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TMI Blog1984 (2) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... Ganj, New Delhi. The shares of the three owners were determinate and ascertained as 50 per cent, 25 per cent and 25 per cent, respectively. As on 1-12-1977 the said property--5--Ansari Road, Darya Ganj, New Delhi, stood transferred as capital contribution by the three assessees in the same shares as they were owning the said property as co-owners and a partnership firm under the name and style of Universal Book Stall came into being vide deed of partnership executed by the above named three assessees on the same date, viz., 1-12-1977. The shares of the three assessees in the said firm, Universal Book Stall, was 50 per cent, 25 per cent and 25 per cent, respectively, i.e., the shares of the assessees as co-owners in the property as also in the partnership constituted, remained the same. 3. Since Shri D.R. Chawla had declared the value of his 50 per cent share in the above property for the valuation date 31-3-1975 at Rs. 1,16,000 for the purposes of assessment under the provisions of the Wealth-tax Act, 1957 (' the 1957 Act '), the ITO while framing the assessments of the assessees for the assessment year under appeal was of the opinion that the total valuation of the property as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor section 45 of the Act was applicable. The case of the revenue is that the issue is squarely covered in favour of the revenue by the decision of the Tribunal, Ahmedabad Bench ' A ' in the case of ITO v. Ramanlal Davalbhai Patel, decided vide orders of 16-6-1980 in IT Appeal No. 72 (Ahd.) of 1979 and C.O. No. 36 (Ahd.) of 1979 as stands reported in [1982] 1 SOT 14 as also by the ratio of the decision of the Hon'ble Gujarat High Court in the case of CIT v. Smt. Dhirajben R. Amin [1983] 141 ITR 875, wherein their Lordships have followed the earlier decision of the same Hon'ble High Court in the case of CIT v. Kartikey V. Sarabhai [1981] 131 ITR 42. The revenue as such, has contended that since the valuation declared by one of the assessees, who was a co-owner with 50 per cent share, and for the valuation date 31-3-1975 was Rs. 1,16,000, provision of section 52(2) squarely applied since the same assessee has declared the value of his interest in the same property at Rs. 99,250 on 1-12-1977. In reply, the learned authorised representative of the assessee reiterated his earlier stand and further contended that in the alternate the cost of acquisition of the property be worked out as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; its agent for the transaction of its business ; its sureties for the liquidation of its liabilities so far as the assets of the firm are insufficient to meet them. The liabilities of the firm are regarded as the liabilities of the partners only in case they cannot be met by the firm and discharged out of its assets. But this is not the legal notion of a firm. The firm is not recognised by English lawyers as distinct from the members composing it. In taking partnership accounts and in administering partnership assets, Courts have to some extent adopted the mercantile view, and actions may now, speaking generally, be brought by or against partners in the name of their firm ; but, speaking generally, the firm as such has no legal recognition. The law, ignoring the firm, looks to the partners composing it ; any change amongst them destroys the identity of the firm ; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. In point of law, a partner may be the debtor or the creditor of his co-partners, but he cannot be either debtor or creditor of the firm of which he is himself a member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which on his bankruptcy passes to his trustee.' The position as regards the nature of a firm and its property in Indian law under the Indian Partnership Act, 1932, is almost the same as in English law. Here also a partnership firm is not a distinct legal entity and the partnership property in law belongs to all the partners constituting the firm. In Bhagwanji Morarji Goculdas v. Alembic Chemical Works Co. Ltd. AIR 1948 PC 100 ; 18 Comp Cas 205, the Privy Council in para 10 of the judgment observed thus (see also [1948] 18 Comp Cas 209) : ' Before the Board it was argued that under the Indian Partnership Act, 1932, a firm is recognised as an entity apart from the persons constituting it, and that the entity continues so long as the firm exists and continues to carry on its bussiness. It is true that the Indian Partnership Act goes further than the English Partnership Act, 1890, in recognising that a firm may possess a personality distinct from the persons constituting it, the law in India in that respect being more in accordance with the law of Scotland, than with that of England. But the fact that a firm possesses a distinct personality does not involve that the personality con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o separate rights of its own in the partnership assets but it is the partners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of section 2(47) of the Act. In our view, therefore, there is no transfer of assets involved even in the sense of any extinguishment of the Firm's rights in the partnership assets when distribution takes place upon dissolution." 6. Now, on the facts and in the circumstances of the case with which we are seized of, the immovable property was owned and held by the three assessees in ascertained shares of 50 per cent, 25 per cent and 25 per cent, respectively, and the same property was contributed in the same shares in the partnership firm as capital contribution, i.e., the shares of the assessees in the immovable property as co-owners, and in the assets/liabilities of the firm as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, even if there was any transfer, it was without consideration. The Appellate Assistant Commissioner, on appeal, set aside the Income-tax Officer's order holding, inter alia, that though there was a ' transfer ', it was without any consideration and no capital gain arose to the assessee." From the above facts it follows that the land contributed by the assessee there as his capital contribution in the firm was owned by him exclusively and the firm where he contributed capital in the form of land, which was worked out at the market value, had 9 other partners of course 5 of them were coparceners of the assessee but 4 others were outsiders unconnected with the subject-matter of transfer, viz., the land. There a single partner brought land as his capital and on his contribution in substitute of cash capital and in the face of capital contribution of other partners, strangers and outsiders included, the said land became the property of the partnership firm, hence, it was held that there was a transfer within the meaning of section 2(47). There the contribution in terms of land as capital contribution being by one partner, once it became the property of the partnership firm, there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has is a one-half share in the residue of the partnership assets remaining after payment of the debts and liabilities of the firm. But on the facts of the cases, with which we are seized of, we can certainly say that the three assessees as three partners are having 50 per cent, 25 per cent and 25 per cent shares, respectively, in the partnership and the same shares they do have in the property, asset brought into the firm as capital contribution as also in the residue of the firm, if that eventuality arises and since that 50 per cent, 25 per cent and 25 per cent ratio in the partnership was the ratio, qua the same three assessees while they held the immovable property as co-owners, the facts of the case before their Lordships of the Gujarat High Court became distinguishable with the facts of the cases with which we are seized of. The main distinguishing feature here, i.e., with the cases before us, being that the same co-owners became partners in a firm and brought one asset as capital contribution and the said asset was contributed as capital in the same ratio as they held as co-owners and the profits/loss sharing ratio in the firm remained the same. The Gujarat High Court's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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