- (1.) This tax case appeal, filed by the assessee under Section 260A of the Income Tax Act, 1961, was admitted on the following two substantial questions of law : "(i) Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that there is a dissolution of the firm and not conversion of a firm into a company for the purpose of capital gains under Section 45(4) ? and (ii) Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 45(4) are attracted even though there was no distribution of assets ?"
(2.) Heard Mr.V.S.Manoj, learned counsel appearing for the appellant/ assessee and Mr.J.Narayanaswamy, learned Standing Counsel for the Department.
(3.) The assessee was originally a partnership firm, which came into existence in 1979-80. It comprised of four individuals as partners upto the year 1990. On 4.1.1990, a private limited company called M/s.Pipeline and Process Equipment (P) Limited was floated by the partners of the partnership firm themselves. Thereafter, the private limited company was admitted as the fifth partner into the partnership firm. The private limited company was admittedly given a lion's share namely 3/4th of the assets of the partnership firm. The four natural partners of the firm took the remaining 1/4th share for themselves.;