus “Clause 16 of the<\/p>\n
Partnership’ Deed’as’1V’jVre1’erreVd.._to’5ab”ovxe_.~ However. because of<\/p>\n
the difT[ere_n_ee opn3i.ni()n”‘a’rr10_ng the erstwhile partners, the<\/p>\n
affairs of the_firrn_eo:uld4’n_ot’be wound up. Therefore, two of<\/p>\n
the ‘;_:a.1’t:ne1’sf Bf “i;’hve fi’rni”.\ufb011ed a petition before this court<\/p>\n
 the lbrovisionfsffovl’ Part X of the Companies Act, 1956,<\/p>\n
 uuipt;-1′ the affairs of the firm in terms of Section<\/p>\n
555:? (4}.[a}t.hereof. The petition was registered as<\/p>\n
Co.P.1\/V__f3Q88. in the said petition by order dated<\/p>\n
 1 1.1988, this court permitted the group of partners<\/p>\n
i (7) having eontroiling int.e1’est to contmue the business as an<\/p>\n
\/’E
\ni”‘\u00a7
\n‘=5
\nVz\ufb01x<\/p>\n
J<\/p>\n
i.11te1″im arraI1gemer1’:” till the Completion of winding up
\nproceedings.\n<\/p>\n
14.06.1991.\n<\/p>\n
scheme for winding up of the affairs of the \ufb01rm  A’
\nassets as 8. going concern. Paragraph <\/p>\n
contains the scheme. Clauses (1), (iii) &1I1::C.’1′(*,’]””\u00a7)f ‘1i’Ah1’.s  <\/p>\n
19<\/span><\/p>\n
in moc1ii’icai,ion of the eariier order framed__i’.he<\/p>\n
are reproduced hereunder:\n<\/p>\n
“( 1′}<\/p>\n
The dissolved paririersh.ip firinyi\ufb02kiaiigaioredwd<\/p>\n
Ganesh Beedi Works’  axgoing” ‘concern
\nshall be soid”–.trJ such {of iis.VLj9ar\u00a31jier\/ s, who
\nmakes an Qfffefojf iiigk-:esi”~prie1\u00a3f… fghe same<\/p>\n
not_.bei_n’g. less  ihe”~rwgiriiri1i:.iIi {reserved}<\/p>\n
T’   crAores'”‘(Rs.Thirty crores)<\/p>\n
= wi:h.in if -.ij.’o._7f1–9_9*1 aeceptingfuriher liability<\/p>\n
‘  topay.iriieresiaaf $1 5% per annum towards<\/p>\n
‘V ..b1J”‘dVo'[Ter for purchase of the dissolved<\/p>\n
 i’ii’},'”=_<\/p>\n
 _amo1’ini”oj’ frie price payable to partner\/s<\/p>\n
 _[ro:n’os.. 5987 an the date ofdeposii.<\/p>\n
ah’:-:”;_ \u00a5=-inf! 9!-‘#\u00a2=f\u20ac *-‘k-‘k<\/p>\n
.”f3iL}’?’i}’I\u20acFS:11ip form as a going concern.<\/p>\n
.Cid.veried io in clause (ii) above, is received<\/p>\n
iviirhirz the stipulated time or if any of the<\/p>\n
Qffers made by the pariner\/s is not<\/p>\n
accepted by the court, the Q\ufb02iciai Liquidator-<\/p>\n
shaii irxviie Qffers for purchase of the<\/p>\n
.’k\/_zC’}\u00a53’3
\nxs<\/p>\n
HO\\V\u20acVt3l’. subsequently by order dated<\/p>\n
iv)<\/p>\n
v)<\/p>\n
20<\/span><\/p>\n
dissolved partnership firm as a going<\/p>\n
concern from the public if1Cll.t.CliT1g the<\/p>\n
partners by giving publicity in three_..__
\nconsecutive issues of two English dai.ig,;l_i’-.”_li~.
\nnational newspapers which have
\ncirculation in the country and one Kannada: l”‘l
\ndaily newspaper havingpicle circi.illa’i’io’_r’i.  <\/p>\n
Kamataka, the time allOLU:\/Jdl’ I.f’or_   f<\/p>\n
offers being at least 45 bet.iue_’en’ the<\/p>\n
last publication  hcliaie’  <\/p>\n
receipt ofthe Q[fers…_.___”-..V_ —<\/p>\n
muse >I::~1e>t< .$w\u00e9:.=:._' Me
\nif the sale of theltiissoliied_pc:jft.nership firm
\nas a going cohc'em'j:n';,ri1ri:our'.Q,\u00a3t'r:ng partner<\/p>\n
or fpar;l%ie_rs.vor a_nVoat\u00a5s.iclerl'i3"accepied by<\/p>\n
_ the'C'oi.irt;'Vsuch"QIj"c.rer shall, within 60 days
\n fromthe  acceptance of the ofjer,<\/p>\n
'deposit' i_uiii1'lihe'i'Ql_7'icial Liquidator the price<\/p>\n
or  part of the price together with<\/p>\n
interest oln\ufb02tlie total amount of the price at<\/p>\n
  "per annum from 06.12.1987 till the<\/p>\n
V ' l.".'<;tai"eloj'deposit", which may become liable to<\/p>\n
'  paid to the partner or partners towards<\/p>\n
 their share of the price in the partnership<\/p>\n
firm together with interest on such amount;<\/p>\n
7'. The above said scheme was assailed by some of the<\/p>\n
partners before the Hon'b1e Supreme Court in Special <\/p>\n
Petition in SLP 10680\/ 1991 which was ult.imate1y "<\/p>\n
as withdrawn in 1994. hi response to the SC}1eI11E._\u00a7E1'aI}'iwtoti <\/p>\n
this court by order dated 14.06.1991"; 1seV'era1"–.13artn1ers eithervh\u00bb<\/p>\n
individually or in groups offered t1ieir.bid_sz.'  <\/p>\n
by an association of persons eonipi'ised of 't11r'eeu'Vpai*t'ners,
\nnamely M.Vishwanath  .1330. a9Shendy and
\nM.Gopinath Shenoy as the 'AOP~3')
\nwas found to 'orores and the<\/p>\n
same was \u00a7aeeepte.d–';1-_V'oy\u00ab.:_th'is_ oou–.rt vide its order dated<\/p>\n
  o\u00a7\u00a71'\u00e9i5was passed on the said<\/p>\n
day: 1 9 V I 9 9  .\n<\/p>\n
j’.”1’he h’ig1_iesieVibidianiount of Rs.Ninety two erores is
\nV-‘:._.:aC.Cepted  group of persons offering the said
\nit  directed to deposit within 60 days from
\n the Official Liquidator the entire amount of
\n two crores together with actual profits earned
\n99 Vd”‘~\u00ab_.i’ro9m 06.12.1987 t.i1l 31.03.1994 and proportionate
\nH profit from 01.04.1994 t.i11 the date of deposit. in terms<\/p>\n
2 — ,~ ‘
\n _\u00a7% \/*3′<\/p>\n
E’\\.)
\nto<\/p>\n
of the O1’C1\u00a3:’.1’S of this Court. eariier issued in<\/p>\n
C.A.No.313\/1994.”\n<\/p>\n
8- At the in.st.a.n.Ce of the three pa.rt.ne1’s offe1*i1’1g <\/p>\n
bid, Clause (1) of the order defer1dant.21..09..i.:\u00a7’9\u00a2if_’v\ufb01\u00e9trgfts-V____”‘_<\/p>\n
amended by a subsequent order defenptazit.  The ‘t<\/p>\n
modified clause (1) of the orcler de1:e.r1de.j.r1t..’2.<\/p>\n
as under:\n<\/p>\n
“”I’ he highest bid. amount O_\ufb01>R$.:?it1tyitDO
\naccepted and the. Qwgap  offetihg the
\nsaid amount” are dtfeeted’ part of
\nthe bid CUTlOtt.t1vE’ of  riineiy  which<\/p>\n
is proportiorifgte t’o:7.t.h=’e  the out\u00bb<\/p>\n
gaii’ig”‘to_ge~thet whihtheptofits on the same
\n tilt the date of deposit.\n<\/p>\n
within\u00e9hat pe:+:{\u00a7c\u00e97.’qff”‘6r.’3:_”‘:t};\u00a2gs from 29.09.1994 in
\n_m_1y of\u00e9krhev nationfgatised banks in the name of the
\n Lit’.f[Lid.QEQ3′. The rest” of our order<\/p>\n
deter1d.c4ih.tv.21.O9. 1994 remains in tact. ”<\/p>\n
  ‘V the above order. the AOP~3 deposited the<\/p>\n
bid ‘<":t'I"I;.lO'{.11'"1iV'v'-jtfui'\u00a325.92 crores on 17.11.1994 with the official<\/p>\n
. 1iqL1itfi':1t0'2f ahei as per the order passed by this court, the<\/p>\n
h   oi?-ihlie firm as 3. going Concern were to be treated <\/p>\n
  been sold to the "I3'L1.rehasin,c_{ AOP" on 20.1 1.1994. It<\/p>\n
\u00bb\n<\/p>\n
-E  7,’
\n‘,L.$’ .<<\/p>\n
 3<\/span><\/p>\n
to
\nJ<\/p>\n
is again a matter of 1’\u20acCO1’Cl that the business of the firm<\/p>\n
along with its assets were handed over by the official<\/p>\n
liquidator attached to this court to the A0138 on <\/p>\n
vicle his report 10\/1995 and sale proceeds eilonggivitlt ~<\/p>\n
interest aeC1’ued thereon were dist.ri.bL1__ied  offiCi.alvs.v <\/p>\n
liquidator under the orders of this :’e.ou;ftjah”1or1_gst.:”thle IouAt::;_’<\/p>\n
going partners on 02.02. l995.”9_}ioj.weveAr~-, the  shot!<\/p>\n
be wound up due to one or t,he__ot.h.er’reasohand the same
\nwas continued even the?-eafte1i_ u3j1cle’r=–_Vthe’tsupervision and
\ndirection of this court arlri th_e”ifina1vi.ord’er oiiwinding up was<\/p>\n
passed by this Heweivler,  firm nor AOP~3<\/p>\n
nor the:Vassesse.ev_urhoV amoiiht towards the realisation
\nof the asxsetsol;t,he’\u00a7oiri9g\u00abeo–r1eerned did not disclose the said<\/p>\n
amount 1’eeeiyed as .eap_ital_’..gain during the assessment year<\/p>\n
 l994\u00ab–.il99E~. iiieome of the business for the period<\/p>\n
 toaglissolution of the firm from 19.12.1987 till up<\/p>\n
to the year 1994-95 was all tlirotigh returned as<\/p>\n
ineorne of  and was accepted as such by the<\/p>\n
