TMI Blog1991 (12) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Syndicate Bank Ltd. The AAC distinguished the facts of the assessee's case from those in the decision of the Karnataka High Court and preferred to follow the decision of the Cochin Bench of the Tribunal in the case of Sreehari Lodge [IT Appeal No. 126 (Coch.) of 1982 for the assessment year 1975-76.] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the AAC was justified in holding that it was sale of assets by the firm. The assessee's contention that it was a slump sale and the consideration that was received was a composite consideration should not be accepted. The written down value of the assets sold was far less than the sale consideration and, therefore, 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 num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a partner can be ascertained only when an account is taken out of all the assets and liabilities, say for instance, in the event of dissolution of the firm. Till then all that a partner can say is that he has an interest in the whole of the partnership property to the extent of his share. In other words, he does not 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 : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1979. Atleast at that point of time the partnership had come to an end and the firm stood dissolved by the act of the partners. It is only at that point of time the properties of the firm stood legally transferred to and in favour of the strangers. Thus, it is a sale of assets by the firm. (2) On the other hand, if it 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, elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1990] 181 ITR 476, held as per head notes as follows : " Section 47 of the Indian Partnership Act, 1932, says that on the dissolution of a firm, the authority of each partner to bind the firm, and the other mutual rights and obligation of the partners, continue notwithstanding the dissolution, so far as may be necessary 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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