Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Income Tax Act 1961: s.45(4) |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Allowed |
Headnote | Income Tax Act, 1961: s.45(4) – Applicability of – Captial gains – Profits or gains arising from the transfer of a capital asset – Object of introducing s.45(4) – Held: s.45(4) states that the profits or gain arising from the transfer of capital assets by way of distribution of capital assets on account of dissolution of a firm or other association of persons or body of individuals or otherwise shall be chargeable to tax as the income of the firm – The object and purpose of introduction of s.45(4) was to pluck the loophole by insertion of s.45(4) and omission of s.2(47)(ii) – Earlier, there was an exemption of the transfer by way of distribution of capital assets from the ambit of the definition of “transfer” – The same helped the assessee in avoiding the levy of capital gains tax by revaluing the assets and then transferring and distributing the same at the time of dissolution – By amendment, s.45(4) takes into sweep not only the cases of dissolution but also cases of subsisting partners of a partnership, transferring the assets in favour of a retiring partner – In the instant case, assets of partnership firm were revalued and the increased amount was credited to the accounts of the partners in their profit-sharing ratio – The credit of the assets’ revaluation amount to the capital accounts of the partners can be said to be in effect distribution of the assets – Some new partners inducted by introduction of small amounts of capital and had huge credits to their capital accounts – The assets so revalued and the credit into the capital accounts of the respective partners can be said to be “transfer” which fell in the category of “otherwise” and therefore, s.45(4) shall be applicable. |
Judge | Hon'ble Mr. Justice M.R. Shah |
Neutral Citation | 2022 INSC 1225 |
Petitioner | The Commissioner Of Income Tax – 23 |
Respondent | M/s. Mansukh Dyeing And Printing Mills |
SCR | [2022] 8 S.C.R. 785 |
Judgement Date | 2022-11-24 |
Case Number | 8258 |
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