lx_tiepart.me1″3t.. Despite. this fact, the assessing officer took the<\/p>\n
VfV1’ew”t.~l1at’ ii} the assessees were liable to pay capital gains tax<\/p>\n
“‘\\,’~~i-‘%–‘= .\n<\/p>\n
V’?\n<\/p>\n
24<\/span>
\non their respective share in the sale price of the assets of the<\/p>\n
firm being Rs.92 erores and {ii} they were also liable t.o be<\/p>\n
assessed on their share in the proportionate\/ notional p_1’o\ufb01t<\/p>\n
for the period during which the business was run  ajf1C1’t’oT1;_” <\/p>\n
behalf of AOP~l3. The Assessing Officer <\/p>\n
objections regarding cthargeability oflhthebleapital ‘gAai.r:1s*  <\/p>\n
on the pleas that {1} sale was sltimpdint’i1atu1’e:.aZi\u00a7:i’ [ii]  V<\/p>\n
transaction amounted to their 1’etire’1’nent  \/A013
\nor relinquishmerit of t:he\u00b0ir,_ share: *  aggriei’\/’edvvvbynthe
\nsame, appeal was filed before tl*i;eE’Coniniitsspioner of income<\/p>\n
Tax (Appeals) ~\u00ab 1.lE;lE$’angaf_;iorei _the “appeal was partly<\/p>\n
allowed;  same, the respondent-\n<\/p>\n
assesseeiiled an  the income tAx Appellate<\/p>\n
T1’ibu1’1V?l1_, Bangalore’  aggrieved by the said order,<\/p>\n
 ha}\/e 1151-e’:-‘e*r:%ed ITA No.134–140\/2000 under<\/p>\n
 of”tlie income Tax Act {hereinafter called as<\/p>\n
‘the   the Revenue has filed ITA Nos.144\/2000,<\/p>\n
 _  ‘Vti47\/2’ooo;tn’d 146\/2000.\n<\/p>\n
 “Vile have heard the learned Counsel appearing for the<\/p>\n
ix”,I:appellan.t,s in ITA Nos. 134-140\/2000 and the learned<\/p>\n
\\i~-sf?\n<\/p>\n
f ,<\/p>\n
’25
\ncounsel appearing for the revenue\/appellants in l’i’A<\/p>\n
l\\los.144\/2000. .147\/2000 and 1.46\/2000 and reply<\/p>\n
argtiments of the assessee azricfl the Revenue in these appeals.<\/p>\n
li. Learned COLiI1S\u20acl appearing for the appellan’t1*sfL’—.<\/p>\n
I.T.A.No.134 to 140\/2000 submit.tedw <\/p>\n
raised the question relating to issue.<\/p>\n
capital gains directly in the hiiiids o’fllindivi:duall:’
\nwho are erstwhile partners\/ irivtheldissolvedg firm of
\nMGBW and the AOP   the husiness of
\nMGBW as a going eoI1ee.rn._:s1’riee dissolution
\n06.12.1987   Slexierllllap-pellant.s have been
\ntaxed aszil’ their respective interests in<\/p>\n
the same ‘businesslandwhat1took place on 20.11.1994 was<\/p>\n
not the sale’as’vaV going Concern of the entire business as<\/p>\n
n<\/p>\n
 ordered by this” in the Company Petition. It is<\/p>\n
 1.2 is distinct and separate from an A0?<\/p>\n
o.I'”.’:.’\u00bb_.\u00bb tilt. of 12 which was taxed since the firm<\/p>\n
was   efflux of time as per Clause 16 of the deed<\/p>\n
— for a ‘nt1n1bei’f()i~ assessment. years up to and inclusive of the<\/p>\n
 _as.se,-\u00e9ssnient year i994~95. Ij)uri1’1g the course of the previous<\/p>\n
g,ie,-=,,=.?”><\/p>\n
year ending 31.03.1995 for the assessment year 1.995436,<\/p>\n
the business as a going concern of the said AOP of 12—-__fwas<\/p>\n
sold because of a dispute among the erstwhiie <\/p>\n
MGBW to give effect to the provisions of clause”  ”<\/p>\n
partnership deed which provided that only kl<\/p>\n
groups among them could bid for t’he7biisiness”a,s 21 <\/p>\n
Concern. Learned Counsel –t_’tir.t_.her .”subn1itteda_:that” an * V<\/p>\n
association of persons  3 nie–mb’ers”\u00ab.iiot  of the
\npresent appellants madel”the–  and the business
\nof MGBW was 4accordi;I’1’gly*  them by this<\/p>\n
court. These rn_en1bers__weregalsol  the 12\/13 who<\/p>\n
const.ituted ViArh’ieh”was’_’ca’riying on the business till
\nthe date–.o’f\u00ab. au.et.ion.Vllot\ufb02las\u00e9sgzts of the firm. Depreciation<\/p>\n
was allowed”.in”respects Vofllthe assets of the business of t.he<\/p>\n
  pal-t11\u00a2;%sm..:i_ie hands of the AOP of 12\/13 till the<\/p>\n
 allowed by the department proving that the<\/p>\n
departnientf’jreeognised that the business as a whole was the<\/p>\n
 asset ..oV”l”\u00ab:_the said AOP of 12\/13 for owners alone can be<\/p>\n
gtraiituped depreciation. It is further contended that the<\/p>\n
business was sold as a going concern which is the very<\/p>\n
27<\/span><\/p>\n
essence to the very concept. of a slump sale which was
\nrecognised by this court in 264 ITR 124 passed on the earlier<\/p>\n
occasion and therefore could not be taxed. It isffaiso<\/p>\n
contended that we valuation has been made ,:Atvht\u00a5~iV.<\/p>\n
directions of this court when the appellants v\u00a77e_refnot’ <\/p>\n
members of the said firm and the Zaripeiiants  <\/p>\n
any offer and when the six rnerribersA:’e;\u00a7_<]or_esseci\u00bbtheir inabfilityr.<\/p>\n
to make a proper offer as the bu_:s"I~1fi.ess.he::.d'n.o:t"v.3:)een'"Vahied if<\/p>\n
the Court thought it app-ropriate**t.o."ti1;ili.ze the 'services of the
\nChartered Accountant t:o"fin'd  of the business<\/p>\n
to enable t.hemset_lyes to VTh.erefore, it was not<\/p>\n
a Valuation that niatieyin an _'agreement to sell, it was not
\nbindingfit: was .r1otV"at\u00b0the—"instance of any of the partners<\/p>\n
much _less the 'preVs'enAt~.Vapp'el1antos and it was with reference<\/p>\n
 .._to date of thAe'"dis.so1ution of the firm on 06.12.1987 and<\/p>\n
 the " Chartered jfaecountant had only considered the tangible<\/p>\n
assets of  apart from goodwiii. They took no account:<\/p>\n
 of the personnel, the business organisation, the structure of<\/p>\n
\ufb01theibtisiiiess etc. of the going concern and therefore in View<\/p>\n
—   decision of the Apex Court in 307 ITR 75, the reference<\/p>\n
U<\/p>\n
28<\/span><\/p>\n
to the transfer as a going concern has specifically observed
\nthat a business undertaking consists not onty of tangible<\/p>\n
items and good will but aiso manpower. tenancy rtgl1ts–._a’nd<\/p>\n
any ticenses etc held by the business and in–‘the” ‘ih;<5ttai'1t'.g\u00ab<\/p>\n
case. there were about 150000 wor1{ers_-'"direct,\/itndirecig <\/p>\n
number of tenanted premises, va*1ues"'eo.f tr'ade1narR\u00a7-su,,,.an1fi'<\/p>\n
copyrights amounting to licenses. These Vfactiors 'were3 not –. 0<\/p>\n
considered by the Chartered Account'ar1ts.biaearnedi counset
\nfurther submitted that   _Val"uation done of the
\nbusiness as a going coneem ontthetivvdate of auction<\/p>\n
namely 20.}  "wa's  sale\/transfer. It<\/p>\n
was not'fas"i'feAtifiere 'Vwere'eQi'1tractin'g parties, it was not as if
\nany such c.ontracting:par'ti.es entered into an agreement<\/p>\n
where the dtfferen,t a.ssAe.tsV'o"f a going concern were got valued<\/p>\n
   Alxjurpose of brining about the transfer and<\/p>\n
 t'h.er"e~ was tno'-.iAd'e–ntity of minds necessary for an agreement<\/p>\n
etiiz It is or1–iy_ vx\ufb01herr there is such an agreement". between the<\/p>\n
'gcontractiivng parties which spells out the itemized figures of<\/p>\n
,.'th.e'tVario'us assets comprised in the business, there is a<\/p>\n
— 0f.–po’ssibi1ity oi’ apportioning the stump sale considerat:io1’1 as<\/p>\n
~..\u00e9<\/p>\n
99<\/span><\/p>\n
4…\n<\/p>\n
laid down by the Hon’ble Supreme Court in 307 ITR 75
\n(P.N.B.FINANCE LIM1’Tt?.D VS. COMMISSIONER OF INCOME<\/p>\n
TAX} and where the transfer of the entire business as a <\/p>\n
concern involved and the contract. indicates git;e.tii.-tjvise_”<\/p>\n
consideration. Section 4} (2) would stand _att.i*aetedfwitli’~t<\/p>\n
regard to the amount of SL1I’}3Il.IS:.'[O:’th\u00a73″‘.\u00a73XtEl”ft:”Qfv_V’1;1;iVt3 <\/p>\n
difference between the written down va.1ue._of t.he_’de’preeia-bled it<\/p>\n
assetts) so transferred and the  cost”the’i’eof.
