This is appeal filed by assessee against order under s. 263 of IT Act, 1961, dt. 26th March, 1999 made by CIT, AP-II, Hyderabad for asst. yr. 1996-97. assessee firm had 8 partners originally, of whom 6 partners retired on 31st Aug., 2005, leaving two partners to continue firm from 1st Sept., 1995 onwards. M/s Kakatiya Hotels (P) Ltd. joined firm as third partner and brought in capital of Rs. 12 lakhs. company M/s Kakatiya Hotels (P) Ltd. retired from partnership on 31st Dec., 1995. At time of retirement, firm did not pay back retiring partners M/s Kakatiya Hotels (P) Ltd. its capital in cash but allotted piece of land bearing municipal No. 6/137 admeasuring 2500 sq. yds. at Hanamakonda. As per retirement/release deed dt. 22nd Jan., 1996, following conditions were clearly specified therein: (a) firm in lieu of capital of Rs. 12 lakhs due and payable to Kakatiya Hotels (P) Ltd. had allotted 2500 sq. yds. of land at Hanamkonda, valued at Rs. 12 lakhs in full and final settlement. (b) From 1st Jan., 1996 above land ceases to be asset of firm and Kakatiya Hotels (P) Ltd. had become sole owner. (c) firm released and relinquished all its rights in above land in favour of Kakatiya Hotels (P) Ltd. (d) firm agreed to identify Kakatiya Hotels (P) Ltd. for any loss or damages that letter may incur in respect of land allotted by it. AO completed assessment for asst. yr. 1996-97, under s. 143(3) on 8th Jan., 1997. However, he did not bring to tax capital gains, if any, arising from above transaction. learned CIT, therefore, issued notice to assessee on 17th March, 1999 to show cause as to why above transaction should not be considered as transfer within meaning of s. 2(47)(i) and (ii) of IT Act r/w s. 2(47)(vi). It was contended by assessee before learned CIT that no action under s. 263 is called for following reasons: (a) company M/s Kakatiya Hotels (P) Ltd. already held leasehold rights over property allotted to it for period of 30 years commencing from 1983- 84. (b) Allotment of land to retiring partner is not sale in law and in practice and hence there was no capital gains involved in transaction. (c) Mere extinguishment of rights would not change position in case of allotment of property to partner on retirement. (d) In view of Hon ble Supreme Court s decision in R.K. Palshikar vs. CIT (1988) 70 CTR (SC) 31: (1988) 172 ITR 311 (SC), there is transfer of property on lease of property to others and grant of lease amounts to transfer within meaning of s. 45. (e) As company was already holding leasehold right over land, asset was already transferred by such lease and property was in possession of company. Thus, there cannot be any further transfer of property or extinguishments of right for same. (f) Allotment of property to retiring partners does not attract any capital gain as per Hon ble Andhra Pradesh High Court decision in case of CIT vs. G. Seshagiri Rao (1995) 129 CTR (AP) 148: (1995) 213 ITR 304 (AP) and Hon ble Supreme Court s decision in Sunil Siddharthbhai vs. CIT (1985) 49 CTR (SC)172: (1985) 156 ITR 509 (SC). contentions raised by assessee were not accepted by learned CIT for following reasons: (1) Various case laws cited by assessee were not applicable for relevant assessment year as s. 2(47)(vi) was inserted by Finance Act, 1987 w.e.f. 1st April, 1988. (2) Clause (ii) of s. 47 was omitted by Finance Act, 1987 w.e.f. 1st April, 1988. (3) Sub-s. (4) to s. 45 was inserted by Finance Act, 1987 w.e.f. 1st April, 1988. (4) Even otherwise facts of assessee s case were identical with that of CIT vs. Bharani Pictures (1981) 129 ITR 244 (Mad), wherein it was held by High Court that such transaction resulted in transfer for purpose of levy of capital gains. (5) company having leasehold rights in above property will not effect transaction coming within ambit of transfer as defined in Act but may have relevance for deciding fair market value of land. learned CIT, therefore, set aside impugned assessment order dt. 8th Jan., 1997 with direction to AO to assess capital gain arising out of transfer of above mentioned property in favour of retiring partner Kakatiya Hotels (P) Ltd. Aggrieved by above order, assessee has filed appeal before Tribunal. appellant has raised as many as 5 grounds of appeal. However, t h e main grievance is against finding of CIT that transaction as mentioned above came within ambit of transfer as defined in Act for purpose of computation of capital gains. Though, no specific ground was raised by appellant on issue of assumption of jurisdiction