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TMI Blog1997 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... s evidence before the Tribunal to hold that the sale of shares of Kay Jay Industries Pvt. Ltd. by the firm to the partners under consideration was a commercial transaction ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that on transfer of shares of Kay Jay Industries Pvt. Ltd. by the firm to the partners, the claim of loss is allowable as business loss?" The assessee---Chase Trading Company, a partnership firm deals in shares. During the course of business 10,000 shares of Kay Jay Industries Pvt. Ltd. were acquired at Rs. 10 per share. The assessee had shown these shares as its stock-in-trade. The value of the said shares in the balance-sheet of the assessee as on the last date of the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal to come to the conclusion that the transaction in the instant case was a commercial transaction and the second question is whether, on the facts and circumstances of this case, the Tribunal was right in holding that the claim of loss is allowable as business loss. On the first question, the Tribunal has recorded its finding that the transaction in question, i.e., sale of shares by the assessee-partnership firm to its partners is purely a commercial transaction. The said conclusion/ finding is arrived at by the Tribunal on the basis that the assessee is a dealer in shares, has shown the shares as its stock-in-trade and this fact has not been disputed by the Revenue. The said fact is also borne out by the accounts maintained by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the assessee was entitled to claim business loss. Under the Income-tax Act, a partnership firm is a distinct/separate assessable legal entity. In commercial life, the partnership firm borrowing from or lending to its partners, selling or purchasing goods or other assets to or from its partners or giving premises on lease or taking premises on lease from its partners are common and acceptable. Merely because the transaction is between the partnership firm and its partners, it will not result in the consequence of application of the principle that there cannot be a trade or profit between the partnership firm and its partners. This court, in a judgment delivered in the case of CIT v. Kaluram Puranmal [1979] 119 ITR 564, has held as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the case of distribution of assets between the partners after dissolution of partnership. The test applicable to the distribution of assets after a partnership is dissolved will be totally different from the test which will be applicable to transactions between an existing partnership firm and its partners. As the Supreme Court has dealt with the question of distribution of assets to its partners after the partnership is dissolved, the law laid down by the Supreme Court will not be applicable to the facts of the present case. Thus, in the present case, the transaction between the partnership firm and its partners being a commercial transaction, the assessee must be allowed the loss suffered by it as its business loss. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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