\ncounsel also relied upon’t:h_e deteisi’oVn;of”n{.he Sup1*e1’1ie Court
\nin 227 ITR 260 {COMM’ISSIO’N$RV  VS.\n<\/p>\n
ARTEX. MANUFAe\u00a73foR1N:G Ctj;.3 inV’sn’pport”:of his Contention.<\/p>\n
Learned   that the decision in
\nArtex’s case will not’be_\u00bbtap;ii’i\u00bbea*b1e in View of the subsequent<\/p>\n
decision o1’theV_V’Hon’bAI’e Suprenie Court in 227 {TR 278<\/p>\n
“‘~1.(eoi~\u00a7?ti\u00a711s–s1o.3;sR2″‘on INCOME TAX vs. ELECTRIC<\/p>\n
 MFG. CO<\/a>}. Learned counsel further<\/p>\n
subrnitted .th\u00e91tAibi1ee the court comes to the conclusion that<\/p>\n
‘gthere is  t.1’anst”er as a going concern of the business of<\/p>\n
V’  as established by the facts. the question of capital<\/p>\n
 gains as such can never arise directly as done in the hands<\/p>\n
txwgfa<\/p>\n
30<\/span>
\nof either the partners of the firm or in the hands of the<\/p>\n
members of an A0? depending upon whether the \ufb01rm or the<\/p>\n
A0? is the seller. Learned counsel further subn’iitted'”t.hat<\/p>\n
not only are the individuals liable even the AOP oi’WViil”r:’ii.ot.-\u00ab K<\/p>\n
be liable. Therefore, substantial questions of ‘la\ufb01v  ‘<\/p>\n
answered in favour of the assessee\/a’pApe’ilant;s. _ . it<\/p>\n
12. Learned Senior Counsel Srilndra Kftintar,  ‘for’<\/p>\n
the revenue submitted that iridview. of the._o’rde_r  by
\nthis court. in Company”P.etitioii”.”‘  assets oi'”MGBW was
\nvalued by a Chartered Aeeoiuntant as w’_COI1C\u20acI’f1 which<\/p>\n
included all tangihie arid intangiblepropefties and highest<\/p>\n
bid of .ae’oept.e\u00bbd_-.ai1dadmittedly the said amount
\nhas been’ distiribiited. lVby?”‘th;’e Official Liquidator to the<\/p>\n
indiv’idL_1a’i pa’i’t’.i*iei”s;of’=t1ie”{irrn add AOF’–].3 in View of tll\ufb01<\/p>\n
“v.p_vproy1’aioi’ips of See’tio11_____4v5 (3) and (4) o the i961 Act. The<\/p>\n
 \u00bbde’e=;sion:rS1i–ed’=upon by the learned Counsel appearing for the<\/p>\n
 to the period prior to 01.04.1988 from<\/p>\n
which date provisions of Section 45 (3) and {4} of the<\/p>\n
_ 4′ ulnconie  Act, 1961, was introduced will not be of help to
\ntheir_asse’ssee in the present. ease and the order passed by<\/p>\n
‘=54<\/p>\n
31<\/span><\/p>\n
this Court’ in Company Petition is elear that the sale must be<\/p>\n
deemed to have been made as assets of a going (‘,{)11CfC’I’11v\\x,\\,r’eH1″!!tf,.
\nauctioned among the group of partners and
\nappropriate orders have been passed for disst)l:.:tVionVV  it
\nfirrn and payment have also  J <\/p>\n
appellants\/ every partners. ,e”i.earneld ‘counsels. furth’er”‘, V<\/p>\n
submitted that the decision relilexd\ufb01lby ‘thel”1earn–e5d
\nappearing for the assesseedbes .t.hel;l)resent ease
\nhaving regard to the facts (16) of the
\nPartner Deed”    Cthfldlissolution, the
\nbusiness  should be sold among
\nthe transfer of capital asset<\/p>\n
as defined in Seet;io’n.’:_”2_:[vl_4}—.oi].the 1961 Act and transfer as<\/p>\n
defined _under S,\u00a7eetj.itv—.n  (47) of the 1961 Act. and therefore<\/p>\n
l.”vthe”iorder, piassedll’b=y——\u00abthe Tribunal is justified. Learned<\/p>\n
 submitted that ITA Nos.l44, 146 and<\/p>\n
 by the Revenue being aggrieved by the<\/p>\n
V._direet.ions; given by the Vice Chairman of the Tribunal<\/p>\n
 computation of capital gains which was wholly<\/p>\n
ugnneeessary having regard to the faets of the case and<\/p>\n
therefore the said directions issued by the Vice President
\nmay be set aside and submitted that when the Vice President<\/p>\n
has passed an order concurring with the decisionfof.._.oih’er<\/p>\n
members, he could not have by himself iss’ii-edAA\u00abee;rt–ai”ri.e ~<\/p>\n
directions which cannot be sustair1ed._and _”1iabie’_’:to’V’be .set <\/p>\n
aside and the same is also contrary;’toA.’the\u00bb._p’roi\/isioihs <\/p>\n
Section 45 of the Act and t.11e__’sdb set=tion.V it.s;eii;{.s~tates3 the <\/p>\n
market value on the date of thextrarisfer daiiddtlierefore the
\nsaid observations and d’i~re’ctions  Vice President<\/p>\n
regarding computat.ion V0-1″”ea\u00a7’itai=gaoindsdinayfbe quashed.<\/p>\n
13.  leaifhed’counsedlv”afipearing for the assessee
\nsubmitted”V.re1ied upon by the assessee is<\/p>\n
helpful to’evfe1’1_ a’\u00a3tez”…ir1c1usion of Section 45 (3) and (4)<\/p>\n
  ifromAAOl\u00bb.vQ.-441988 and the decision of the Tribunal<\/p>\n
 V is \u00abcent-‘raV”i ‘i:o”}’aw as er the decision relied u on b him and
\n_ 7 _   P i3 Y<\/p>\n
sub’1ii1tted’.’–‘\u00a5,j1?\u00a71’t the appeals may be a”0WCd-<\/p>\n
  .VVV_e:’ have given careful consideration to the contention<\/p>\n
“.AAof.,_th.e learned counsei appearing for the parties and<\/p>\n
 VV scrtitinised the material on record in the Eight of the<\/p>\n
2;\n<\/p>\n
33<\/span>
\ndecisions relied upon by the learned counsel for the parties<\/p>\n
in these appeals. Before Considering the contention of the
\nparties. it is necessary to bear in mind the legislative histo1*y<\/p>\n
pertaining to Section 45 (1).\n<\/p>\n
15. it is necessary to bear in mind the legis!.at.iv*e.xhistory   l <\/p>\n
the provisions of Capital Gain presently_icorxtainedin’ <\/p>\n
45 of the 1961 Act. Tlue present section <\/p>\n
Section 1213 of the Income Tax  922 jhwalseconched<\/p>\n
in the following terms: V <\/p>\n
.’T.J;’ZB(5U;\u00a7–.’_”I*h:e tax sliall. oewpayable by an
\niasessee ‘u.n,ci’erf–.ctheheadCapital gains’ in
\nrespeet of aiiylp-rof_’1t:s  gains arising from
\n segue-, “e>p;”change’;”V relinquishmerzt or
\n._ -t1’a1′;’sfe_r”‘of capital asset effected after the
\np ._3l~-‘*1. lVl.l\u00a31iTCl1v,.’.’V’l-9535 and such profits and
\n gai1″1s’xsh’a11_be–,_d’eemed to be the income of
\nthe’ Vp1″eviou’s.>’ year in which the sale,
\n ‘relinquish.ment r t ansfer too};\n<\/p>\n
.__place;”‘  ….. .. v<\/p>\n
   of the Income Tax Act, 1961 . however,<\/p>\n
reads as iciimis:\n<\/p>\n
 “45. Capital gai.ns:– Any pro\ufb01ts or gains
\n” arising from the transfer of a capital asset
\neffected in the previous year shall, save as
\notherwise provided in sections 53 and 54,<\/p>\n
be chargeable to ineome~t.ax under the head
\n‘Capii.a1wgains’, and shall. be deemed to be<\/p>\n
17.<\/p>\n
1964. following new sub–sect’ions were inserted as fiiriderjij’ ”  <\/p>\n
In the year 1964, by See<\/p>\n
34<\/span><\/p>\n
the income of the previous year in which the
\nt1*ansfer took place.”\n<\/p>\n
{2} Notwithstandiiig a11yt,hir”1g–.con-taiifledlfinlll’  V
\nsub-section (1), every equity Sh3l’\u20achO1C1\u20aci7__tDVVx__’ ”<\/p>\n
whom any shares are “allotted by” the ~  <\/p>\n
company by way of-4_bontis_ shall, e.1;ir1le’ss<\/p>\n
such shares are ‘1ssu__ed_ wholly out v.of*,the..e <\/p>\n
share premium accou’nt’be chargeable }to
\nincome~tax under the—heAad_ ‘C.apital” gai11s’_7in
\nrespect of suVc.h”‘sha.resV_o1’i 31,1 lamount ‘equal
\nto the fair market Va_.l;ja*e} ofV”st:eh–.. shares on
\nthe date nextH_fol1owiVn\u00a7f the ‘expiry of the
\npe1″lod.:of_ thirty days iroin the odate of such
\nallotnaeirztl and i such\u00bb darhount shall be
\nd.~e’erned~–.. be: the lI1CQII1\u20ac of the previous
\nyear–f_ir.; whieh”=t’he’ ‘da;te’=_next following the<\/p>\n
~~c.a:-‘;5vi:\u00a2sa’:a;_ p_er.i__od__ of ‘the_thi\u00a71*ty days falls:<\/p>\n
. V’V’P:’1’oVidbed.eVt11aI; income~tax shall not be
\neh_argeab1je._u’1fld’e1f,.–~th.is subsection if such<\/p>\n
shaifesV’areincl”u.ded in the stock~in\u00abtrade of<\/p>\n
the _asse;ssee orif such shares were allotted
\nbeforethe 1*’ April, 1964:\n<\/p>\n
Provided further that nothing<\/p>\n
 convtained in section 48 shall apply to the
\n“_*v_v.ii1oo1he chargeable under the head ‘Capital
\n. gaiins’ under this sub-section.\n<\/p>\n
Explana1ion:– For the removal of
\ndoubts. it is hereby declared that income
\nchargeable under the head ‘Capital gains’
\nunder this subsection shall. for the
\npurposes of this Act. be treated as capital<\/p>\n
tion 12 of the Finance<\/p>\n
WI\/\/N4 \u00bbM.\u00bb\u00ab..-aa~z;a\u00bb4\u00a2.>\u00bb;\u00a2;’\u00a2,:,-4,,<\/p>\n
