High Court Of Madras
Siddharth Media Holdings (P) Ltd. vs. DCIT
Sections 45(1), 260A
Asst. Year 1982-83
N.V. Balasubramanian & K. Raviraja Pandian, JJ.
Tax Case (Appeal) No. 102 of 2002
18th December, 2002
Counsel Appeared
R. Kumar for T.N. Seetharaman & Hema Sampath, for the Appellant
JUDGMENT
N.v. Balasubramanian, J. :
This appeal is preferred against the order of the Tribunal passed in ITA No. 1673 (Mad) of 1989 dt. 26th March, 2002.
The assess is a partner in a firm by name Express Traders and it transferred its interest in the firm to another company for a consideration of Rs. 30,000. The assessee during the course of assessment proceedings for the asst. yr. 1982-83 claimed short-term capital loss and long-term capital loss on the ground that the assessee had suffered losses in the firm for several years prior to its retirement and it claimed short-term capital loss with reference to the loss suffered within a period of three years before retirement and long-term capital loss suffered for the period prior to three years before retirement and the AO found the capital of the assessee in the firm was Rs. 30,000 and the sum of Rs. 30,000 was also received as consideration for retirement from the partnership firm. He denied the claim of the assessee for the capital loss. The CIT(A) confirmed the order of the ITO on the ground that the interest of the assessee in the partnership firm did not involve any cost and no capital loss of any sort arose to the assessee. The Tribunal also held that on the date of retirement, the assessee has transferred its interest in the firm as a partner and a sum of Rs. 30,000 was received as consideration, which was equal to the capital contributed by the assessee. The Tribunal held that the assessee was not entitled to claim deduction of the loss on account of the loss suffered by it for the years and dismissed the appeal. The appellant has preferred this appeal.
We heard Mr. R. Kumar, learned counsel for the appellant. We find that the Tribunal has considered the question in the proper perspective. The assessee admittedly has contributed a capital of Rs. 30,000 and it also retired from the partnership firm. It is axiomatic that during the subsistence of the partnership firm, no partner can claim to own any property of the firm as his own even to the extent of his profit sharing ratio. The assessee has retired and the new partner was admitted in his place. The net wealth of the capital should have been ascertained after taking note of the assets and liabilities of the firm and on that basis alone, the assessee’s share in the firm was determined at Rs. 30,000. In other words, the sum of Rs. 30,000 was paid to the assessee taking into consideration all the liabilities of the firm. The result of getting the sum of Rs. 30,000 is that the assessee would be no longer obliged to bear any loss. The accounts made up at the time of retirement showed that the assessee was found to be entitled to a sum of Rs. 30,000 after adjustment of all the losses of the firm. Therefore, we hold that the Tribunal was correct in holding that the assessee was not entitled to get any further deduction on account of the alleged loss suffered by it in the earlier years.
Learned counsel for the appellant relied upon the decision of the Delhi High Court in Bishan Lal Kanodia vs. CIT (2002) 257 ITR 449 (Del), wherein Mr. S.B. Sinha, learned Chief Justice (as his Lordship then was) speaking for the Bench has considered a case of a partner receiving the amount in excess of his share and the Bench of the Delhi High Court has held that the excess amount received over his share would be assessable as capital gains. Learned counsel therefore submitted that on the same analogy the loss suffered by the assessee in the earlier years should be allowed as a capital loss. We are unable to accept the said submission as the Delhi High Court in Bishan Lal Kanodia’s case (supra), was dealing with a case of a receipt of the amount over and in excess of his share. Therefore, there was no difficulty in holding that the excess amount was assessable as capital gains. Here, we are concerned with a converse case where the assessee’s share was determined after taking note of the assets and liabilities of the firm and the liabilities of the firm have already been adjusted and then the amount of Rs. 30,000 was determined to be paid to the assessee. Further, when the assessee claimed that the losses incurred should be considered as capital loss, it overlooked that it has taken into account the assets of the firm. On an ultimate analysis, the Tribunal has found that on settlement of the accounts the assessee was entitled to a sum of Rs. 30,000 which has been received by it also. Therefore, it is impermissible for the assessee to claim that the losses which were already adjusted should once again be considered in its individual assessment as a capital loss, viz., either short-term or long-term capital. Moreover, the alleged losses never arose as there was no transfer of any capital and hence the assessee is ineligible to claim the same as capital loss. We find that the view of the Tribunal that the assessee has not suffered any loss when it received the sum of Rs. 30,000 at the time of retirement is perfectly in order and we do not find any question of law, much less a substantial question of law, warranting interference by us in the order of the Tribunal.
Accordingly, the appeal fails and is dismissed in limine at the admission stage itself.
[Citation : 260 ITR 286]
