SUVARDHAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) M/s Suvardhan of Bangalore is before us seeking an opinion in the light of the order of the tribunal in ITA No. 405/bang/1997 dated 22. 12. 1997.

(2.) THE assessee is a registered firm which came into existence by way of partnership deed dated 23. 7. 1986. Partnership consists of three persons. On 1. 7. 1998 one of the partners retired and the other two continued the partnership in terms of partnership deed dated 17. 10. 1988. Survey was conducted in the business premises of the assessee. It came to light that the firm had been dissolved and the business had been taken over by one of the partners Smt. Anuradha Maruthi gokarn, It was also noticed that the partnership was dissolved on 1. 4. 1992 and the assets and liabilities had been taken over by the said lady. The assessing officer proposed to apply Section 45 (4) of the Act. Notice was issued. Assessee filed a Nil-return. Thereafter, the Assessing officer concluded the assessment under Section 144 of the Act charging capital gain in the hands of the firm in respect of the assets transferred by the firm. An appeal was filed. Appeal stood dismissed. Matter was taken to the Tribunal. Tribunal rejected the appeal. Thereafter, at the instance of the asscssee, Tribunal has chosen to refer the following questions of law for our consideration. Whether, on the facts and in the circumstances of the ease, the Tribunal was justified in coming to the conclusion that the assessee firm was liable to capital gains Under Section 45 (4) on the ground that there was transfer or distribution of capital assets on the dissolution of the partnership firm?

(3.) HEARD Sri Parthasarathi, learned Counsel appearing for the appellant. He would invite my attention to Section 45 (4) of the Income fax Act to contend that the orders of the Tribunal requires our consideration, He would also refer to Section 2 (47) for the definition of 'transfer' in the case on hand. He wants both the provisions to be read together for the purpose of 'no transfer' in the Case on hand. He would also rely on number of judgments in support of his submission. Per contra, Sri. M. V. Seshachala, learned Counsel for the Department would support the order.