U9
\nLh<\/p>\n
gains relating to capital assets other than
\nshort term capital assets.\n<\/p>\n
(3) Where any shares in respect of which  6′ _
\nassessee is chargeable to income tax 1.1Ij1’Cl’\\’3\u00ab!’_’V’._ ‘ S , ‘<\/p>\n
the head ‘Capital gains’ under sub~se’ction_ ‘
\n(2) are transferred by him before 1h.e.,e\u00a7<;\u00bb;)Viry.:" <
\nof the period of thirty days "I'!3'lA\u20acI'~'1'"E3ClMt"C)~:vl1'1V'<\/p>\n
that sub~section, any }_prof_i,1sj or " <\/p>\n
arising from such irans'i'er7._shlall 'not, be \u00bb.  <\/p>\n
included in his toial=in__come;' ._ '-<\/p>\n
(4) Save as otherw1's'e.._l"provide~d_  sorb-
\nsection (3), .—-;ii1othing——- _c'0–nt"a.ined "in SL_1lD-
\nsection {2} s1:gill\u00ab.be.'deenie.;i .to'~.prec1udAe"the
\ninclusion of ariy5profili;.s:v and" g\u00e9iins arising
\nfrom the transfer of anj-7 s.'nares~.1_4e_;.i'erred to
\nin that' submsection in~.ih_e t;oizi1': income of
\ntheiassgessee Toriariy f)re'vi.ouVs__yfea1' in which
\ns~Li'c!?i.._sh:–1r';es"a:i.r  titansfeijted by him."<\/p>\n
18. The ablovelvsuhllsec\ufb01iens iiainelyl, (2) to (4) of Section 45
\nwere h.ovi\/eyer, ornit:i:_ed._l’b\u00a7[“‘Se;:tion 13 of the Finance Act.<\/p>\n
1966 with 6fr\u20acCl:.lfFOi1T1 17% Aplril, 1966. However, the Taxation<\/p>\n
.”‘Laws l:{Am\u00aben’dnie11ll)’:5iet;” 1984 inserted a new sub–section (2)<\/p>\n
  1-fit April, 1985 i.e.. from the assessment year<\/p>\n
19’8_6–86 .oni}i?;”i.i5(ls and by Finance Act, 1987 which came into<\/p>\n
*._effect. irom W April. 1988, in subsection (1) of Section 45,<\/p>\n
lw_oi*ds “54E. 54F and 54G” were substituted for “543 and<\/p>\n
6417” and after $L1b”S\u20acC1’lO11 (2). the present: sub–seci.ions (3),<\/p>\n
n<\/p>\n
 L 41 :3<\/p>\n
V’;-\n<\/p>\n
(4) and [5] were inserted. At that time. clause {a} of sub-<\/p>\n
section {5} contained the words “in which such COH1f)\u20acI1SE3.uti*D_Ii’*.<\/p>\n
or part. thereof. or such consideration or part. t.he1_’e”o’i’.\u00ab5 _._ it<\/p>\n
first. received” in place of “in which the transi’erV–tooi:pvplace”<\/p>\n
and clause (0.) was not there. Sub~seet_io1is.t[Sft <\/p>\n
were in existence between. 1.5′ April, 196-4 and {%viV–5’A.l:\\\/iareli, <\/p>\n
1966.\n<\/p>\n
19. The scope and effect ofthef’;alnot}el.’:tairiendments was<\/p>\n
explained by the  in it<\/p>\n
“CapitafI.ga’.in’s tot: ‘t’rans;”e}’. oj’_]irnis’ assets to
\npartrzjers ajtct Dice .’ L’\u20ac_i.’SCI\u00bb_ and by way of
\ni..Cofii;)tLlso_,_ry_ ar:”qt\u00a31i.3itto_n—-~\u00ab24.1 One of the
\ndeviees u1″\u00a7;.ed_b;1.”aissesVsees to evade tax on
\n capital.gainsis”-to*convert an asset held
\n\u00abirtdividtialfbr “1n_to.a;n asset of the firm in
\n‘which “the’.A’indi’vtidual is a partner. The
\nV deeisionof t’:_1e.*Supreme Court in Kartikeya
\n Sarah-hot u CIT has set at rest the
\n <:ontrovervsy~'i'ell outside the scope of capital
\n_ , gain taxation. The rationale advanced by
\n .i1l'ie._C'o'L1i't: is, that the consideration for the
\n f"t,ran'sfer of the personal asset is
\npdindeterminate, being the right which arises
\n._ or" accrues to the partner during the
\n subsistence of the partnership to get his
\nshare of t.he pro\ufb01ts from time to time and on
\ndissolution of the partnership to get the
\nvalue of his share from the net partnership
\nassets.\n<\/p>\n
‘Kg, fa;\n<\/p>\n
\u20ac 3<\/p>\n
24.22 With a View to blocking this escape<\/p>\n
route for avoiding capital gains tax. the
\nFinance Act, 1987 has inserted new sub;  ._
\nsection (3) in Section 45. The effect of  ‘<\/p>\n
amendment is that profits and gains ar_i_sing–\u00ab-.  ~<\/p>\n
from the transfer of a capital assettby
\npartner to a firm shall be cnha1*geab1_e’.sas~._: .<\/p>\n
the partners income of the “;3revtou_s yiear’-.iio<\/p>\n
which the transfer took plaee.:-Fofi’ p,ur’pos.es=.
\nof computing the capital gains, the val__ue Vol: ” <\/p>\n
the asset recorded in the books of the=\u00a3’ir11’1<\/p>\n
on the date of the tra–nst’e1~ shall be_deen1_e’d’ <\/p>\n
to be the full Value of the considieratioin
\nreceived or aztcruedi-“‘asfaV”-result.’oft the
\ntransfer of the-..ca\u00abpital   <\/p>\n
24.3 Conversion” of pa1*t,nersVhip:’V*assets into
\nindividuavlg assets~ onf._ dissolution or
\nothermse-l also =i.for’ins*  the same
\nsg.hei:.1_el~–o.f;Tta:\u00bb:._:avo.idance.v Accordingly. the
\nFinaiict: Act,\u00bb  has inserted new subm<\/p>\n
 ——– –.secttcon”t\u00bb;i7t}V.in.._Section.__\u00a715v,of the Income Tax<\/p>\n
Aet’;f1V9617\u00b0._ effect _isWthat profits or gains
\n;1ris.ing9frorr.y thetran-sfer of a capital asset<\/p>\n
baby a ‘Eirinf.to”..a”‘\u00bb.pa~rtner on dissolution or
\n“otherwise ‘shall’be chargeable as the firm’s<\/p>\n
indcomecciin thelprevious year in which the<\/p>\n
 transt-er took place and for the purposes of
\n1 computat’iU1’1Vof capital gains the fair market
\n_ vrvallue of the asset on the date of transfer
\n sh’a_ll”be deemed to be the full Value of the
\n,,,\/..ao11.sideration received or accrued as a
\n‘reisstilt of the transfer.\n<\/p>\n
 24.4 As a consequential measure, clause<\/p>\n
[ii] of Section 47 has been omitted and sub
\nclause [b] of clause (iii) of section 49{l] has
\nbeen amended.\n<\/p>\n
..’;W’<\/p>\n
,..,.,,,,mM,HM.4wms\u00bbemaa>>;\u00aberm9swsy:a:.\u00bb’ ,<\/p>\n
(ii)<\/p>\n
” l ‘ –._ tyhligf ._ vi l’;3ub_~cla use,<\/p>\n
personal effects. that is to say.\n<\/p>\n
movable property {inclL1di.ng..\n<\/p>\n
wearing apparel and fttrnittircf’
\nheld for personal use
\nassessee or any member oflhisiyy ” ‘
\nfamily dependent on <\/p>\n
excludes —\n<\/p>\n
(21) jewellery:\n<\/p>\n
(bl a1’chaeological . collect_io’ns”1_: V    <\/p>\n
[cl drawing_si:’ ~ . __ ‘
\n(VCi}..\ufb01aini-ings.\n<\/p>\n
[el  (_.)1.”i”  ‘ we<\/p>\n
      ll<\/p>\n
Eicplanationit. Fe-r”tl’ie purpose of
\nA “jewellery”\n<\/p>\n
in’clude–s–_–?\n<\/p>\n
 {a}Vl”O_r1:.a1ments made of gold,<\/p>\n
._ ‘=syil’v__er, platinum or any
\n_ Hotiier precious metal or any
\n‘..-alloy containing one or
\nmore of such precious
\nmetals, whether or not
\ncontaining any precious or
\nserni–precious stone, and
\nwhether or not worked or
\nsewn into any wearing
\napparel;\n<\/p>\n
(bl Precious or sernbprecious
\nstones. whether or not set
\nin any furniture. utensil or
\nother article or worked or
\nsewn into any wearing
\napparel:_)<\/p>\n
(iii)<\/p>\n
agricultural land in India. not 1 it<\/p>\n
4()<\/p>\n
being land Slltiail\ufb01i-~”\n<\/p>\n
la]<\/p>\n
in any area whic’n”*
\nthe,’<\/p>\n
comprised within, V_ _’
\njurisdiction’  Of  ” ._ V
\nrnur1icipa.1ity__ f. ”(.whe’t.her,y_ ‘
\nknown as. a7._niunicipal_ity.\n<\/p>\n
niuiiieipal  *-e()rpo,r–atio’Ii.:’ y
\nnotifi.e’ci~._ area eo_rnmitt_ee–.,. <\/p>\n
town area committee,-I town
\neornnaittee,  or by any<\/p>\n
\u00ab.nar.ne}_ V or’ .alW,eantor1″In’ent
\nll board  El_r1d’r_”‘\\’\\[hiCh has a<\/p>\n
  of ~T_i’\/\\f11’!;i{‘,i’l V the
\n‘{l”igures ‘<\/p>\n
hp-‘3.pu_laiion–‘\u00ab.of not less than
\n thotisand iaoeording to
\nitlie last’ preeefding census
\nL V relevant<\/p>\n
‘ have been<\/p>\n
 _ Vp-1;i1:s1ishe:\u00a7<:l before the first<\/p>\n
b"._"day oflthe previous year; or<\/p>\n
 any area within such<\/p>\n
\ufb01ciistanee, not being more
\n' than eight kilometres, from<\/p>\n
the 'roe-ai limits of any
\nmunicipality or<\/p>\n
Cantonment board referred
\nto an item (a]. as the
\nCentral Government. may,
\nhaving regard to the extent<\/p>\n
of. and scope for.\n<\/p>\n
urbanisation of that area
\nand other relevant<\/p>\n
considerations, specify in
\nthis behalf by notification
\nin the Official Gazette;\n<\/p>\n
41<\/span><\/p>\n
(iv) 6 ‘xi per cent Gold Bonds. 1977
\n{or 7 percent Gold Bonds, 1980] . __
\n(or National Defence Gold’ 7<\/p>\n
Bonds. 1980) issued by <\/p>\n
Cemral Governmexltz<\/p>\n
( 2) Special Bearer Bonds;\n<\/p>\n
issued by  “thee  Ce11t.:1.2:1
\nGovernmerlt :  ” ‘ h’  ”\n<\/p>\n
(Vi) Gold Deposit V”B0’nds sissnled’ .
