TMI Blog1971 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... SHAH C.J.-- The respondent, who is the karta of a Hindu undivided family, entered on behalf of the family into a partnership with one Devi Sharan Garg to carry on the business of manufacturing and selling pharmaceutical products and literature relating thereto. On July 27,1946, the partnership was dissolved. The assets of the firm which included goodwill, machinery, furniture, medicines, library and copyright in respect of certain publications were valued at the date of dissolution at ₹ 2,50,000. The respondent was paid a sum of ₹ 1,25,000 in lieu of his share and the business together with the goodwill was taken over by Devi Sharan Garg. In proceedings for assessment of the respondent for the year 1947-48, the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xchange or transfer of the capital assets ;.... Liability to pay capital gains arises under section 12B(1) if there be a sale, exchange or transfer of capital assets. There was no sale or exchange of his share in the capital assets of the firm by the respondent to Shri Devi Sharan Garg. Nor did he transfer his share in the capital assets. The assets of the firm included the goodwill, machinery, furniture, medicines, library and the copyright in respect of certain publications. A large majority of the assets were incapable of physical division, and the partners agreed that the assets be taken over by Devi Sharan Garg at a valuation, and the respondent be paid his share of the value in money. Such an arrangement, in our judgment, amounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities fell within the purview of the third proviso to section 12B(1), it could not be treated as a sale of capital assets within the meaning of section 12B(1), was rejected by this court. This court observed that the object of the third proviso to section 12B(1), in providing that any distribution of capital assets under a will shall not be treated as sale, exchange or transfer of capital assets for the purpose of section 12B was that as long as there was distribution of capital assets in specie and no sale, there was no transfer for the purposes of that section, but if there was a sale of the capital assets and profits or gains arose therefrom, the liability to tax arose, whether the sale was by the administrator or executor or a leg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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