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TMI Blog1980 (9) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... artners were taken in the firm. On 31st Jan., 1975 according to the assessee there was dissolution of the entire firm whereby four partners including the two assessees herein were directed to be paid a sum of Rs. 2,50,000 and also the shares and certain tangible assets and liabilities and such shares works out to a sum of Rs. 25,961. The case of the assessee is that such sums came in the hands of each one of the assessee by way of dissolution of the partnership firm and hence under s. 47(ii) of the Act no capital gains is chargeable. On the other hand, the case of the Department is that there was only retirement of the partners and the entire business continued with the remaining partners and the four partners only retired getting their sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d they continued in the firm in partnership with three other newcomers. A perusal of the deed of dissolution shows that it is in fact a deed of dissolution and that the dissolution of firm is complete. All the partners had not only agreed to dissolve the firm, but also affirmed in the deed of dissolution that the dissolution was complete. The relevant recital in the resolution deed bear this out: " Where the parties have mutually agreed that the partnership shall stand dissolved w.e.f. 31st Jan., 1975 and the assets of the partnership divided between the parties hereto as hereinafter mentioned. Whereas the parties decided to reduce to writing the terms agreed to between them in respect of the dissolution of the firm. Now this Deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. We have gone through the decision and found that the facts of the case are not the same as the facts of the present case. On the other hand the facts of the present case are identical to the facts of the case decided by the Madras High Court in the case of Mavukkarai (N) Estate Tax Factory vs. Addl. CIT, Madras II (1978) 112 ITR 715 (Mad). That was a case of a firm when four partners of a firm of five partners retired from the partnership on 30th June., 1970, after executing a release deed under which the remaining partner, J, took over the rights and liabilities of the firm. On the same day, J formed a new firm with the same name as the old firm by taking in three new partners. On such facts it was held by the Madras High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f dissolution, and this is sufficient answer to the objection taken by the ITO that there was no dissolution of the firm as envisaged in s. 43 of the Partnership Act. It is not a condition- precedent to a dissolution that there should invariably be a notice in writing given by one or more of the partners of his or their intention to dissolve the firm. In the case of the assessee, the recitals in the Dissolution Deed to the effect that the parties have mutually agreed that the partnership shall stand dissolved w.e.f. 31st Jan., 1975 and it was decided to reduce to writing the terms agreed to, is indicative of, and bears witness to, an antecedent oral contract. So, there can be, as there was in this case, a valid dissolution of the firm which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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