COMMISSIONER OF INCOME TAX Vs. DSILVA L F

JUDGEMENT

(1.) THE question required to be answered by us as referred under section 256(2) of the Income-tax Act, 1961 ("the Act" for short), reads :

(2.) WE are concerned with the assessment year 1981-82, relating to the accounting period ending on March 31, 1981. The assessee was a co-owner of a property at Banglore along with two others. His share was one-third in the property. During the relevant accounting year, on July 2, 1980, this property was brought in as an asset of a firm called Messrs. Curzon Project, consisting of six partners, out of whom, three were the co-owners of the property in question. The property was contributed in lieu of the contribution of the three co-owners, each co-owner's contribution being Rs. 9 lakhs. Thus the property was obviously valued at Rs. 27 lakhs. The object of the firm was to engage in the business of developing property. The other three partners had not immediately contributed anything towards the share capital; but it was agreed as per the deed of partnership, that "further capital of the partnership will be provided by parties of fourth, fifth and sixth parts in such proportions as may be mutually agreed upon. The parties hereto of the first, second and third parts shall not be liable to bring any further capital". The parties of the fourth, fifth and sixth parts were the partners other than the three co-owners, who were parties 1 to 3, referred to in the deed of partnership. The partnership business was to execute building construction contracts, dealing in land, etc., Each partner was to share profits and losses equally, i.e., each had a one-sixth share, and for this purpose the share capital of the firm was taken as Rs. 54 lakhs.

(3.) HENCE, he proposed to make an appropriate order under section 263 to make good the loss of revenue for the assessment year 1981-82.