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TMI Blog1983 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... result that its income or loss has to be considered in the hands of the firm ? (ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the properties mentioned above could not be converted into partners' personal property except by means of an instrument in writing in accordance with the requirements of the Transfer of Property Act and the Registration Act ? The facts behind these legal formulations are: The assessee is a firm of four partners. The property bearing Municipal Nos. 102 and 103 (74 and 75) at Commercial Street, Bangalore, was the asset of the firm. Later on, the property bearing Nos. 21-22, Dispensary Road, was purchased from out of the funds of the firm and both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of a registered deed of conveyance. The assessee appealed to the AAC who allowed the claim of the assessee. He held that no deed conveying the properties to the individual partners was required to be executed and the book entries evidencing that the properties should be treated as separate properties of the individual partners would be sufficient. He, however, held that the firm was liable to capital gains tax. He, accordingly, set aside the assessment with a direction to the ITO to make a fresh assessment. The Department appealed to the Tribunal challenging the validity of the order of the AAC. The Tribunal allowed the appeal by following the judgment of the Allahabad High Court in Ram Narain and Brothers v. CIT [1969] 73 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm, or acquired, by purchase or otherwise, by or for the firm in the course of the business of the firm. It includes also the goodwill of the business. The question herein is whether the partners, by making mere book entry or by agreement as between them, could claim the assets of the firm as their separate properties during the continuance of the firm. We do not think so. Book entries do not change title to properties unless the properties are given by the partners as their contribution to the capital of the firm. Any other conveyance known to law must be by instrument properly executed and registered, if the value thereof is over Rs. 100. The earliest decision on this question is of the Allahabad High Court in Ram Narain's case [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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