TMI Blog1976 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets of the assessee firm on 14th April, 1972 (being the opening date of the year of account of the assessee for the period from 14th April, 1972 to 12th April, 1973). Entries were made in the books of accounts crediting the entire value of the workshop, office building, vacant sites etc. and debiting one third thereof to the partner's accounts as indicating transfer of the above properties by the firm to the partners. In making the return of income of the assessee firm for the assessment year 1973-74 (year ending 12th April, 1974) the assessee firm did not return any income from the immovable properties on the ground that they have been transferred to the accounts of the partners by appropriate journal entries and that the income therefrom had been admitted in their individual return. The Income-tax Officer, however, did not accept the assessee's contention, but held that the immovable properties continued to belong to the firm, since according to him immovable properties could not be transferred by mere book entries. He made consequential assessments of the income from property etc. 3. On appeal the AAC following the rulings of the Madras High Court referred to in his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs on the point and, therefore, no reliance can be placed thereon in the face of the Supreme Court rulings laying down the law as stated above. 6. We have carefully considered the rival submissions. The point that falls for determination in this appeal is whether the firm had relinquished its right of interest in the immovable properties under consideration in favour of the three partners of the firm. The ruling of the Allahabad High Court reported in 73 ITR 423, relied upon by the learned departmental representative, no doubt supports his stand. But on a consideration of the principles, enunciated by the Supreme Court in the rulings referred to by the AAC and relied upon by the learned counsel for the assessee before us, we are unable to agree with the departmental representative that the said decision would support his stand. In that case the firm of M/s. Ram Narain and Brothers of Lucknow comprised of seven partners and the firm was dealing in iron and hardware goods. The said firm was constituted under a deed of partnership dated 18th June, 1953. On 14th Oct., 1954 the firm purchased certain immovable property for a sum of Rs. 27,000. After the purchase, the income from thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above ruling of the Allahabad High Court in the face of the authoritative pronouncement of the Supreme Court in the following case which is discussed below. In Commissioner of Income Tax, West Bengal, Calcutta vs. Juggilal Kamalapat(3) the Supreme Court dealt with a case containing the following facts. Prior to the assessment year 1943-44 three brothers, viz. Sir Padumpat Singhania, Kamalpat Singhania and Lakshmipat Singhania, referred to as Singhania Brothers, were carrying on hosiery business in the name of the M/s. Juggilal Kamlapat. On 29th Nov., 1939 these three brothers executed a deed of partnership by which one Jhabbarmal Saraf was taken in as a partner and under this deed all the four partners had equal shares. On 27th Oct., 1941 the three brothers executed a trust deed known as the Kamla Town Trust. Under this deed the three brothers became the first trustees on 2nd Dec., 1942, a deed of relinquishment was executed by the three brothers, relinquising their rights and claims to all the properties and assets of the firm. Juggilal Kamalapat, in favour of Jhabbarmal Saraf and of themselves in the capacity of the three first trustees of the Kamala Town Trust. On 1st Dec., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of s. 17(1) of the Registration Act, 1908. The Court upheld the view of the full Bench of the Andhra Pradesh High Court in Addanki Narayanappa vs. Bhaskara Krishnappa(2), Madholkar, J. speaking for this Court held: "It seems to us that looking to the scheme of the Indian Act, no other view can reasonably be taken. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done, whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership the person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated, his right during the subsistence of the partnership is to get his share of profits from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may also mention that the Madras High Court in the case of R.M. Ramanathan Chettiar and Another vs. Controller of Estate Duty, Madras(6) has decided the question whether the share of a partner in a firm, which owned immovable properties, is movable property or not. At page 413 their Lordships observed as under:— "The question, whether the share of a partner in a partnership firm, which owned, among its assets, immovable properties, can be treated as movable property was considered by us in Writ Petition No. 1477 of 1968, P.L. VRM. Ramaswamy Chettiar vs. Assistant Controller of Estate Duty(7), wherein after considering decisions on the point, we held as follows:— "From the above decisions, it appears to be well settled that the share of a deceased in a partnership is a movable property, even though the firm owned immovable properties. R. 8 merely sets out the principles of general law regarding the situs of movable property, and R. 9 likewise sets out the situs of immovable property and these Rules also accord with the general law relating to the fixation of situs of movable and immovable properties. We do not, therefore, find in R. 7 to 9 any departure from the principles o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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