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TMI Blog1984 (12) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... el products. There were several changes in the constitution of the firm. The firm purchased 58.22 acres of agricultural lands in Seegahalli, Roskote Taluk, in 1972 from Krishna Mining Co. Gudur. Permission was obtained from the Deputy Commissioner, Bangalore, for converting the said land for non-agricultural purposes. In order to meet the conversion fees, new partners were brought in, in April 1979. The continuing partners, of whom the assessee was one, also brought in moneys for this purpose in November 1979. The land was revalued because of its conversion for non-agricultural purposes. The revaluation was as follows : Rs. Cost of land 57,500 Conversion fee paid 2,30,284 Difference in revaluation 9,12,216 --------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n CIT v. Bhupinder Singh Atwal [1981] 128 ITR 67 and held as follows : " It is significant to note from the facts reiterated above that the appellant along with others retired, taking from the firm whatever amount was due at the time of retirement. The new set of partners, who had enough financial resources, continued the business of the firm. If the facts of the appellant's case are properly understood and interpreted, the position is that the appellant lady has been paid merely the amount which was due to her at the time of retirement and there has been no relinquishment of her rights in the assets of the firm. Long before the date of retirement, revaluation of the assets was done by the first group of partners and the appreciation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notional sale of partnership assets and be paid to him but the determination and the payments of his share might not invariably be done in that manner and it was quite conceivable that, without taking accounts on the footing of notional sale, by mutual agreement, a retiring partner might be receiving an agreed lump sum amount for going out as and by way of consideration for transferring, releasing, assigning or relinquishing his interest in the partnership assets to the continuing partners and if the retirement takes this form whether payment on that basis would be exigible to tax as capital gains, as are the facts of the instant case before me, the Bombay High Court did not express any opinion. But, as we said, it is not necessary. But, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm bringing it with the provisions of section 47(ii) of the Act. The Tribunal held that this was not a case of dissolution of the firm. Quoting from the head-lines, the High Court held as follows : " In the instant case, having regard to the particular mode employed by the assessee and the continuing partners to effect and bring about retirement of the assessee from the partnership, the transaction will have to be regarded as amounting to ' transfer ' within the meaning of section 2(47) of the Act, inasmuch as the assessee could be said to have assigned, released and relinquished his interest and share in the partnership and its assets in favour of the continuing partners and the transaction cannot be regarded as amounting to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flowed upon dissolution after discharging liabilities was nothing but a mutual adjustment of rights between the partners and there was no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of section 2(47) of the Income-tax Act, 1961. There was no involvement of a transfer of assets even in the sense of any extinguishment of the firm's rights in the partnership when the distribution took place upon dissolution. In order to attract section 34(3)(b) of the Income-tax Act, 1961, it was necessary that the sale or transfer of the assets must be by the assessee to a person. The Supreme Court held that the dissolution of a firm must in point of time be anterior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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