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TMI Blog2010 (5) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 2(28) of the Bombay Sales Tax Act, 1959 and therefore, liable to tax? Facts The few facts leading to this reference can be briefly summarized as under: The applicant is a partnership firm engaged in the business of buying and selling yarn. The said partnership firm was dissolved on December 29, 1989. At the time of dissolution, all three partners executed a dissolution deed. The said firm was assessed for the period from April 1, 1989 to December 29, 1989 by the Sales Tax Officer by an order of assessment dated March 15, 1993. The Sales Tax Officer held that there was sale of car from the firm to its partner and taxed the transaction by raising a demand of Rs. 28,040 including interest charged under section 36(3)(b) of the Bombay Sales Tax Act, 1959 (in short, the BST Act, 1959 ). Against the aforesaid order of assessment dated March 15, 1993, the applicant-assessee filed first appeal before the Assistant Commissioner of Sales Tax (Appeals), P-III, Mumbai who vide order dated July 18, 1994 partly allowed the said first appeal and redetermined the sale price of car at Rs. 70,000 in place of Rs. 1,06,935 and determined the tax payable at Rs. 10,190 to which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner is itself a mistake apparent on record and hence, rectification application of the applicant was wrongly not entertained by the Assistant Commissioner. The said Second Appeal No. 591 of 1995 was decided by the Third Bench of the Tribunal vide judgment dated March 7, 1998 holding that there was no apparent mistake in the order passed by the Assistant Commissioner (Appeals) on rectification application. The Tribunal held that the original order in first appeal passed by the lower appellate authority dated July 18, 1994 will hold the field and, therefore, confirmed the tax on the motor car at Rs. 10,500 and consequential interest under section 36(3)(b) of the BST Act, 1959 at Rs. 8,190. Being aggrieved by the order dated March 7, 1998, the applicant/assessee filed Reference Application No. 34 of 1998 before the Fourth Bench of the Maharashtra Sales Tax Tribunal, Mumbai under section 61(1) of the BST Act, 1959 and the Tribunal vide its judgment dated September 27, 2002 referred the above mentioned question of law for the opinion of this court. Definition of sale Before considering the submissions of the parties, it is necessary to reproduce the defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to him, there was no sale of car by the firm to its partner and therefore, the sales tax is not applicable in the present case. He further submitted that the Tribunal has erred in rejecting the contention of the applicant that there was no sale because the firm and partners are one and same entity. He further submitted that the applicant had placed on record the judgment in case of Commissioner of Sales Tax, M.P. v. Khurana and Co. [1980] 46 STC 39 (MP) on an identical question of law, but the Tribunal distinguished the same by observing that it is nowhere stated before the Assistant Commissioner (Appeals) that Mr. Parekh was retiring and car was allotted to him in satisfaction of his claim. Mr. Surte further submitted that in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course presupposes capacity to contract, that it must be supported by money consideration and that as a result of the transactions, the property must actually pass in goods for consideration of money. In the present case, Mr. Parekh received the car in consideration as a partner of the firm. In support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. Mr. Sonpal further submitted that the firm was dissolved as per the dissolution deed dated December 29, 1989. The asset (car) was valued at Rs. 70,000 and transferred to one partner Mr. Kamlesh Parekh by debiting his account for Rs. 70,000 by way of sale and his personal account was also credited by depositing the money from the bank. Mr. Sonpal further submitted that in the profit and loss account, interest received was shown as Rs. 11,103, moreover the profit by sale of car was shown at Rs. 28,350. After considering the expenses made for the period of assessment, the net profit of Rs. 4,067 was transferred to each partners capital account. Thus, the profit received from the sale of car was distributed amongst the partners. He, therefore, submitted that this itself shows that there was transaction of sale and purchase and therefore, the provisions of the BST Act, 1959 are applicable in the present case. Mr. Sonpal further submitted that the firm and partners are two different legal entities and there can be a sale by firm to its partner. In support of this submission, he relied on the judgment in case of State of Gujarat v. Patel Oil Mills reported in [1993] 91 STC 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes place upon dissolution of the partnership. In the present case, the motor car was transferred in the name of one of its partners in lieu of his share in the partnership firm in the proximity of the process of dissolution of the firm. Whatever may be the character of the property which is brought in the partnership when the partnership is formed or which may be acquired in the course of business of the partnership, it becomes the property of the partnership firm and what a partner is entitled to is his share of profit if any accrued from the partnership from the realization of the said property and upon dissolution of the partnership, his share in the money representing the value of the property. Therefore, whenever there is dissolution of the partnership firm each partner gets his share in the profit and loss as well as in the property of the firm. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever brought in the partnership would cease to be the exclusive property of the person who brought the property in partnership. It would be ..... 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