AHAMMEDKUTTY Vs. INCOME

JUDGEMENT

(1.) The questions of law arising from the impugned order are reframed as follows:

(2.) It is the submission of the learned senior counsel that the petitioner, along with his family members, had formed a partnership firm ; more in the nature of a family arrangement, the terms of which are seen from annexure-A. One of the partners, the first signatory in the document did have money to contribute and hence offered a land and building for the business ; which business was commenced for renting out the building as an auditorium. The other partners contributed Rs. 5 lakhs each, which formed the capital of the firm. The partner who offered the land; allegedly on licence, received an amount of Rs. 6 lakhs and later, just prior to dissolution, paid back the said amount and received back the property and building.

(3.) The property was sold as per annexure-B deed dated December 20, 2006. An assessment was made by annexure-C, on the partnership firm, employing the provisions of section 45(4) treating it as profits and gains arising from the transfer of capital assets by way of distribution of capital assets on dissolution of the firm or otherwise. The assessee-firm was never the owner of the capital assets and there was no intention to bring it to the capital of the firm. There was only a licence arrangement in so far as the firm being permitted to rent out the building.