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TMI Blog1980 (10) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,412 on the date when the land was contributed by the assessee to the firm in which the assessee was a partner. The assessee contended before the ITO that the land was an agricultural land situated outside the prescribed limit and that the provisions of s. 45 of the IT Act would not apply. The ITO held that the capital gain was leviable. 3. The assessee preferred an appeal to the AAC. Before the AAC, reliance was placed on two decisions of the IT Appl. Tribunal. The AAC held that there was no transfer within the meaning of s. 45 r/w s. 2(47) of the IT Act. 4. On behalf of the Department, reliance was placed on the decision of the Appl. Tribunal in ITA No. 72/Ahd/79 dt. 16th June 1980. If this had been the only decision of the Appl. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing in the property must pass forthwith to the transferee as provided in s. 8 of the Transfer of Property Act. When the property is absolutely transferred no rights are left in the transferor. In other words, when the property is sold the purchaser becomes the absolute owner thereof. 7. The decision of the Karnataka High Court in Addl. CIT vs. M.A.J. Vasnaik (1979) 116 ITR 110 (Kar) on which the ld. Rep. for the Department relied was also relied before the Supreme Court in Malabar Fisheries Co. vs. CIT (1979) 12 CTR (SC) 415 : (1979) 120 ITR 49 (SC). The Supreme Court did not express any opinion on the correctness or otherwise of the view taken by the Karnataka High Court on the ground that it was unnecessary to express any such opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le involved in a transaction between one's ownself. The tribunal observed that the value of the machinery had not been written off in the books of the firm but the assessee contributed it as their capital in the partnership firm at an appreciated price. On these facts, the following question was referred to the High Court: "Whether, on the facts and in the circumstances of the case, the tribunal was justified in deleting the sum of Rs. 4 lakhs from the total income of the assessee?" The Calcutta High Court answered the question in the affirmative. The Commr. Appealed to the Supreme Court. One appeal was filed by special leave and the other appeal was filed by certificate granted by the High Court. Both appeals were dismissed. It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts in the share are extinguished. We are, therefore, of view that when a shareholder receives his share on final distribution of the net assets of the company in liquidation, there is no transfer of capital assets by him which would attract the charge of capital gains tax under s. 45." Again at page 201 of the reports it is thus stated: "The words used by the legislature are 'extinguishment of any rights' and the word 'any' is a word which ordinarily excludes limitation or qualification and it should be given as wide a construction as possible, unless, of course, there is any indication in the subject matter or context to limit or qualify the ordinary wide construction of that word. Vide the observations of Williams, J. in Victorian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to a transfer of assets as was sought to be contended by the counsel for the Revenue. Secondly, it is unnecessary for us to express any opinion on the correctness or otherwise of the view taken by the Karnataka High Court in that case." 11. The Supreme Court in terms held that a partnership firm is not a distinct legal entity apart from the partners constituting it and that equally in law the firm as such has no separate rights of its own in the partnership assets and that when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint or common interest. 12. Much water has flown after the decision of the Supreme Court in CIT vs. A.W. Figgies and Co. Ors. reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... These provisions of the Act go to show that the technical view of the nature of partnership under English Law or Indian Law cannot be taken in applying the law of income-tax." 15. In the view of the Gujarat High Court, the aforesaid observations do not advance the case of the Revenue. It was held that the observations were obiter dicta and that they could not prevail against the ratio of later decisions. It was held that in subsequent decisions of the Supreme Court it is recognised that even for the purposes of IT Act a partnership is not a distinct person but a plurality of persons. The ratio of those decisions, in the view of the Gujarat High Court, is that even for the purposes of IT Act, the firm has no distinct legal entity apa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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