March 8, 2010 : DLF UNIVERSAL LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX

ITAT, DELHI

ITA Nos. 3622/1995, 2546 & 3233/2001 and 267 & 4986/2003

Asst. yrs. 1992-93 & 1997-98 to 2000-01

Decided on 4th January, 2010

Gist of decision :

When an asset, whether held as capital asset or stock in trade, is transferred  by a partner to a firm it  is a contribution on capital account and therefore attracts  capital gains  based on difference between cost of acquisition versus amount credited to the partner on account of value of the asset

It need hardly be said that the form in which the transaction, which gives rise to income, is clothed and the name which is given to it are irrelevant in determining the true and correct nature of the transaction. There is material distinction between commercial and trading transaction and transaction on capital field. The assessee may by making entries in the books, which are not in conformity with the facts of the case and proper accountancy principles, conceal real nature of the asset or the receipt or the transaction, as the case may be. In that event true nature and character of the transaction or receipt or asset in a given case is to be determined on a consideration of the totality of the circumstances of the case. Therefore, the entries in the books of accounts of the assessee and the partnership firm alone are not decisive or conclusive to decide the question whether the assessee has transferred its personal assets to a partnership firm by way of capital contribution or it is a normal sale in the ordinary course of its business or trading transaction. There is no bar in making over of personal asset belonging to a partner to a firm at a revalued market price as his contribution towards capital. Therefore, merely because, in the present case, the assessee has contributed land at revalued price, which is more than the cost price to the assessee, it cannot be said that the asset in question was not contributed to a firm by partner towards its capital. Even, such a transaction is now taken care of by s. 45(3) is inserted from the asst. yr. 1988-89.