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TMI Blog1984 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... o its partners at the rate of Rs. 2 per share as against Rs. 10 per share. The assessee, therefore, claimed a short-term capital loss of Rs. 50,400. The ITO disallowed this claim of the assessee on the ground of unity of identity of a firm and its partners and the impossibility of dealing between the firm and its partners. 4. The assessee appealed to the Commissioner (Appeals) who confirmed the action of the ITO by relying on a number of decisions mentioned in his order and observing as under : "In this case, in any case, the loss is purely notional. The shares were allotted to the firm on the conversion of the partnership business. The shares have been purported to be transferred to the partners by the firm at a notional rate, the so-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be capitalised by the assessee to state that it is an indication of an actual sale. Four partners are brothers and the fifth partner is the wife of the fifth brother. The company in which the shares are held is their own company. The reason for not transferring all the shares has also not been mentioned. The firm and its partners are in a position to pass any entry they like. The entries are supposed to have been passed on the last day of the relevant accounting year. Thus, here there is no real loss apart from the legal position that a partner cannot make profit out of his transactions with the firm, a firm cannot make profit out of its transactions with the partners, a partner cannot incur loss out of the transactions with the firm and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the partnership by the vendor of the assessee. The profit that accrued to the assessee on the purchase of the land by the partnership was held to be income of the firm. Reliance was placed on the decision of the Karnataka High Court in the case of A.S. Krishna Setty Sons v. Addl. CIT [1975] 100 ITR 587 and that of the Gujarat High Court in the case of CIT v. Kartikey V. Sarabhai [1981] 131 ITR 42 wherein the assets transferred by the firm to its partners were held to be a genuine transfer. The learned counsel for the assessee, therefore, submitted that the lower authorities should have allowed the assessee's claim for short-term capital loss of Rs. 50,400. The learned departmental representative, on the other hand, highlighted the elabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r incorporated or not incorporated. Therefore, a firm is also a person under the provisions of the Income-tax Act. In the instant case, it was an undisputed fact that the assessee-firm acquired shares of Sree Bihar Jute Twine Mills Ltd. out of its own funds and the shares were held by the assessee-firm as its own assets, although these shares were held in the names of different partners. The law is fairly settled that during the subsistence of a partnership no partner can claim any of the properties belonging to the firm in which he is a partner as his own property. The Transfer of Property Act, 1882, contemplates a transfer from a person to himself or to himself and one or more other living persons. In the instant case, the firm claimed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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