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TMI Blog1984 (6) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1977-78 5,55,617 1978-79 3,27,375 1979-80 3,10,995 2. The total value of all the assets of the firm on the respective valuation dates was as follows : Assessment Total value of the assets as per year balance sheets of the respective years Rs. 1977-78 19,96,616 1978-79 20,46,029 1979-80 24,70,686 As against the above value of the assets, the capital of the partners as far as can be seen from the balance sheets in question was as follows, remaining amount being borrowings : Assessment Total capital of Borrowings Total year the partners Rs. Rs. Rs. 1977-78 12,99,431 6,97,166 19,96,597 1978-79 11,58,214 8,87,515 20,46,019 1979-80 13,41,380 11,29,306 24,70,686 3. The WTO computed the value of the assessee's shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the learned counsel for the assessee before us that following the reasoning given by the Tribunal in the case of house property in the aforementioned appeals, relief ought to have been granted to the assessee in respect of the corresponding value of the shares also. 6. On behalf of the revenue the order of the learned AAC was supported. 7. We have given careful consideration to the rival submissions. The valuation of the share of a partner in a firm is governed by the statute. in terms of clause (b) of sub-section (1) of section 4 of the Act, the value of the interest of a partner in the firm has to be 'determined' in the prescribed manner'. Sub-section (2) of section 4 stipulates that : " In making any rules with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 44 of the Partnership Act, 1890, of the United Kingdom. Lindley on Partnership has explained the above scheme of settling, the accounts amongst the partners in the following words : " It follows from the rules contained in the above section that if the assets are not sufficient to pay the debts and liabilities to non-partners, the partners must treat the difference as a loss and make it up by contributions inter se. If the assets are more than sufficient to pay the debts and liabilities of the partnership to non-partners, but are not sufficient to repay the partners, their respective advances, the amount of unpaid advances ought to be treated as a loss, to be met like other losses. In such a case the advances ought to be treated as a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remains after satisfying the liabilities set out in clause (a) and sub-clauses (i), (ii) and (iii) of clause (b) of section 48.... " [Emphasis supplied] Their Lordships approvingly quoted the following extracts from Lindley on Partnership, 12th edn. at p. 375 : " What is meant by the share of a partner is his proportion of the partnership assets after they have been all realised and converted into money, and all the partnership debts and liabilities have been paid and discharged. This it is, and this only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid provisions indicates that the share of a partner in the firm has to be determined more or less on the same principles as are contained in section 48 even though on the valuation date the firm does not stand dissolved. The share of a partner under section 48 does not extend to any particular asset of the firm as such, but to the excess of the value of all the assets over all the liabilities of the firm. A partner can claim his shares only in such excess. If there be no excess, he will have no share in the firm even though the assets of the firm may be numerous. The assets, no doubt, belong to all the partners jointly, but no individual asset of a firm, whether it be shares or property, would belong to a partner individually. This be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey owned the assets jointly and not individually. The law on this point was well brought out by their Lordships of the Hon'ble Patna High Court in the case of CWT v. Nand Lal Jalan [1980] 122 ITR 781, when they made the following observations, explaining this aspect of the law : " Now, therefore, keeping in view the above discussions, it cannot but be said that even though during the subsistence of a partnership, assets thrown into the partnership by the partners get merged together and lose their identity, yet all the same, the assets as a whole do belong to the partners. In computing the net wealth of the firm by reference to rule 2 of the Wealth-tax Rules, if a partner qualified for any of the exemptions provided under the Act, such e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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