\nunder  G(‘)’.r:1_ qDvep’0_s1i~
\nScheme, 1999 _n0t’1fied”b3,? the
\nC\u20ac=f1tI’a1G\u00bb0’\\f\u20ac3f1″3.1Ii\u20ac.I1t.  9<\/p>\n
21. The word “‘Lransfer”  Section 2(-47)
\nof the Income Ta);  196 as frg11_\u00a25v.;;<;.:._' ''<\/p>\n
"(:4"?h}"'transfer' .1fr;_ ie.1ati'01:i to a capital asset.<\/p>\n
 __,– .    ,  <\/p>\n
‘V3_[i)  _ “the s\u00e9ilev. exchange or
\n ‘  “r_e1i1’.1qu-ishment of the asset:<\/p>\n
  (ii)  Vtiie extinguishment of any
\n‘ rights therein: or<\/p>\n
 (iii) the Compulsory acquisition
\n thereof under any law: or<\/p>\n
(iv) in a Case where the asset is
\nConverted by the owner
\nthereof into or is treated by
\nhim as. st0cknin–t,1’ade of a
\nbusiness carried on by him.\n<\/p>\n
such. ctonversioxl or
\n[I’\u20acat1’I1\u20acI1i’.;\n<\/p>\n
(ix-Ia] the maturity or redemption of a
\nzero coupon bond: or<\/p>\n
(V) any transaction involving t.h;e”” <\/p>\n
allowing of the possessioiji”o{7. 1<\/p>\n
any immovable property”\n<\/p>\n
be taken or retainec_1.~ii–r1,.__part–._’
\npe1’formanc.f:’ “er ”  b cc_nt.racft ..of V<\/p>\n
the nature re.fe1’rveci-_ to’ H<\/p>\n
section 53A of the Tran-s_fer of<\/p>\n
Property.__ Act}, 3.’8821={4A.VVof<\/p>\n
1882}  ”  V _  <\/p>\n
{vi} any trarisaciion {whether by
\nsway of-“beco1n–i..ng a “1’ne_IAI1ber<\/p>\n
‘  or.’ acqLi’iri11g”~-sha1’es in. a
\nco~o’per_ai;ii;=e    _ society.\n<\/p>\n
corripany  o’ther[_’a.ssociation<\/p>\n
f of ‘perso1isc\u00bb.o1* bypyway of any
\nagire’ement’  we  any<\/p>\n
. ” ..arr’angement or in any other<\/p>\n
  ;_ ” ‘ rnannevri’ Whatsoeve1′} which\n<\/p>\n
 ——–  _  ‘1:;:_  –._has t11e__effect of transferring,
\n it A’ p or enabling the enjoyment of.\n<\/p>\n
 iinmovable property.\n<\/p>\n
t _ \u00a3\u00a3k_p1ar1ation~–For the purpose of sub-<\/p>\n
b_ clauses “”(v} and {vi}. ‘immovable<\/p>\n
property’ shaii have the same<\/p>\n
by me’aning as in clause {(1} of section
\n 269UA.\n<\/p>\n
22f   that Section 45 may be attracted. there must<\/p>\n
  the trarisiei’ of a capital asset. The expression ‘transfer’ is<\/p>\n
 in Section 2 (47) and ‘capital asset’ is de\ufb01ned in<\/p>\n
  Seiction 2 (14) of the Income Tax Act. Such transfer must: be<\/p>\n
‘E.\n<\/p>\n
X. {-\n<\/p>\n
‘s_j\u00ab\u00ab-\n<\/p>\n
43<\/span><\/p>\n
effected in the previous year and some profit or gain must<\/p>\n
arise from such transfer. if these conditions are <\/p>\n
Section 45 provides that such profit or gain is char;geabIe— :_. S <\/p>\n
income tax under the head ‘capital gains’ and t_h~a:–<\/p>\n
be deemed income of the previous year i1’1:N,3i,’,1’1:i,;C]’I:Iu,>th,I’3′ transfer f<\/p>\n
has taken place. Since Sectionercreatesdan”item ‘artificia1<\/p>\n
income’ its provisions shouid  coi1struVed..d2\u00a7 Tiius
\nSection 45 brings to charge itsdingredients
\nare: H . . . * . ..\n<\/p>\n
i) the eXis;t,e.nce:3._of  owned by the
\n ‘ .\u00ab ,
\nii} the o’f,s:t:ch\u00ab during the previous
\nE7.3:reard: -V V S S H .\n<\/p>\n
iii) _v  of gains from transfer of such
\n  a??$\u00a7tshand ——–\n<\/p>\n
S * iv}  profits and gains must accrue and arise to<\/p>\n
the oissessee.\n<\/p>\n
..  11:1″a:’recent decision in COMMISSIONER or INCOME<\/p>\n
 ofiAV:><;,–.. EARIDABAD vs (3-HLANSHYAM {HUF} {(2009) 8 sec<\/p>\n
 the Hon'b]e Supreme Court had an occasion to<\/p>\n
45<\/span><\/p>\n
short’. Section 45 defines ‘Capital gains’, it
\nmakes them chargeable to tax and it allots
\nthe appropriate year for such charge. It
\nalso enacts a deeming provision. Section 48
\nlays down the mode of computation of”–_
\nCapital gains and deductions therelrom.’fm~._V *<\/p>\n
24. The Contention of the counsel appearing for;i’fl’1’e..’pa._rti+:s <\/p>\n
and the decisions relied on by them has to be..c_o’riside1’ed in’  <\/p>\n
the light of the above said provisions of<\/p>\n
Act.\n<\/p>\n
firm MGBW was dissolved on  and_tl1ereE was no<\/p>\n
further’\u00ab._ agreeAnie’nt.__vtlie.’ partners to Continue the
\nbusiriessofpthe firm”: dissolution of the firm, the<\/p>\n
 L. .3 ..;”.’Q-m..\u00a7 “””” ..-..m..: .,. Ln 4-,. -1… “,4 ,….n.,. n\n<\/p>\n
1.. ‘ lifiii WCiC lCL1L1llCU ‘iu um: ulatfluuicu axixuixgai.<\/p>\n
 proportion to their profit sharing ratio.<\/p>\n
  of Clause 16 of the Partnership Deed<\/p>\n
wlie~r_ei11V__Vit  Aelearly stipulated that a sale shall be held<\/p>\n
 ‘I’.}t1\u20ac partners by which sale nobody other than<\/p>\n
i’ partners shall be entitled to bid and a Company Petition was<\/p>\n
    before the High Court for winding up the business of<\/p>\n
E
\n2\u00bb<\/p>\n
LJ<\/p>\n
25. The material on recorcilll?-“‘t1\u00bbl.1ld ciezariy. s1\ufb01,c\u00a7{z4ro’t\u00abt1aa.t.–\u00bb5 the \u00bb ‘<\/p>\n
46<\/span>
\nthe firm as per Clause 16 of the Partnership Deed and in the<\/p>\n
said Company Petition l\/1988. this court directed that in<\/p>\n
the interest of more than 1,50.000 employees “tvhovkeere<\/p>\n
employed throughout. the State. the business 3<\/p>\n
continued till the actual winding up proceedingslweotzlicl.  V’ <\/p>\n
to an end and therefore the business continue;Cl.as_per’~t’he’.<\/p>\n
direction of the Company Court. in the intev_res\u00bbt. of<\/p>\n
employees and in View of c1ause_;”1~ep of  Eieed
\nand after 1987′. the asse’ss111en.ts’were tiled Asasoejiation of
\nPersons upto 1994-95 lshowiixgil’  and claiming<\/p>\n
depreciation in respect  the firm. It may also<\/p>\n
be notiedlmlatrt  gift-1e”r”‘ the Winding up of the
\npartnership. and process started, one of the<\/p>\n
partners Mr’;Vinod assigned his shares in favour of 7<\/p>\n
 ..V_oth.ejri<part11ers bjf'a.s.si.gnn1ent dated 03.07.1993. Thereafter<\/p>\n
 Va.ss'e–ssm_er'1tiwas_being filed by A01'-'wl2. The fact that this<\/p>\n
cctirt passed Sfariotis orders including the valuation of the<\/p>\n
 assets bf the firm and ordered that the partners or<\/p>\n
9' 2..j't.\/Xsso.ciation of Partners shall submit their bid and highest<\/p>\n
  tvoulcl be accepted and on the basis of the valuation<\/p>\n
"3<\/p>\n
z-*'
\n1;\u00bb)\/s<\/p>\n
47<\/span>
\nmade by the Chartered Accountant. the basic price was fixed<\/p>\n
at Rs.3O crores is also not in dispute. The fact that 8<\/p>\n
partners [hereinafter caiied AOP43} submitted their bid 7<\/p>\n
other partners also submitted their bid 3<\/p>\n
submitted by 3 partners was for Rs.92 crores was  <\/p>\n
be the highest bid and the same w,s;s”a(:cept.ed<\/p>\n
and the Officiai Liquidator was   ._recVei\u00ab.ve<\/p>\n
amount and distribute the ‘sartie ahiongeVthetfvotitgtoing ”<\/p>\n
partners cannot be disputed sin”xr.ipewV’*~of the’speciii’1c order
\npassed by this court and)thef’:<ri:atereial,V:io:1 record wouid<\/p>\n
further show that finai:'order:ind Petition was<\/p>\n
passed:'ori'VdV2GA.A.};v53 :   the 3 partners who had<\/p>\n
submitted their Vhi:gi1esvt.._'dbids..~for R892 crores sought for<\/p>\n
modificatior1V.of'  \u00a7~:der7' for deieting the direction that<\/p>\n
amajdiit;.ati_ributab}–e——\u00ab\u00abto them as artners from bein<\/p>\n
 'deposiAtevd:"a:rid:2'the same was accepted and thereafter the<\/p>\n
said' 3 'par't'ners whose bid was accepted have<\/p>\n
 deposited: the amount of bid in respect. of the<\/p>\n
jwshares of 9 other partners and a statement was also<\/p>\n
'  p'.jepa1'ed regarding the Value of the assets of the firm and<\/p>\n
48<\/span><\/p>\n
after deducting t.he liability of the 9 partners. the net value of<\/p>\n
t.he assets was arrived at and distributed among t.he.._9;.<\/p>\n
partners and the direction given by this court. i’or__i’ili1#.g’~anl’7  <\/p>\n
undertaking that the 3 partners would Cent~ihtie’i-l.:’t’,he<\/p>\n
business oi” the firm and the other  pjarttifzers would.’<\/p>\n
interfere with Carrying on b’usi11ess__by the 3 partinepsllwhose<\/p>\n
highest. bid has been accepted and…_xt’heV order Court.
