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TMI Blog1991 (12) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. A trial balance as on 6-11-1979 was also filed containing the list of outstanding owed by the firm and owed to the firm besides certain sundry items. The assessee had shown a sum of Rs. 71,390 (gross) under the head capital gains and after deduction available under section 80T, a net capital gains of Rs. 49,792 was admitted. This was sought to be set off against the brought forward business loss which, according to the assessee's accounts amounted to Rs. 56,264. The capital gains reported by the assessee was ascertained as under : Sale value of the lodge building with premises. Rs. 8,00,000 Less: 1. Book value of the building account. Rs. 6,91,413 2. Electrical fittings (WDV + addition of Rs. 500). Rs. 7,909 3. Bed and bed sheet account (WDV of Rs. 13,271+ additions during the year). Rs. 21,879 4. Furniture. Rs. 7,409. ------------------- Rs. 7,28,610 ------------------- Capital gains. Rs. 71,390 ------------------- The Income-tax Officer determined the cost of the assets sold at Rs. 8,75,360 consisting of the written down value of Rs. 7,21,201 and the amount allowed for depreciation in a sum of Rs. 1,54,159. Thus, the ITO concluded that there was only a capital loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-76.] There were certain disallowances in a small sum of Rs. 2,000 and Rs. 1,000 and for want of proof, the disallowances were confirmed. 4. The ITO had added a sum of Rs. 7,000 towards omission of rent and the assessee agreed to reconcile the rent account before the AAC but did not furnish the details as a result of which the addition was also confirmed by the AAC. In the result, the assessee did not succeed before the first appellate authority. It is, therefore, on second appeal before us. 5. Shri George K. George, the learned counsel for the assessee submitted that it was a slump sale; besides it was the sale of business as a whole. Therefore, the surplus is not taxable. The assessee has not sold the assets but the partners individually sold the same. No price was fixed individually for the assets sold. Firstly, one of the partners had sold his interest and the value of that interest cannot be ascertained. Secondly, the other partner had released his right in favour of the very same party to whom the first partner had conveyed his interest. This was in respect of his share of interest. Therefore, there was no sale by the firm. Even if it is held that there was sale by the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it cannot be described as a slump sale. The assessee has been allowed depreciation on the book cost of Rs. 7,28,610. The assessee has realised Rs. 8 lakhs. So, it is only a question of mere arithmatics to find out the profit on the sale of such assets. Even if it is held that the consideration cannot be vivisected, there can be a general profit on the sale of all assets and such profits can be held to be taxable. Therefore, it is taxable atleast under the head capital gains invoking the provisions of Section 51 of the IT Act. He also relied on the decision of the Tribunal in the case of Sreehari Lodge for the proposition that the transfer of assets in similar circumstances would amount to transfer of assets by the firm and not by the partners in their individual capacity. Referring to the entries in the books and also the fact that after the sale of such assets a number of items remained with the firm, he submitted that it cannot be held that it was a case of sale of business as a whole. Thus, he defended the orders of the revenue authorities. 7. Having heard rival submissions, we uphold the order of the AAC though for different reasons. This is a case of a partnership firm c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have any specific portion of interest in any particular asset of the firm though he has an interest to the extent of his share in all the assets of the firm. Such being the case, we hold that the sale deed dated 10-10-1979 effected by Shri Kaladharan cannot have the effect of alienating the properties belonging to the firm as mentioned in the schedule. 8. It is settled law that even if the strangers acquire title under a valid deed of transfer or assignment of the interest of a partner in the partnership firm, they cannot become partners themselves in the firm unless they are specifically admitted into the firm as partners by the consent of the other partners. The effect of an assignment or transfer of his interest in the firm's property by a partner has been laid down under the English Law of Partnership by Underhill, 10th Edition, pages 100 and 101 as follows : "...... The answer is, that without the consent of all the partners (unless there be some express stipulation in the partnership deed), a partner cannot transfer his share in the partnership so as to place another person in his shoes with all the rights of a partner. Partnership is founded on personal confidence, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is considered that by the impugned sale deed Shri Kaladharan had in effect transferred his interest in the partnership firm in favour of the strangers, inasmuch as the partnership consisted of only two partners, the partnership should be deemed to have been dissolved, the strangers having not been specifically admitted as partners. 10. In either case, dissolution had taken place within the previous year ending on 31-3-1980 which is the previous year relevant to the assessment year 1980-81. It is the contention of the assessee that the business as a whole was transferred and, therefore, neither capital gains nor the profit under section 41(2) would arise for consideration. We do not accept such a proposition. On a careful scrutiny of the sale deed dated 10-10-1979 and the surrender deed dated 5-11-1979 what was transferred was only the assets such as buildings, electrical fittings, sanitary fittings etc. belonging to the firm, in addition to lands the ownership of which is not clear. If a business as a whole is transferred, nothing prevented the assessee from transferring all the assets and liabilities with the right to the transferee to carry on the business either in the same nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of dissolution. Under section 189 of the Income-tax Act, 1961, where any business or profession carried on by a firm has been discontinued or where a firm is dissolved the Income-tax Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place and by section 2(24)(v) of the Act, income will include any sum chargeable to income-tax under section 41 also. "
Therefore, we hold that the dissolution had taken place during the previous year but still the firm can be assessed in respect of the profits arising in the course of its winding up. That is what has been done in this case. The revenue's contention is also supported by the decision of the Tribunal in the case of Sreehari Lodge.
13. Though the assessee would appear to be aggrieved with the addition of Rs. 7,000 towards rent and the disallowances of Rs. 4,000 we do not find any specific ground of appeal on the above and, therefore, we decline to entertain the plea of the advocate to consider the issues.
14. In the result, the appeal is dismissed X X X X Extracts X X X X X X X X Extracts X X X X
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