COMMISSIONER OF INCOME-TAX VS Smt. S. VIJAYALAKSHMI
2002 P T D 1394
[242 I T R 46]
[Madras High Court (India)]
Before R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME-TAX
versus
Smt. S. VIJAYALAKSHMI
Tax Case No. 1110 of 1988 Reference No. 872 of 1988 decided on /01/.
rd
September, (a) Income-Tax ---
Capital gains---Firm---Partner----Long-term capital gains---Property owned by firm for more than sixty months allotted to partner and sold by her---Gains from sale were long-term capital gains---Indian Income Tax Act, 1961, Ss.2 & 45.
(b) Income-tax----
----Appeal to Appellate Tribunal---Powers of Tribunal---Facts necessary for considering claim of assessee before Tribunal---Absence of specific .appeal or cross-appeal assessee would not prevent Tribunal from granting relief---Indian Income Tax Act, 1961, S.254.
The partners in a firm are always the owners of the property held in the name of the firm and in cases where the property had been held by the firm for over sixty months and thereafter given to one of the partners exclusively or to some partners as co-owners, it cannot be regarded as a short-term capital asset.
CIT v. Kamala Devi (1997) 227 ITR 701 (Mad.) fol.
Held, that, in the instant case, the facts required for examining the claim were before the Tribunal. The absence of an appeal by the assessee against the order of the Commissioner, who had remanded the matter to the Income-tax Officer, did not in any way preclude the Tribunal from holding that the capital gain in the instant case was a long term capital gain, since such relief had in fact been sought by the assessee before the Assessing Authority.
C.V. Rajan for the Commissioner R. Janakiraman for the Assessee.
JUDGMENT
R. JAYASIMHA BABU, J.---The questions of law, namely:
"(1)Whether, on the facts and in the circumstances, the Appellate Tribunal was right in law in holding that as a partner in the firm of Poornamala Process, Sivakasi, the assessee was part owner of the machinery and she should be considered as having held the property in question right from her membership as a partner in the firm and that the capital gains arising in the hands of the assessee on the machinery received by her from the firm on retirement and sold b her should be treated as long-term capital gains?
(2)Whether the Tribunal was right in law in admitting the assessee's contention that the capital gains in the hands of the assessee could be taken as long-term capital gains in the course of the Department's appeal without her filing an appeal against the order of the Appellate Assistant Commissioner or a cross -objection?"
Referred to us at the instance of the Revenue, arise .out of the Tribunal's order, which rejected the appeal of the Department preferred against the order of the Commissioner who at the instance of the assessee, had filed an appeal before him against the order of the Income-tax Officer had held that the actual cost of the machinery in the hands of the firm would be ascertained by determining the amount of capital gain which had accrued to the assessee by reason of the sale effected by her of the machinery received by her on May 31, 1978, after she had retired from the firm, towards her share of the assets of the firm on her retirement, the machinery having been sold on August 18, 1978. The sale consideration was Rs. 50,000. The amount due to her from the firm was Rs.17,219.
In the case of CIT v. Kamala Devi (1997) 227 ITR 701, this Court has held that the partners in a firm are always the owners of the property held in the name of the firm and in cases where the property had been held by the firm for over sixty months and thereafter given to one of the partners exclusively or to some partners as co-owners, it cannot be regarded as a short-term capital asset.
The Tribunal in this case has held in the light of the undisputed facts before. it, which facts are available in the record, the capital gain that had arisen was a long-term capital gain as the firm had held the assets for over sixty months and that period should be taken into account for determining the period for which the assessee had owned the assets. The reasoning of the Tribunal is in accordance with the decision of this Court, to which we have referred earlier. The first question referred to us, therefore, is answered in favour of the assessee and against the Revenue.
As regards the second question, we answer, that question also against the Revenue and in favour of the assessee.
The Tribunal was not required to embark on an enquiry, which was outside the scope of the assessee's claim and the claim made by the assessee before the Income-tax Officer was that the capital gain was a long-term capital gain. The facts required for examining the claim were before the Tribunal. The absence of an appeal by the assessee against the order of the Commissioner,, who had remanded the matter to the Income -tax Officer, did not in any way preclude the Tribunal from holding that the capital gain in the instant case was a long-term capital gain. The ends of justice justify the Tribunal to grant the relief to the assessee even in the absence of a specific -appeal or cross-appeal, if the facts available on record permit the grant of such relief and such relief had in fact been sought by the assessee before the Assessing Authority.
M.B.A./666/FC
Order accordingly