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TMI Blog1971 (3) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... found that stocks of the value of Rs. 97,790 were taken over by one of the partners in lieu of his share of the capital and assets of the quondam partnership firm. In that connection and consequent upon the accounting and adjustment as agreed to, the petitioner and another took over stocks of the value of Rs. 97,790. In the return submitted by the quondam partnership firm for the assessment year in question, this turnover was not brought in, as, according to the petitioner, there was no transfer of property by one to the other for valuable consideration and, therefore, there was no sale of stocks of the value of Rs. 97,790 from one set of partners to the other set of partners who took over such stocks. The assessing authority, in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of a partnership firm in the course of dissolution does not reflect the ordinary elements which should be present in a sale, and there being no sale, no sales tax is leviable and a fortiori a penalty on the alleged escapement of turnover. It is contended that the instrument of partnership merely reflects a scheme of accounting and adjustment of the rights of partners and in order to implement such an agreed formula amongst the quondam partners of the firm if any stock is taken over or transferred at the book value from one set of partners of the firm to the other group of partners, it is only in the normal course of adjustment of rights of partnership assets and such transaction does not involve a transfer of property in the goods from on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the surplus distributed among the partners or their representatives according to their rights." The section reaffirms the well-known rights of a partner which is commonly known as his general lien on the surplus assets of the firm. Such an equitable partner's lien enables him to cause the available surplus to be distributed amongst the partners in accordance with their accredited rights in the partnership. The mode of settlement of accounts between the partners is again a matter of contract. In the absence of such contract, section 48 of the Partnership Act comes into play and the rights of partners of a dissolved firm are thus adjusted. I have referred to the above salient general principles only to reaffirm that the accounting which f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .C. 329., the Gujarat High Court had occasion to consider the vires of section 26(3) of the Bombay Sales Tax Act which purported to bring to tax, allotment of goods of a firm amongst the partners on the dissolution of the firm fictionally as a sale. The learned Judges held that such allotment did not fall expressly within the subject of legislation contained in entry 54 in List II of the Seventh Schedule to the Constitution and therefore were of the view that it was constitutionally impermissible to the State Legislature to treat such an allotment as a sale within the meaning of the Indian Sale of Goods Act. When the net assets of a partnership firm are divided amongst the partners in specie, no money consideration passes though for all leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty so as to constitute a sale of goods as defined in the Sale of Goods Act." A Full Bench of this court, while dealing with the provisions of the Gift-tax Act, 1958, and particularly the position where a Mitakshara father decides to treat his self-acquired property as the property of the family, in Commissioner of Gift-tax v. P. Rangasami Naidu[1970] 76 I.T.R. 315., held the view that such conversion of separate property into joint family property does not involve any transfer or disposition of property within the meaning of section 2(xxiv) of the Gift-tax Act, 1958. The learned Judges were of the view that such conversion by blending or throwing it in the hotchpot of the joint family cannot be construed as a transfer of property as there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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