by learned CIT under s. 263 of Act, learned counsel of assessee argued that assessment order was not erroneous or prejudicial to interest of revenue in facts of present case. In support of above, following case laws were cited by him. (1) Smt. Durdana Khatoon vs. Dy. CIT (2005) 93 TTJ (Hyd) 753: (2005) 93 ITD 15 (Hyd); (2) Dy. CIT vs. Jitendra Prasad (2003) 131 TAXMAN 181 (Mad)(Mag); (3) CIT vs. Kunnamkulam Mills Board (2002) 178 CTR (Ker) 356: (2002) 257 ITR 544 (Ker). It was also argued by him that there should be registered deed for transaction if it is to fall within ambit of definition of transfer as given in Act. above proposition was supported by case law cited in Abdul Kareemia & Bros. vs. CIT (1983) 36 CTR (AP) 263: (1984) 145 ITR 442 (AP). Kareemia & Bros. vs. CIT (1983) 36 CTR (AP) 263: (1984) 145 ITR 442 (AP). Other arguments taken before CIT in 263 proceedings were also reiterated by him. Learned Departmental Representative on other hand relied on grounds given by CIT in 263 order. It was pointed out by her that by written relinquishment/release deed firm transferred residual rights in above property for consideration of Rs. 12 lakhs . It was also pointed out by her that in view of legal position obtained in relevant assessment year case laws cited by learned counsel of assessee, for various propositions made by him, are inapplicable. There cannot be two views in facts of case that impugned transaction amounted to transfer as defined in Act. It was, therefore, submitted by her that CIT assumed jurisdiction under s. 263 correctly and direction given by CIT to assess capital gain on impugned transactions requires to be upheld. In rejoinder it was pointed out by learned Counsel of assessee that case law referred to in Jetendra Prasad s case (supra) was delivered for case relating to asst. yr. 1988-89 and Hon ble Kerala High Court s decision in case reported in Kunnamkulam Mills Board case (supra) related to asst. yr. 1989-90. We have heard both parties and gone through case laws cited before us. In Jitendra Prasad s case (supra) it was held by Tribunal that when two partners retired from firm and in consideration of retirement, land and building belonging to firm were allotted to them, s. 45(4) was inapplicable insofar as there was no dissolution of firm and allotment of land and building to retiring partner was not device to reduce tax. Further, it is noticed that Hon ble Madras High Court s decision in case of CIT vs. Bharani Pictures (1981) 129 ITR 244 (Mad) was not considered by Bench. It is also noticed that implication of wordings "on dissolution of firm or other AOP or BOI....or otherwise" was also not argued by parties in above case. Also facts of present case are distinguishable from facts considered by Madras Bench of Tribunal. There was no such written relinquishment/release deed for particular consideration as was available in present case. In this view of matter, above case laws are distinguishable both on facts and in law. Kerala High Court s decision in case of Kunnamkulam Mill Board (supra) is on issue as to whether revaluation of asset, on reconstitution of firm can amount to transfer. Thus, issue dealt with in that case is all together different from that involved in present case. It was held by Court that as ownership of property did not change, there could not have been transfer . In present case there was change in ownership of property. It is also seen from record that in case of (CIT vs. A.N. Naik Associates (2004) 187 CTR (Bom) 162: (2004) 265 ITR 346 (Bom), it is held by Court that transfer of asset to partner by existing firm would give rise to capital gains in view of insertion of sub-s. (4) to s. 45 w.e.f. 1st April, 1988) It was held that expression otherwise used in sub-s. (4) to s. 45 is not to be read "ejusdem generis" to "dissolution of firm or body of AOP", expression otherwise has to be r/w words transfer of capital asset by way of distribution of capital asset. It was held that word otherwise takes within it s sweep not only cases of dissolution but also cases of subsisting partners of partnership transferring assets to retiring partner. Considering above factual and legal position, we are of considered opinion that assumption of jurisdiction under s. 263 by learned CIT cannot be assailed. Also, direction issued by learned CIT to AO to bring to tax capital gain on account of such transfer is also upheld. In result, appeal of assessee is dismissed. *** ASHOKA ENTERPRISES v. DEPUTY COMMISSIONER OF INCOME TAX