RAJLAXMI TRADING CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This appeal by the assessee directed against the order of the Income-Tax Appellate Tribunal in I.T.A.No. 1922 of 1995 dated 17-8-2000 for the assessment year 1991-1992. The assessee was a registered firm. The said firm was dissolved on 31-8-1990 and upon the dissolution, one of the partners took over the assets at book value of Rs. 2,17,555/-. The Assessing Officer applied the provisions of Sec. 45(4) of the Income-Tax Act, 1961 and held that the Fair market value of the property so transferred was Rs. 5,36,100/- as determined by the District Registrar, Ranga Reddy District. The difference between the amount determined by the District Registrar and the amount of written down value (book value) of the asset in question was added in the hands of the assessee firm as short-term capital gains, which was to the extent of Rs. 3,18,545/-. the assessee firm carried the matter in appeal to the Commissioner of Appeals. The Commissioner of Appeals did not agree with the contention of the assessee firm and hence confirmed the addition made by the Assessing Officer. The matter was carried on in further appeal to the Income-Tax Appellate Tribunal, which also did not agree with the contention of the assessee. Hence, the present appeal.

(2.) The learned Counsel for the assesseecontended that the Income-Tax Appellate Tribunal as well as the departmental authorities have taller in error in putting an interpretation of Section 45(4) of the Income Tax Act so as to take the value determined by the District Registrar as the market value and in computing the capital gains thereon. The learned Counsel relied upon a decision of the Supreme Court in the Case of Commissioner of Income tax, West Bengal and another vs, George Henderson and Co. Ltd., and contended that the value of the consideration must be the consideration received by the firm and not something else and according to the learned Counsel, in view of the said Judgment of the Supreme Court, the written down value which was received by the firm is to be taken as the full value of the asset and, therefore, there is no provision for taking any other value. The said value should be the fair market value of the asset.

(3.) The matter was heard at length at theadmission stage. After hearing the learned Counsel we do not find that there is any substantial question of law arising out of the order of the Income-Tax Appellate Tribunal. The facts are not in dispute. The firm was dissolved on 31-8-1990 and upon dissolution of the firm one of the partners viz., Shri Sitaram Sarada took over the assets at the book value of Rs. 2,17,555/-. It is also not in dispute that the assets were transferred in favour of the said partner and the District Registrar, Ranga Reddy District determined the fair market value for the purpose of stamp duty at Rs. 5,36,100/-. The contention of the assessee is only that the consideration that was received by the assessee firm should be treated as the fair market value. In support of his contention, he relied upon the decision of the Supreme Court in Commissioner of Income-Tax's case. In the said case, the Supreme Court was considering the provisions of Section 12(B) of the Indian Income-Tax Act, 1922. In the said provision, there is no reference to the fair market value. The reference in the said provision was full value of the consideration for which the sale, exchange or transfer of the capital asset is made and according to the Apex Court, the full value of the consideration is the consideration that was actually received by the transferor and there was no provision to substitute any other value in the place of the consideration actually received by the transferor. The position is totally different under Section 45 of the Income Tax Act, 1961. For convenience, the relevant provision is extracted, which is as under: