COMMISSIONER OF INCOME-TAX Vs. GURUNATH TALKIES

JUDGEMENT

(1.) THIS is an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, 'the Act') directed against the order of the Income-Tax Appellate Tribunal, Bangalore in ITA 581/Bang/2002 rendered on 1-10-2003.

(2.) THE appeal had been admitted for examination on the following questions of law:

(3.) SUBMISSION of Sri. Aravind learned counsel appearing for the revenue is that the Tribunal has committed an error in simply following the reasoning and the judgment of the Kerala High Court in Kunnamkulam's case; that the Kerala High Court has made a mistake in not noticing the full effect of the provisions of Section 45(4) of the Act; that Section 45(4) being attracted not merely in the case of transfer of property involving dissolution of the firm but transfer in any other situation as is indicated under Section 45(4) has been overlooked and attention has been drawn to the applicability of the provisions of Section 45 to a situation where the assets of the firm on transfer otherwise than by way of dissolution of the firm and in the present case though there was no dissolution, in effect there being the transfer of the assets of the firm in the hands of four earlier partners to the firm later as it was held by the two incoming partners with addition and deletion of partners and that the two incoming new partners bringing capital investment of Rs.17,00,000/- out of which except for the amount which is the value calculated as written down value of the assets of the firm as reflected in the books of accounts of the firm, the balance of the contribution of the two incoming new partners having been shared by the four out going partners, it is clearly a case of transfer by the firm for consideration and therefore the provisions of Section 45(4) is clearly attracted and the judgment of the Kerala High Court in Kunnamkulam's case may not be of any assistance in the present situation.