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Issues Involved:
1. Validity of the transfer of immovable property to the partnership firm without a registered deed. 2. Inclusion of income from the said property in the individual assessment of the assessee for the relevant period. Issue 1: Validity of the Transfer of Immovable Property to the Partnership Firm Without a Registered Deed The primary issue was whether the transfer of the property at No. 17, Clemens Road, Madras-7, by the assessee to her partnership firm, M/s. Batoola Hospital, without a registered deed, constituted a valid transfer under section 14 of the Indian Partnership Act, 1932. The Income-tax Officer (ITO) held that the absence of a registered document meant the property continued to belong to the assessee, thus including the income from the property in her individual assessment. The Appellate Assistant Commissioner (AAC), however, held that the transfer was valid based on book entries and the decision in Vishnu Industries v. ITO [1984] 7 ITD 676, thereby excluding the income from the property in the hands of the assessee. Upon appeal, the Tribunal had a split decision. One member argued that the book entries alone were insufficient to transfer property rights, emphasizing the need for a clear intention or agreement among partners to treat the property as the firm's. The other member, however, supported the AAC's view, citing Supreme Court and High Court decisions, which held that no registration is required when a partner brings immovable property into the firm as capital. The Third Member resolved the difference by affirming that the transfer was valid. The Supreme Court's decision in Kartikeya V. Sarabhai v. CIT [1985] 156 ITR 509 clarified that no written document or registration is required under section 17(1)(b) of the Registration Act when a partner contributes immovable property to the firm. The Third Member concluded that the book entries and the intention demonstrated by the partners were sufficient to validate the transfer under section 14 of the Indian Partnership Act, 1932. Issue 2: Inclusion of Income from the Said Property in the Individual Assessment of the Assessee The second issue was whether the income from the property for the period from 1-5-1979 to 31-3-1980 should be included in the assessee's individual assessment for the assessment year 1980-81. The ITO included the entire income from the property in the assessee's hands, arguing that the property remained with her due to the lack of a registered transfer deed. The AAC, however, excluded the income from 1-5-1979 onwards, recognizing the property as belonging to the firm based on the book entries. The Tribunal's split decision saw one member supporting the ITO's view, emphasizing that without a registered deed or clear agreement, the property remained with the assessee. The other member upheld the AAC's decision, relying on the legal principle that no formal document is required to transfer property to a firm when a partner contributes it as capital. The Third Member, aligning with the AAC and the supporting Tribunal member, concluded that the income from the property should not be included in the assessee's individual assessment from 1-5-1979 onwards. The Third Member emphasized that the transfer was valid and the property was rightly treated as the firm's property, thus excluding the income from the assessee's individual assessment. Conclusion: The appeal by the revenue was ultimately dismissed, affirming the AAC's decision to exclude the income from the property from the assessee's individual assessment from 1-5-1979 onwards. The Tribunal recognized the transfer of the property to the partnership firm as valid without the need for a registered deed, based on the intention demonstrated through book entries and relevant legal precedents.
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