TMI Blog1964 (3) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, the partnership was dissolved, and the business was taken over by the other partner as his sole proprietary business. The assessee was assessed by the Income-tax Officer for the assessment year 1947-48 (the relevant accounting period being the calendar year 1946) and was assessed to tax on capital gains under section 12B in respect of the gains upon the value of its karta's share in the assets of the firm. The assets of the firm, which included its goodwill, machineries, furniture, medicines as well as a library and the copyright in respect of certain publications were valued at ₹ 2,50,000 as on the date of dissolution. The Income-tax Officer estimated the valuation of the stock-in-trade, stores and raw materials at ₹ 80, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to the benefit of the third proviso to section 12B(1) because what the assessee received was a distribution of capital assets on the dissolution of the firm and by reason of the proviso this distribution could not be treated as a sale, exchange or transfer of capital assets, and that being so, the case did not fall within the mischief of section 12B(1). For the Commissioner, it is urged that the assessee did not receive a share in the assets of the firm but in lieu of that share received money value therefor. It is contended that, in order that the proviso should apply, the assessee should have received its share of the assets in specie, and that the proviso can apply when the distribution of the firm's assets is made in specie. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the partners. In all these cases it is not possible to conceive that the law contemplated distribution of the assets by physical division of the property. In the case of distribution of the assets of a firm upon its dissolution, it is a recognised mode of distributing the assets that one partner may be given the assets of the firm while the other receives its money value. In the absence of a clause in the partnership deed providing for the method of winding-up, or where effect cannot be given to the method prescribed, and failing an agreement between the partners, it is well established that the assets may be put to sale and the sale proceeds then divided between the partners. In either case, the receipt of money by a partner is nothing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty into money; and this money, after payment of the partnership debts, must be divided amongst the partners in the shares in which they may be entitled to it. Agreement for fair division. An agreement that on a dissolution the partnership property shall be fairly and equally divided, after payment of its debts, has been held to mean that the property shall be sold, and that the money produced by the sale shall be divided after the debts have been paid. Even if the agreement be for the division of the partnership property in specie, the court may order a sale if that appears to be most beneficial to the parties . It, therefore, appears to us that when it was agreed that the assessee would receive the value in money of its share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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