COMMISSIONER OF INCOME TAX Vs. P N BHASKARAN

JUDGEMENT

(1.) The only question of law arising from the order of the Tribunal is, whether, in the facts and circumstances of the case, there could have been a suo motu revision by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 [for brevity "IT Act"]. The facts coming to the fore are simple but pose quite complex questions of law on partnership necessitating reference to the Partnership Act, 1932, the precedents thereunder and the provisions of the IT Act, which we are obliged to answer in view of the arguments raised by both sides.

(2.) On facts, the assessee, who is the respondent herein, was a partner of a firm which commenced on 05.04.1979. The partnership firm was engaged in running a hospital. The firm was reconstituted several times, over a period of time with different partners and eventually the assessee and his daughter alone were the partners. At the outset we have to notice that there is no definiteness as to the exact share of each of these partners for want of sufficient material. Any way, on 31.03.1997, the firm, consisting of two partners, i.e., the assessee and his daughter, was dissolved and the daughter released her share in the firm to the exclusive share of the father, the assessee herein. The assessee also took his share of the assets of the firm and the hospital belonged exclusively to him on such dissolution of the firm. It thus became a proprietorship and later it was sold on 18.03.1999 for Rupees Five Crores.

(3.) The assessee filed a return for the year 1999-2000, showing the apportionment of the consideration relating to building, furniture, electric and sanitary fittings, equipments and machinery, land, goodwill and trademark of the hospital and nursing home. With respect to the building, the assessee offered short term capital gains for assessment. Consideration obtained for land, goodwill and trademark, which come to Rs.3, 75, 00, 000/-, was offered for taxation as long term capital gains; but, however, claimed exemption insofar as having invested in UTI as per Section 54EA. The Assessing Officer allowed the claim of exemption from long term capital gains, which was sought to be suo motu revised under Section 26