1969 (2) TMI 40 - HC - Income Tax

Estate Duty Act, 1953 - share of the deceased in the partnership - chargeability to the Act as movable property

Summary

Issues:
Interpretation of estate duty law regarding the treatment of deceased partner's share in a dissolved partnership as movable or immovable property.

Analysis:
The case involved a dissolved partnership named AR. PL. Singapore, where the deceased partner sued for dissolution in the High Court of Singapore. The court appointed the deceased as receiver and manager of the firm's properties until its dissolution on May 14, 1958. The issue arose regarding the treatment of the deceased partner's share in the partnership as movable or immovable property under the Estate Duty Act, 1953.

The accountable person argued that the deceased partner's share should be considered as immovable property due to the nature of the assets and the lack of specific administration steps taken post-dissolution. However, the revenue department contended that the share should be treated as movable property, as per Rule 7 of the Estate Duty Act, which categorizes a partner's share in a dissolved partnership as movable property regardless of the firm owning immovable assets.

The court referred to Section 29 of the Indian Partnership Act, 1932, which specifies that a partner's right is to share in the net assets of the firm, not in specific assets. The court cited the Supreme Court's decision in A. Narayanappa v. B. Krishnappa, which clarified that even if a partner receives immovable property during the dissolution, it is considered as movable property in lieu of the partner's share of profits.

Furthermore, the court referenced a Division Bench decision and the case of Commissioner of Income-tax v. Dewas Cine Corporation to emphasize that the distribution of assets during dissolution is for adjusting partners' rights and does not constitute a transfer of assets. Therefore, any property received by a partner post-dissolution is regarded as personal property, whether in the form of money or immovable assets.

In conclusion, the court held that the deceased partner's share in the dissolved partnership should be treated as movable property for estate duty purposes. The court ruled against the assessee, affirming the revenue department's interpretation, and awarded costs to the department.