\ndated 14.06.1991 and  siniravvvtpages
\n10 and 12) is also indispntable_  regard
\nto th.e above  facts of the
\ncase, it is    or the firm MGBW
\non O6.   proeeedings were taken in the<\/p>\n
Con1panyi?etii:ioi”:’ of the partners for dissolution<\/p>\n
of the ~l-1’vl'[I1  _realising_ the assets of the firm in View of<\/p>\n
dlfjlau\ufb01se’ 116: oi’ the l?art’r1ership Deed and that the out going<\/p>\n
partne’rs;?a.ppel1.arits herein have received their net share of<\/p>\n
the valuev.o’l”tl\u00a7fieeil’assets of the firm out of the amount received<\/p>\n
 V’-by way of sale of assets of the firm as a going concern<\/p>\n
x’~t_’,0FiCl.t.i_(‘.t.\u20acd  per order of this court after deducting their<\/p>\n
  individual liability in the firm earmot. be disputed and<\/p>\n
49<\/span><\/p>\n
therefore it is clear that there was transfer (sale) of capital<\/p>\n
asset and the assets of the firm were purchased  23.<\/p>\n
erstwhile partners of the Partnership Firm and by   at<\/p>\n
of this court. dated 14.06.1991 and 20.11.1994’theyfjaise’ 1″<\/p>\n
undertook by filing an undertaking i:}:et’ore_   <\/p>\n
the order passed by this co’ur’t:-._o11 20,vi’1.I99V451.thatf’  it<\/p>\n
would not interfere with the  of the  the
\nsuccessful bidders      the
\nvalue of the highest bid offered  thereafter
\nas per order   partners who
\npurchased the  succeed to it: and
\nc0nstit.ut.e if thtefhfsarne name ‘MGBW” and
\nthereafter has distributed the amount<\/p>\n
amongst’.pt11e”9 ._pa:t;ners. including the appellants herein after<\/p>\n
,,.,ded’uct.i5n’g the liability’ of each of the partners and therefore<\/p>\n
   the partners is the Value of the net asset<\/p>\n
of  fi.rn1″ftiszestablished and therefore the capital gain is<\/p>\n
 attracted~  observed by the Hon’b1e Supreme Court in<\/p>\n
 eoivrM1ss1oNER or INCOME TAX. FARIDABAD VS.<\/p>\n
  __GHANSHYAM (HUF) (2009 (31 sec 412) as referred above.<\/p>\n
50<\/span>
\nThe decisions rendered prior to 01.04.1988 has to be<\/p>\n
considered in the light of the amendment of provisions of<\/p>\n
Section 45 with effect from 01.04.1988 and deletion of-.i.he<\/p>\n
clause in the definition of transfer in Section 2  3<\/p>\n
\u00a3961 Act. Pro\ufb01ts and gains arising from t1’ans’i’er oi”fca’pita]l.f_ V’ <\/p>\n
asset would clearly show that theremis”tia.\u00a7(“l–.i’or.gC:apiI._a.lV<\/p>\n
and same is attracted as the capita-1i_zasset’,wii;hi:n–;_ut’i:1\u20ac5’~<\/p>\n
amendment of Section 2 (14) ‘under it<\/p>\n
Section 2(4’7′) of the 1.96,–i..Acti ant}-..tg’_11e’ llcrjucialil iquestijon is as
\nto who are the persons  the capital gain<\/p>\n
and whether it is’th_e o1:it”gV’oi1’ig _ers:twhile;..ersons who have<\/p>\n
receivedlthe ‘val};e  asse_tdinlVi.he \ufb01rm or capital gains
\nhas to   _AOP–i3\/ 12. According to the<\/p>\n
appellants,Vll’Ehe’v a}l3pell~alnts’lV are not individually as such<\/p>\n
 i_vo’utgoi<r1gjoartners'"of…e.rstwhiEe firm MGJBW are not liable to<\/p>\n
  –on’~eapital gains as according to them they have only<\/p>\n
received  shlai-e which they already had in the firm and<\/p>\n
.\u00ab therellisx no transfer of any capital asset and therefore it is the<\/p>\n
li.’sass()siation of persons or firm or A()P\u00bbi3\/12 i.e.. liable to<\/p>\n
_ pa-ylllciapital gain. The Assessing Officer–the first appellate<\/p>\n
gvg\/gt<\/p>\n
would attract capital gain and in the said eases having<\/p>\n
regard to the facts ofthe said cases which was in respectxorii_a*_<\/p>\n
transfer prior to 1988 before amendment of Sect.ioa;’_1″”‘rii:5tV’_~i.il3f:)3  <\/p>\n
and (4), the lionble Supreme Court heldthat.  SW-o:ul.d<\/p>\n
attract capital gain u \/ s 45 of the Act and}  are.<\/p>\n
helpful to the appellants in t.he  <\/p>\n
Similarly, the decision of  S_t1prerne_ll:i ‘VCotl;t’t  in
\nCOMMISSIONER or     LAL
\nVAIDYA [1971 (79) ITIVIA…  were two
\npartners in  the   one partner
\nreceiving   share in assets, the
\nsale or   to attract capital gain<\/p>\n
11\/ s 12~Blo_f4’the’  \/fkct in View oi” the amended<\/p>\n
p1’Qv.riS;it’,-‘(ES of  45’. [Stand (4) inserted by Finance Act,<\/p>\n
 lwith effect 1’i~\u00a3:.\ufb01i’o’1.04.19ss. The said decision is also<\/p>\n
I notghel’p.fti1_ltelthe_:.appellant.s in the present case.<\/p>\n
f 26.  .It”‘is clear from the close scrutiny and consideration of<\/p>\n
St S’ therrnaterial on record and in the light. of the decisions of the<\/p>\n
 ‘AP-pleXAAlCot11’t. after the amendment, of Section 45 with effect<\/p>\n
 ‘”i’ron1 0l.O4.l988 that in the present. case, the partnership<\/p>\n
2 \u00bb<\/p>\n
if -\\<\/p>\n
2\\\\}”\\.\\::\u00a3\\*~
\n‘t<\/p>\n
54<\/span><\/p>\n
protect the interest of more than 1,530,000 employees of the<\/p>\n
firm spread all over Karnataka and the sale has <\/p>\n
conducted in accordance with the direction i.ssued;”‘b3,?.r’this?  <\/p>\n
court among the partners.\n<\/p>\n
court has taken care to see that the isaleppaiotilld be– reahstic’ <\/p>\n
and the value should be based : on objective andscienti\ufb01cud”<\/p>\n
reasons. This court got the valuatioia of the._;\u00a7.ss\u00ab\u00a71;sa\u00a7:ie
\nthe Chartered Accountar\ufb01iwho  ._the\u00ab’ass’ets\u00a7of the
\nfirm with reference to the :’g\u00a7oc)’d’\u00a7vil1 and with
\nreference to {hp   g  other tangible<\/p>\n
assets at Rs130.:crores—-  this court has taken<\/p>\n
care to see th_at’t’i,;e_ to  sold among the partners
\nor a group ofpartners’whe_;su,b*mit the highest bid subject to<\/p>\n
reserve   crohresfx ltsis not disputed that 3 partners<\/p>\n
. ahad” bid’lfoi'”R’s.92 crores and other 7 partners had<\/p>\n
Asub_n’1ittefd.._phtiiVeir”bid for an amount which was less than<\/p>\n
Rsigg croresiand therefore bid submitted by 13 partners was<\/p>\n
 ‘  ‘”\u00bb.accepted”_Aas the highest bid and the same has been accepted
\n High Court. Therefore. what was auctioned by the<\/p>\n
  Qif\ufb01cial Liquidator as per the direction issued by this Court<\/p>\n
2 _.x\u00ab <\/p>\n
{,3<\/p>\n
Before conducting th.eV_A’_sale:.:jthis it<\/p>\n
was assets of the Firm –~ MGBW, of which the assessees were<\/p>\n
the outgoing partners and what has been sold <\/p>\n
outgoing, partners is the assets of the firm (K1LI,iCK’_dNIX’QN_V’t.  <\/p>\n
AND \u00a330.. Vs. 0.1.1′ ((1967) 66 714 (set;  3<\/p>\n
ordered to be deposited in the aeievottnt,dA.ei’u’-eethe.’<\/p>\n
Liquidator attached te the Hi\u00a73:h’..”COL1Vft’_v. sand the<\/p>\n
Liqu.i.dat01′ has distributed the amd\ufb01adt as pet’-.t.he’Vst3DteInVent
\nprepared by the out g0irigi.._._;\u00a7srtr.te.rs_ thedddefstwhile
\npartners by deducting theitj   vV[i}’rh_’_.and vaiue of
\nthe net asset  as per the<\/p>\n
statement anrjiexejdltd   2X’pp’11eati0n as follows:<\/p>\n
‘Kg<\/p>\n
27. Thereafter this court has declared by ordervxdatled<\/p>\n
20.11.1994 that the proceeding of dissolution
\nand that undertaldng shall be given by
\npartners in favour of 3 partners <\/p>\n
accepted and they should not .4_interfere’\u00bb– wit.h,5th.:e” said’  it<\/p>\n
erstwhile partners carrying   in
\nconsideration of the   therlrrlasllllper the
\norder of this courtyand   of sale of the
\nassets of the favciiur  .3_._p:ersons. Therefore,
\nit is clear   applellants that the value
\nof the  and therefore tax on
\ncapital   cannot be accepted as<\/p>\n
valuation  ‘be_e’n  by the group of partners by<\/p>\n
“‘v..assessin-gg the va1uev—-o17~’the assets and the assets had already<\/p>\n
 b’ce.ri’va’lued the Chartered Accountant. Similarly, there is<\/p>\n
no nierit. irr the conterltion of the learned counsel for the<\/p>\n
 appellants that since the transactiion was only adjustment of
\n shares by the partners and there was no sale as such the<\/p>\n
ayppellants were not parties to the same and the same was<\/p>\n
59<\/span><\/p>\n
conducted by the Official Recehser attached to the High<\/p>\n
Court and therefore the individual e1iii;;t_s<\/p>\n
herein who are erstwhile partners and received valaep’ ofthe<\/p>\n
assets cannot be taxed for capital gain.<\/p>\n
28. The nature of interest of the p:\u00a7irtiiers._iii. “the :\ufb01_I’1″i'”\u00a7’_”<\/p>\n
during subsistence of part.nershVip..xane1
