Assessees were partners in a firm engaged in land development and construction. Capital accounts in partnership firms were credited with amounts resulting from revaluation of land. Revaluation of land took place during financial year 2008-09 and increased value of land was reflected as current capital of Partners on credit side of balance sheet of firms. Partnership firms had been converted to Private Limited Companies with effect from 23-9-2008 and capital account appearing in Partnership Firms (revaluation reserve) had been transferred to unsecured loan received from shareholders. Converted companies amalgamated with Takshashila Gruh Nirman (P) Ltd. with effect from 1-4-2010. Assessing Officer held that assessee earned income on revaluation of land; but he did not follow provisions prescribed under section 47(xiii)(b) at time of conversion of firm into Company; thus he made addition of capital gain arising on revaluation of land in hands of partners-assessees. On appeal, Commissioner (Appeals) deleted additions on account of capital gain made in hands of partners as he was of opinion that applicability of section 47(xiii)(b) at time of conversion of partnership firms into Companies could be considered only in hands of partnership firms to which land belonged. Sale of business of assessee-firm as a going concern to company for consideration of paid up share capital does not amount to transfer liable to tax as capital gains. Since in instant case only change that had taken place on firm being transformed into a company was that shares of partners were reflected in form of share certificates and beyond that, there was no physical distribution of assets, in said circumstances, addition made on account of capital gain on revaluation of land in hands of assessees-partners were not sustainable in law. (AY. 2009-10)