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TMI Blog1976 (12) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... irm had agreed to take out these properties out of the books of the firm and own them jointly and enjoy the income directly. Pursuant to that agreement entries were made in the books of the firm transferring the value of the properties to the partners in proportion to the profit sharing ratio of the partners. The ITO noted that according to the agreement, properties were to be divided among the partners and since no such actual partition had taken place, there was no distribution of the assets among the partners. He came to the conclusion that the properties had not, therefore, been genuinely taken out of the books of the firm and added back a sum of Rs. 14,046, which he determined to be the income from the house property, to the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the firm. Reliance was placed on the decision of the Gujarat High Court in the case of Velo Industries 80 ITR 291 (Guj) and it was pointed out that since it was held in that case that the share given to a partner on his retirement does not amount to a conveyance in the same way the act of the partners in the present case did not amount to a transfer and there was no reason why the agreement of the partners not to treat the properties as those of the firm should not be accepted by the Department. 5. On the other hand, it was contended on behalf of the Revenue that in effect the properties which belonged to the firm have become the properties of the partners and this fact should, therefore, be construed as a transfer. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution and could not therefore, be accepted. This reason has ignored the facts that there was no dissolution of the firm which continued to exist and is therefore, untenable. The Revenue has attempted to support the order of the authorities below by contending that the actions of the partners amounted to a transfer of immovable properties from the firm to the partners and since such transfer involved immovable properties, it could not be accepted as valid unless it was evidenced by a registered instrument in writing. There is no direct decision on this point which has been brought to our notice and we must, therefore, decide this matter on first principles. Lindlay on Partnership, Thirteenth Edition, contains the following passage at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement of the partners to treat it as such. It would follow that by a similar agreement expressing their intention, the partners could take back the immoveable property and no larger treat it as that of the firm. Whether an asset is that of the firm or not does not depend upon the title to the property, for title to the immovable property can always rest only in the individual concerned and not in the firm as such. The treatment of the property as that of the firm or otherwise, the conversion of the property of an individual to that of the firm or of the firm to that of the individuals does not, therefore, involve any transfer of title since title continues to vest only in the individual concerned. We are, therefore, of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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