\nwith reference to Section 14,     of the
\nPartnership Act, 1932;  by  Horfbie
\nSupreme Coartil’ in  BHASKARS<\/p>\n
KRISHNAPPA ism  1 see) as mews;\n<\/p>\n
 ….   V15. 29, 3:2, 37, 38
\n}:ind_   tliattiiliateuer may be the
\ncharacter   which is brought in by
\nthe’  partnership is formed or
\nli.oh.icl1 r:iaVQllbeV’ ax:-quir cl in the course of the
\nirj’tisii-ass  iiii the partnership it becomes the<\/p>\n
V  i. of thefirm and what a partner is entitled
\nto share of profits, if any. accruing to the
\nv–par*triersliip from the realisation of this property<\/p>\n
it  upon dissolution of the partnership to a share
\nin the money representing the value of the
\nproperty. No doubt, since a firm has no legal<\/p>\n
existence, the partnership property will vest in all<\/p>\n
6}.\n<\/p>\n
is true that even. during the subsistence of the
\npartnership a partner may assign his share to
\nanother. In that case what the assignee tL?O1Li-‘StW’~~”.”’ ”
\nget would. be only that which is permitted by”  ‘<\/p>\n
( 1}. that is to say, the right to receive the
\nprofits of the assignor and acce\u00e9\ufb01tfVt}1’e\u00ab_a’ecoi:nt”‘o;’
\nprofits; agreed to by the partriers}’_’_’d  j’o,–{  <\/p>\n
Partnership, 1 gm Ecin. RefI”‘to”ETngliesh}  <\/p>\n
Indian Case Law DiscusseVd*…_.V'”AIR 19\/t_7″Ldh
\n(F8), Approved. Are 1959″‘z’–t\ufb01d}i”‘\u00bb.Pra 380v-er.t3\u00a7),
\nAjfirmed\ufb01  L   2<\/p>\n
29. In DILVIPV  vs;”coMM1ssIoNER or
\n1NcoME__ :rA.XAt2eo2′:t25’3j”IrR. 630), a division bench of the
\nGujrath  eoort.  dn\u00ab._o’C1E\u00e91sion to consider the question<\/p>\n
as togwlzether onthe fe.ei;s and Circumstances of the ease,<\/p>\n
the  oi ~ was liabie to be included on
\nI assessee. In the said case. Chinubhai
\nMotiketl  intestate on February 20, 1.965, and was<\/p>\n
 ‘  his three daughters. four sons and widow. After<\/p>\n
‘ h1’s..deat.h. one of his properties. 21 residential house, devolved<\/p>\n
 __L_1i7pox:i his four sons. By executing 21. memorandum deed<\/p>\n
M\u00bb–‘a.E””\n<\/p>\n
Ls<\/p>\n
;’..-I<\/p>\n
62.<\/p>\n
dated March 27. 1973. the said property was given to the<\/p>\n
Hindu Undivided Families of the four sons. ThOL1gl’}V”,_:tl’}C<\/p>\n
residential house was not partitioned by metes anrjj”‘bo’url__ds.._u <\/p>\n
under the said mernorandum. with effect frrmx  <\/p>\n
1973. the Hindu Undivided Farniliezs of…tjhje  <\/p>\n
acquired equal share in the sa=id-._prope’rty’~and  sodas ll<\/p>\n
of late Chinubhai Motilal Shah  filed lttxeiprretttrnsllafter
\nthe execution of the   197 3
\nand in the returns of   families. their
\nrespective   arising from the
\nproperty   xriowever. it was the
\ncontenitilon    by metes and bounds<\/p>\n
and share of Undivided Family had been<\/p>\n
determined by, virtue of the memorandum dated March 27,<\/p>\n
 E*lDditi:ng thewassessment year 1979-80, two of the<\/p>\n
 t’a1r1ilies;\u00ab._yo’11e”e~_of.. which was the assessee, disposed of their<\/p>\n
rights ;l.ii~ th)elp1*operty in favour of the other two families by<\/p>\n
 n\u20ac\u00a7(\u20acCt1’l.l_l’l’\u00a7-35 t.he sale deed dated July 7. 1978 and during the<\/p>\n
  ‘prejxfiotis year ending on March 31, 1979. two families ceased<\/p>\n
“alto be joint owners in respect. of the property whereas the<\/p>\n
63<\/span><\/p>\n
families of two brothers became joint. owners of enhanced<\/p>\n
shares in the pl’Op\u20ac1′{.y’ and on the said facts, the (_3aji1-igitjh_<\/p>\n
High Court having regard to the p1’ov’isior1s of    _<\/p>\n
observed as follows:\n<\/p>\n
“It is not in dispute ihat’\u00bb.._the_”asfsessee l1″1(:ic’E7’=.l__  .’<\/p>\n
shown its share of income from thesaid pr’operty
\nin its return after the property teas
\nwith effect from ;_Mar’chAy_2_oi;’~.__1 hi  the
\nproperty not been\u00bb.  = ..j_’1′,’\u00bblv’v:’f.}.:l’.’ e ffect” from
\nMarch 26, I973,  in   of the
\nrnemorand:-trip-_   27. 1973. the
\n  toould not have
\nshowrt  ‘f.~’on’~’t the said house
\np_roperiy.:{5in  ftledjor the assessment
\nyears:  This fact: clearly
\nderiotesri that “l:tF1.e””*-._assessee\u00abHindu Undivided
\n5 *F’a,rnily”h.ad got iiisllils\/4”! share in the property in
\np:_Aa.rs’aance”of7–.t.h.e’ memorandum dated March 27,
\n   by virtue of the deed dated July 7.\n<\/p>\n
  tThe–:”assessee had sold its share to the
\nV f1’i:1(L’lt’LE_.’:.UrldiUid\u00a7Cl Family of Shri Jttendra
\n..Ci’t\u00abint1b}1ai. Shah.\n<\/p>\n
. it It: is pertinent to note that the said property
\n was not owned by a body of individuals or an
\nassociation. of persons as contended by the<\/p>\n
teamed. advocate appearing for the assessee.<\/p>\n
()4<\/p>\n
There was no association. of persons or body of<\/p>\n
ind.ivid.uals as on July 7, 19?8. which was the<\/p>\n
owner of the entire propen”y.\n<\/p>\n
hereinabove, four different families were l_u;virig5
\ntheir distinct share. though not defined
\nand bounds, as on July 7. 1978, Clni$:i.’i._l1l\u20ac.Sl-iLL7.I’\u00a2VOfV  V’<\/p>\n
the assessee was in fact: sold Etc) anotl1er– Hi.nci.u. <\/p>\n
Undivided Family on that<\/p>\n
Looking to the above’rrfcu:ts and.  leyial<\/p>\n
position to the effect’ t’ha’ii'”the.:’properi.y  not<\/p>\n
owned by any body  association
\nof persons. the asesseeig\u00bb ivha   ‘owner of
\n1\/ 4″? sliarelofflhthe said  share on
\nJuly 2*,’  the Revenue had
\nrighiali a–nrio.urit”azhic_h.lwas earned by the
\nasesseen  i may y of capital gains.\n<\/p>\n
A ‘Let  issue from a different<\/p>\n
_angle.’~….lIp, :3’  of the assessee that there<\/p>\n
was an “association of persons and the said<\/p>\n
a.ssocic1.i_ion. of persons was the owner of the<\/p>\n
 {and on July 7. .1978, there was a<\/p>\n
”  d.i.sso’l:..itliolr1 of the said association of persons and<\/p>\n
the share in respect of each. individual had<\/p>\n
“tievolved upon different individuals. Had it been
\n so. 1\/4″‘ share of the said property would have<\/p>\n
it devolved upon each. brother or the I-“Iindu<\/p>\n
Undivi.dedfam1’ly of each brother. Thai.” is not the<\/p>\n
5x\\;I._.-ya;\n<\/p>\n
As <\/p>\n
,. …,n.N,wMxw.M.a\u00bb\u00bb;\u00bbv\u00bb.;<\/p>\n
30.<\/p>\n
the preserit”–.case.VV’the:_eii’e_et of the sale conducted by this<\/p>\n
the  become entitled to speci\ufb01c share in the<\/p>\n
65<\/span><\/p>\n
case here.\n<\/p>\n
deed dated duty 7, zers, oniy two H:ndej__”‘ee
\nUnd\u00e9vicied Familiesa had remained the owners
\nthe said property because two Hindu UnC\u00a7ii9idea’. :”
\nFamilies, inciuding that of the assessee; “hart: r
\ntheir shares to the renraiininpr’ \u00abtaro
\nUndivided Families, who    remain ”  iii A<\/p>\n
not only owners of their ‘re_sp.ective’ share,  <\/p>\n
atso had become owners of the shares of the tiuo
\nHindu Undivided edngiizemghzeii ifidd dzspesredof,
\nby way of sale, their sitarestiin  of the two
\nremaining Hindu. :uiu’i\u00a3v:icied_”  the
\nsubmissiorl’  the “feaifned adi)ocate..appeanng for
\nthe   if we view the<\/p>\n
ispsue_fron_i’thi.3_ angie._’_’ V’ t<\/p>\n
in”yi\u00e9x;i_r of theV’p.rov.isi’atis__’of Section 45 it is clear that in<\/p>\n
._,p’vc0uV_1″t\u00a7.a;iionvg par’tr.:e_i’_s.v and under Clause 16 of the said<\/p>\n
 ‘Partner’s_hi~pDeea, is that once the partnership is dissoived,<\/p>\n
j asset.~3nofath.e firm which is proportionate to their share in
\n “j.,s11aringvVthe profits of the firm and they are pieced in the\n<\/p>\n
—  sariieiposition as the tenants in common and for the purpose<\/p>\n
  dissoiution and 11\/5 4′? of the Indian Partnership Act.<\/p>\n
tee<\/p>\n
In the instant case, by virtue of the<\/p>\n
66<\/span><\/p>\n
1932. it. is Clear that even after the dissolution of the firm.<\/p>\n
the authority of each partner to bind the firm and the other<\/p>\n
mutual rights and obligations of the partners;”‘e’ontiniuie_~:_A’<\/p>\n
r1ot,withst.andir1g the dissolution so far as n’1ay~’iietxeissaiy <\/p>\n
to wind up the affair of the l”i.1’m and to eoi.i1p\ufb01iei.e t.rAansae;:tipons_ <\/p>\n
begun but unfinished at t.hoe-.__.tirr1e”._of~ theg,v–‘dissoiuti–on.r it<\/p>\n
‘1’ herefore. for realisation of _tassetsl.l  the
\nliability of the firm and   ofthe\ufb02partners.
