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Issues Involved:
1. Necessity of a registered document for converting immovable property of the firm in favor of the partners. 2. Validity and sustainability of the Appellate Tribunal's finding regarding ownership of the properties. 3. Confirmation of deletion of additions made by the Income-tax Officer consequent on the sale of the properties. Summary: Issue 1: Necessity of a Registered Document The court addressed whether a registered document is necessary for converting the immovable property of the firm in favor of the partners. The Tribunal had held that mere book entries were sufficient to convert the firm's property into the personal properties of the partners. However, the court disagreed, stating that the properties were purchased in the name of the firm and the sale consideration proceeded from the firm. The court emphasized that a transfer of interest in immovable properties exceeding Rs. 100 requires a registered document u/s 17(b) of the Indian Registration Act, 1908. The court concluded that book entries alone cannot effectuate such a transfer without a formal instrument. Issue 2: Validity and Sustainability of Tribunal's Finding The court examined whether the Tribunal's finding that the assessee-firm was not the owner of the properties on the date of transfer was based on valid and relevant materials. The Tribunal had relied on book entries made in 1963, which purportedly transferred the properties to the individual partners. The court held that even if the properties were deemed to be held in common by the partners, a formal document is required to divide the common properties into individual ownerships. The court found that the Tribunal's finding was not sustainable in law due to the lack of a registered document evidencing the transfer. Issue 3: Confirmation of Deletion of Additions The court considered whether the Tribunal was right in confirming the deletion of various additions made by the Income-tax Officer. The Tribunal had deleted the additions on the grounds that the properties had become the separate properties of the partners. The court, however, held that without a registered document, the properties remained the firm's properties. Consequently, the sale by the partners should be treated as executed on behalf of the firm, making the firm liable for capital gains tax and other income. The court thus sustained the assessment made by the Income-tax Officer. Conclusion: The court answered all the questions in favor of the Revenue, holding that a registered document is necessary for the transfer of immovable property from the firm to the partners, and the Tribunal's findings were not legally sustainable. The assessment made by the Income-tax Officer was upheld, and the Revenue was awarded costs. Separate Judgment: BALASUBRAHMANYAN J. added that the properties were not joint properties of a Hindu undivided family but were co-owned by partners. He emphasized that without a deed of partition or mutual release, co-ownership cannot be converted into separate individual interests. He concurred with the main judgment, stressing that book entries alone cannot effectuate a legal partition.
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