[aaykarbhavan] notional transfer cannot be subject to taxation

 

1. KARNATAKA HIGH COURT - Income Tax
   COMMISSIONER OF INCOME-TAX And ASST COMMISSIONER OF INCOME TAX Versus M/s KARNATAKA AGRO CHEMICALS
   Transfer of goodwill to partners - reconstruction of firm - transfer - extinguishment of right - AO noticed that assessee firm had created and self-generated assets in the form of goodwill and transferred it to the current accounts of the four partners proportionately consequent to reconstitution of assessee firm - Whether there was transfer or not and in view of the circular of CBDT notional transfer cannot be subject to taxation – Held that:- The assets of the partnership was revalued and for the first time they valued the goodwill at ₹ 7,59,28,000 - No portion of the goodwill is transferred to the retiring partners, there is no transfer of the capital asset – Tribunal rightly was of the view that if there is no transfer of capital asset, Section 45(4) is not attracted - the partnership firm did not cease to hold the property - its right to the property is not extinguished - the retiring partners did not acquire any right in the property as no property was transferred in their favour – thus, the order of the Tribunal is upheld – Decided against Revenue.

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Regards

Prarthana Jalan

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Posted by: Prarthana Jalan <prarthanajalan@ymail.com>

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