\nete.. the firm wilA1._eontii11.1.e:l._to   dissolution
\nand not for     on record in the
\ninstant ‘after dissolution of the
\nfirm    filed any return and
\nin viewllo\ufb01 the  permitting the partners to<\/p>\n
carry –m__ the .business in the interest of employees, return<\/p>\n
 waslifiledd 15’;AOP;I3″‘eonsisting of erstwhile 13\/12 partners<\/p>\n
 tor 8.'(\u20ac’..:Cl’}”e1’1’1’V’Ll’VI~ig”131’0fllS. and seeking depreciation in the assets<\/p>\n
oi’-the f,im’1″ and continued to do business in View of the order<\/p>\n
 of this.’ court. that there was no agreement. among the<\/p>\n
l’ .’ ‘partners to continue the business during the pendency of<\/p>\n
fthe winding up proceedings. Further having regard to<\/p>\n
67<\/span>
\nClause 16 of the. Partnership Deed of the dissolved firm, it is<\/p>\n
clear that: the partners intended that the assets of the firm<\/p>\n
should not be sold to an outsider. it is well settled that ..e’tre1″y<\/p>\n
act of t.he partner would be binding on the firm  3<\/p>\n
partners interse and Clause 16 of the Pa1’tI1ershi.p.. V’<\/p>\n
which has been culled out sup1ji\u00a3illl’clearlyl..’  <\/p>\n
Partnership is dissolved, the going cvoncle-_1’n ca1’ri.ed* on 1:1r_id–er”.<\/p>\n
the name of the Firm   it<\/p>\n
and all the trade ma1*ks,—-tised iVn'”eot’rrse-.of the said-‘ousiness
\nby the said firm and ltinderl’a.xar’i\u00bbii;chl:l’etheVVlEntisiness of the<\/p>\n
Partnership is carr._i_ed {5n”ls’liall_lvestV_ in and belong to th.e<\/p>\n
Par\u00b0t.ne1j’iVWhVo’  or more Partners who
\njointly o{fer’._and.  price therefor as a single<\/p>\n
group at a ls”-a..le”to be held as among the Partners shall<\/p>\n
  to  other Partners shall execute and<\/p>\n
 coriip1ete_in:iat}o1,oi1′ of the purchasing Partner or Partners at<\/p>\n
his\/her’ o1**-Vihelir” expense all such deed, instruments and<\/p>\n
\ufb02Vapplicat_ilonsland otherwise aid him\/her or them for the<\/p>\n
registration his \/ her name or their names of all the said trade<\/p>\n
–  rnarlis and do all such deed. acts and transactions as are<\/p>\n
tvagji<\/p>\n
I’<\/p>\n
68<\/span><\/p>\n
incidental or necessary to the said transferee or assignee<\/p>\n
Partner or Partners. The final order passed by this {?t’)t’I’1’f’t>’l=V(‘)<\/p>\n
wind up the affairs of the firm would clearly  _<\/p>\n
property of the \ufb01rm is pi.i1’cl’iased by the   it <\/p>\n
partners who submitted their highest’,-bid~ .l<\/p>\n
partners had to give an uncleif_taking.v.that lgnot <\/p>\n
interfere with the carrying on bulsinIess_ppwhileli   in the
\nname of MGBW and  in theueourse of
\nsaid business and th\u20ac1’E’E_lT{)V_If:’.\u20ac’~.VlV’t  appellants
\nwho are ho’t;l”si.r.eleessful bidders for
\n  capacity of the
\n    tangible and intangible
\nassets  of 3 partners whose highest<\/p>\n
bid of _Rs.9d2″‘e_r’0reVs*. Wa_sl’aeeept.ed and admittedly after the<\/p>\n
 H16 ordei””of this court. on 20.11.1994. all the<\/p>\n
p_a’ppell.eariv1;si herein and other outgoing partners have given<\/p>\n
reqiililsite.  as per the order of this court and the<\/p>\n
lr__MGl3W  a going coneerri under the name and style MGBW<\/p>\n
and”‘*all trademarks used in the Course of said business by<\/p>\n
the said firm and all tangibl.e and iritangible assets of the<\/p>\n
VQ6<\/p>\n
69<\/span><\/p>\n
firm vested with the purchasers erstwhile 3 partners who
\npaid the highest bid and the appellants have received
\nconsicleration of the conveyance and their respective share in<\/p>\n
the sale of net assets of the firm after their uridertakirigly:that<\/p>\n
they cannot. interfere with the business of MGBW~~whi.cllil’jisl” <\/p>\n
vested with all assets in favour of 3 partnershhaxi\ufb01 ‘r:eceived~.l<\/p>\n
the value of their net. asset which hasf’been:diistributeyd”by.”1<\/p>\n
the Official Liquidator and AQP 3 who have pu_ijchas’~ecll’:.’thell’<\/p>\n
business of the old firm, succeeded to itanti. a
\nnew firm in the same nafne (vidiellorcieif lci”efenda1tt;”14′;l06.199l<\/p>\n
in the Company Petition} and clear that the<\/p>\n
order passeti theyasseslsingAuthority corifirmed in the<\/p>\n
first appeal “arid trheijiayl’thegincoriie Tax Appellate Tribunal<\/p>\n
[Special Ben\u00e9ahl hoidiAri.gf’that the appellants as erstwhile<\/p>\n
if”‘-parltnerevareyy lial:l>lle”””tol pay capital gain on the amount<\/p>\n
  thernyytowards the value of their share in the net<\/p>\n
assets of.thel–.V_fi.rm are liable for payment of capital gains u\/s<\/p>\n
*..45 of the’:.Aci:. The said finding is justified and accordingly<\/p>\n
Vwe a3″_=swer the substantial question of law in favour of the<\/p>\n
” Reveriue and against the <\/p>\n
~.\n<\/p>\n
‘xi<\/p>\n
‘\u00bb.\\<\/p>\n
-~ , irom.\u00bb  facts of ‘the case that while fixing th.e auction o<\/p>\n
70<\/span><\/p>\n
31. Similarly. the contention of the assessee that the csale<\/p>\n
is in the nature oi.’ slump sale and is not in respect.’4oi”-the”~..<\/p>\n
i .\n<\/p>\n
separate valuation made and therefore not assessai3~IVeV”‘i:o<\/p>\n
capital gain cannot also be acceptedas it is ‘L’1\u20ac3E?i.T’AVf’1’k.)’iT1V this <\/p>\n
perusal of the material on record iihiaththe saiedthvaij <\/p>\n
conducted on the direction o1’th1s:e.’ou1’t aiiiorigt’heV”:;iarti’1ers
\nand the consideration i’ecei\u00a7ied  not \ufb02byv,\u20ac%1t.1.;:i”1p sale
\nas the shares of all the partne’1’s’  was fixed
\nin propoi’tionate  tire”    after the
\ndissolution  business as an
\nassociationivof#i3erso’iiifa.._aiid notllasgpartners. It is to be noted
\nthat What has  ‘present case by the outgoing
\npartners    — MGBW. It is also clear
\nf<\/p>\n
1.1 ,.\n<\/p>\n
LLLC<\/p>\n
  of the-.1\u00a7’i*rrn — MGBW as a going concern, the value has<\/p>\n
 basis of the report of the Chartered<\/p>\n
— Accot’i1’1t,ant.”obtained as per the direction of this Court and
\n aiso_.aft.e’r” considering the objections filed by the partners to
\n iIhe”s’aid report and as resewe price of ‘ 30 Crores was fixed<\/p>\n
V’ “and no sepa1’ate valuation was made. During ai.1ct,ion. three<\/p>\n
$5.43?)<\/p>\n
‘ ,-\n<\/p>\n
of t.he erstwhile pa1’tne1’s quantified the value of the assets of<\/p>\n
the Firm — MGBW as ‘ 92 Crores and the offer made by<\/p>\n
other partiiers quantifying the vaiue oi’ the assets oi”.\u00abtl_”ieoff*”‘.i!5I11’H.<\/p>\n
~ MGBW was less than ” 92 Crores.  H<\/p>\n
quantification made by the \u20ac1’StWhi:tE\u00a5Mpaf1;I1\u00a3f’I’S_.'[‘h’\u20acii3S\u20ac?1\\;’.(\u00a7S <\/p>\n
has been accepted and what has beefii ffbyffthg\u00e9 putgoiit<\/p>\n
partners is the assets of the 1iri11.._V(F’~JoLLlC.K.N1;'(\u00a75isI: <\/p>\n
Vs. o.1.’r {(1967) so 714 {so}; andfiwhe’i*efo1’e’.the staid sale
\nwould not be a slump sale’.  of’the\u00bbf’1:i\u00bbndi11g on facts,
\nthe decision 1’e1ied_up_on bymtheiteafned fco’un&s’e1″appea1’i11g for<\/p>\n
assessee in ..\u20ac:.’-1.4″l’.5:\\_\/fS;v has-R_o  CHEMICALS<\/p>\n
{{20}O} 327   not helpfui to the assessee in<\/p>\n
the present tease. ‘  f’ f<\/p>\n
 31. Veiieonetiireht’. finiding on question of fact that value<\/p>\n
 of pr_o’fit’  du1*ing,ii1terregnt1rn period for a period of<\/p>\n
23.4″d_ays”is”‘t:Vo b.zCvVili’\u20acat\u20acd as revenue income having regard to<\/p>\n
V _ the fe–asci_iis-.assig11ed that said profit is Calculated on the<\/p>\n
h  lofasisof notional profit eaiculated on two years average profit<\/p>\n
if .a1’\u20acIVcVi”frOII1 this a\\re1’ag{e 40% was to be deducted and the net<\/p>\n
amoxint was to be paid, the finding  unassailabie.<\/p>\n
x <\/p>\n
72<\/span><\/p>\n
Accordingly. we answer the subst:ant.ial questions of law in
\nfavour of the revenue and against the assessee. In Vi\u20ac\\-‘V of the
\nsaid finding. the appeals filed by the assessee in ITA<\/p>\n
Nos.l34, 135, 136. 137’, 138, 139 and 140\/2000,:.””a:e<\/p>\n
dismissed. The appeals filed by the revenue in  <\/p>\n
146 and 147’\/2000 are allowed by setting asid.e_.th–e.  <\/p>\n
issued by the Vice President regarding\u00bbtox\ufb01putatidripfllthe <\/p>\n
capital gain passed by the IT\/\\T\u00bb,. Bangalefe.<\/p>\n","protected":false},"excerpt":{"rendered":"
Karnataka High Court B Raghurama Prabhu Estate vs Joint Commissioner Of Income Tax on 23 December, 2010 Author: V.G.Sabhahit And B.Manohar ” ” 5 ‘+570 008. {I3Y SR1 5P3.R. INDRA KUMAR, ADV. ,) IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THEEJWDAY OF DECEMBER, go. V PRESENT .1 % :3’ THE HONBLE MR.JUSTICEI […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,20],"tags":[],"class_list":["post-200947","post","type-post","status-publish","format-standard","hentry","category-high-court","category-karnataka-high-court"],"yoast_head":"\nB Raghurama Prabhu Estate vs Joint Commissioner Of Income Tax on 23 December, 2010 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/b-raghurama-prabhu-estate-vs-joint-commissioner-of-income-tax-on-23-december-2010\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"B Raghurama Prabhu Estate vs Joint Commissioner Of Income Tax on 23 December, 2010 - 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