TMI Blog2012 (6) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No. 203 OF 1994 - - - Dated:- 15-6-2012 - S J Vazifdar And M S Sanklecha, JJ. For Appellant : Mr. Suresh Kumar Adv For Respondent : Mr. Percy Pardiwala, Senior Adv - Amicus Curiae JUDGEMENT Per : M S Sanklecha : This is a reference under Section 256(1) of the Income Tax Act, 1961, at the instance of the Revenue for the Assessment Year 1978-79. 2) The following question arising out of its Order dated 18/7/1989 has been referred by the Income Tax Appellate Tribunal for the opinion of this Court: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the AAC s order in which the A.A.C. had held that it was a case of distribution of assets on dissolution of par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the dissolution of the partnership firm cannot be brought to tax as capital gains in view of Section 47(ii) of the Income Tax Act, 1961. 4) At all times relevant to this application, Section 47(ii) of the Income tax Act 1961 read as under: 47. Nothing contained in Section 45 shall apply to the following transfers:- (i) (ii) Any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons; (iii) .. . 5) Mr. Pardiwala, the learned Senior Advocate appearing as an amicus curie submits that any amount paid to a partner as his share on dissolution of the partnership firm cannot be regarded as transfer not only in view of the clear mandate of Section 47(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son introduces his personal property as a capital in a partnership firm. The basis of the above was that on introduction of property into the firm there is a reduction in the exclusive interest which an individual had over the property as it is reduced to a joint or shared interest with other partners and therefore to that extent there would a transfer of property. However, the consideration for the same according to the Court could not be evaluated immediately as the interest of the partner is subject to the future transactions of the partnership and the evaluation of the partners interest can only take place upon the dissolution of the firm and/or retirement of the partner from the firm. The Supreme Court inter alia observed as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of his share in the net assets of the partnership which remain after meeting the debts and liabilities. An amount paid to a partner upon retirement, after taking accounts and upon deduction of liabilities does not involve an element of transfer within the meaning of S.2(47) . 9) The aforesaid decisions will apply with greater force in respect of any sum received by a partner on dissolution of a firm as the same is specifically covered by Section 47(ii) of the Income Tax Act, 1961 as existing during the Assessment Year 1978-79. Therefore the question is answered in the affirmative i.e. in favour of the Assessee and against the Revenue. 10) We would like to place on record our appreciation of the assistance rendered to us by Mr. Perc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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