JUDGMENT

S.C. Agrawal, J.-This appeal by certificate is directed against the judgment of the Gujarat High Court dated August 29, 1980. The matter relates to the assessment year 1967-68. The assessee is a partnership concern consisting of 13 partners. On March 31, 1966 it entered into an agreement whereby it transferred the entire assets of business together with liabilities as a going concern to a limited company, styled M/s. Electric Control Gear Pvt. Ltd. for a consideration of Rs. 8 lakhs. The erstwhile partners of the Assessee firm were allotted the shares of the same value in their profit sharing proportion. The Income Tax Officer held that depreciation allowed to the assessee firm amounting to Rs. 3,32,863/- in respect of the assets transferred by the firm to the said company was chargeable to tax under the provisions of Section 41(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). He also brought to tax capital gains of Rs. 8 Lakhs, being purchase consideration received by the assessee and after excluding the sum of Rs. 5,000/- as basic exemption, included the sum of Rs. 7,95,000/- in the computation of the total income of the assessee under the head Capi