SWAMY STUDIO Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS appeal by the assessee relating to the assessment year 1989 -90 and arising out of the order of the Commissioner (Appeals), Madurai, dated 19 -7 -1990, is centred on a single point of levy of capital gains under Sec. 45(4).

(2.) THE assessing officer observed that the assessee -firm consisted of three partners. It was dissolved with effective from 31 -12 -1988, and a dissolution deed was drawn on the same date. The business of the firm was taken over by one of the partners Sri G. Kumaraswamy. The other two partners were Sri K. Ganesan and Sri G. Rajamanickam. Since the firm was dissolved the assessing officer considered the application of the provisions of Sec. 45(4) for determining the liability of the firm to capital gains. The assessing officer came to the conclusion that there was transfer of property under Sec. 45(4) as a result of dissolution of the firm. He adopted the market value of house property at No. 34, West Car St., Tenkasi, at Rs. 1,90,000 and after allowing deduction for the cost of building (Rs. 70,237) and deduction under Sec. 48 of the Act at Rs. 64,882, the assessing officer determined the long -term gains at Rs. 54,881.

(3.) IN appeal, the Commissioner (Appeals) confirmed the action of the assessing officer. The Commissioner (Appeals) also held that transfer of a capital asset by way of distribution of capital asset on the dissolution of the firm is chargeable to capital gains and the fair market value of the asset on the date of such transfer has to be the basis for computation of capital gains. The assessee felt aggrieved and has preferred the present appeal before the Tribunal.