Sole proprietor has introduced his capital to partnership. AO denied the exemption on the ground that it was reconstruction of business. On appeal the Tribunal held that apart from capital received from proprietorship concern, huge amount of fresh capital had also been introduced to the firm  and  assets appearing in balance sheet of old concern i.e. sole proprietorship, had not been shifted to the firm hence it is not a reconstruction. High Court up held the order of the Appellate Tribunal. (AY. 2007-08)