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TMI Blog1968 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rs. 2,558. By a deed of partnership dated August 5, 1959, the proprietary business of the assessee was converted into a, firm of partnership consisting of himself and another by name V. Abdul Kayoom. The partnership as agreed between the two was to commence as and from April 1, 1959, and it was to be one at will, determinable by either party by notice of a specified period. The net profits and losses of the partnership were to be divided or borne by the partners in the proportion of 9 annas and 7 annas in the rupee as between the assessee and the other partner respectively. Each partner was to contribute a sum of Rs. 4,000 towards initial capital of the firm. Any additional capital needed for the purposes of the partnership business was to be contributed equally by the parties. The three lorries were brought into the assets of the firm and the clause in the partnership deed relating to it reads: "The capital account of the party of the first part shall be credited with a further sum of Rs. 15,000 being the agreed value of the three lorries handed over to the partnership business by the party of the first part on the 1st day of April, 1959." In the accounts of the firm, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfers to the latter the property in the goods for a price. The existence of a contract presupposes that there must have been an offer to buy or sell goods for a price and the acceptance of such offer. We are unable to say that these elements in the formation and execution of a contract of sale are present in the transaction of making over the lorries to the firm. The lorries are transferred or handed over at the commencement of the firm's business, though the contract of partnership has been entered into on a subsequent date. The preamble to the partnership deed recites, and this has been noticed in the statement of the case, that the partnership has been thought of because of the indifferent health of the assessee and his inability to attend to the business. That was the reason why, while the assessee wanted to continue the business, he sought the assistance of the other partner in achieving that object. No doubt, a partnership is treated as an entity for certain purposes, as for instance by the Income-tax Act for purposes of assessment of firms of partnership or the Code of Civil Procedure for purposes of procedural matters or the law merchant. But barring the exceptional cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Nair J. held that, though the association and the private limited company were different legal entities and, in a strict legal sense of the term, there was a sale of the buses by the association to the private limited company, yet, as the persons who owned the buses before and after the transfer were identically the same persons, in substance and fact and in a commercial sense there was no sale but there was only a readjustment for the purpose of carrying on the business in another form. On that view, they held that the charge could not be sustained. The learned judges derived support from Rogers and Company v. Commissioner of Income-tax for the view they took. We find that Liquidators of Pursa Ltd. v. Commissioner of Income-tax shares the view. The Patna High Court in Maharaiadhiraj Sri Kameshwar Singh v. Commissioner of Income-tax has struck a different note and took the view that in such a case the corporate personality cannot be allowed to be pierced so as to allow the identification of the individual with the company, in order to promote his own benefit or advantage. But we are inclined to think that the assessee, having regard to the circumstances in which he entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the contention is not correct. After all, the Income-tax Act charges income, profits and gains made by an assessee. We fail to see what income, profit or gain the assessee made only by handing over the lorries to the firm. The debit in the purchase account and the credit in the capital account are but mere entries without the assessee actually getting in his hands the sum of Rs. 15,000. But we need not base our conclusion on this reasoning. Apart from the foregoing, there are other weighty reasons for concurring with the view of the Tribunal. Section 14 of the Indian Partnership Act shows the different process or methods by which a firm of partnership may come to possess property. The section says " the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm or acquired, by purchase or otherwise, by or for the firm. " This is, of course, subject to the contract between the partners. When a partnership is formed for the first time and one of the members of the partnership brings into the firm assets, they become the property of the firm, not by any transfer, but by the very intention of the parties evinced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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