Dismissing the appeal of the revenue the Court held that, if new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership. As there is no transfer of a capital asset, no capital gains or profit can arise. (CIT v. A. N. Naik (2004) 265 ITR 346 (Bom) (HC) distinguished, Dynamic Enterprises (2013) 359 ITR 83 (FB) (Karn) (HC) followed). (AY. ( ITA No. 137 of 2017, dt. 26.03.2019) (AY.2010-11)
PCIT v. Electroplast Engineers ( 2019) 263 Taxman 120/ 178 DTR 316/ 310 CTR 238 (Bom.)(HC), www.itatonline.org
S. 45(4) : Capital gains-Distribution of capital asset-Retirement of partner -If new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership- As there is no transfer of a capital asset, no capital gains or profit can arise. [S. 45]