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TMI Blog1971 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... question it is necessary to refer briefly to the facts that gave rise to the same. Srinivasa Bus Service, Puttur, the respondent-assessee, was a registered firm of three partners carrying on business in bus transport. For the assessment year 1960-61, corresponding to the relevant accounting period ending with March 31, 1960, the assessment was completed on February 27, 1963, by the Income-tax Officer who determined its total income at Rs. 1,09,932. The firm was dissolved with effect from April 1, 1960. As per the terms of the dissolution of the firm, two vehicles belonging to it, viz., ADO. 840 and ADC. 854 were taken over by two partners of the firm and thereafter, run on their own account. At the time of the division the value of those t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal was preferred by the Income-tax Officer contending, inter alia, that the transaction in substance amounted to sale attracting the provisions of section 10(2)(vii) of the Act. Reliance was placed by the department in support of its plea on the decision of the Mysore High Court in Y.V. Srinivasamurthy v. Commissioner of Income-tax. However, the Tribunal, on a consideration of the facts and circumstances and relying upon the decision of the Madhya Pradesh High Court in Dewas Cine Corporation v. Commissioner of Income-tax, held that there was no sale so as to attract the provisions of section 10(2)(vii) of the Act and affirmed the decision of the Appellate Assistant Commissioner. Hence, this reference. Sri P. Rama Rao, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness or after the cessation thereof exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place." Though clause (vii) of sub-section (2) of section 10 provides for the deduction of the difference between the written down value and the sale price of any building, machinery or plant which has been sold or discarded or demolished or destroyed, from the business income chargeable under section 10(1), the second proviso empowers the Income-tax Officer to add so much of the sale price which is in excess of the written down value of such building, machinery or plant as the same shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceed the written down value of such building, machinery or plant. If the sale price exceeds the original cost of the building, machinery or plant, such excess amount could be charged as capital gains. True, as urged by the learned counsel for the revenue, the written down value on the date of the dissolution of the firm and the transfer of the two vehicles in question belonging to the assessee-firm to its two partners was nil. But the pertinent question that still falls for decision is whether there was a sale of the machinery, i.e., the two vehicles, by the firm to the partners in the instant case so as to attract the provisions of section 10(2)(vii), second proviso. The two motor vehicles in the instant case can no doubt be termed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property by the vendor called the seller and the purchaser, the vendee, for a price. Unless these ingredients of a valid sale are satisfied or established, it cannot be said that the transaction in question would amount to sale attracting the provisions of section 10(2)(vii) of the Act (Income-tax Act). In the present case as per the terms of the dissolution of the firm, two vehicles belonging to it were taken over by two partners of the firm and, thereafter, run on their own account. Under the law of partnership, each partner is the owner of the assets of the partnership. They are collectively entitled to the assets of the firm. Where the assets of the firm are divided amongst the partners at the time of the dissolution of the partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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