In Brief
Vatsala Shenoy and other partners of a dissolved firm sold their partnership assets to the highest bidder as a going concern. The Assessing Officer apportioned the Rs 92 crore sale consideration among various assets and taxed the gain as capital gains in the partners' hands. The Supreme Court held that although the firm had dissolved in 1987, the sale of its assets in 1994 constituted a transfer of capital assets triggering capital gains tax liability. The Court distinguished this from a "slump sale" because assets were separately valued. However, regarding business income earned during the interim period, the Court held it should be assessed in the hands of the successful bidder (AOP-3) who had retained the tax component from the sale proceeds.
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