TMI Blog1995 (7) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 27(1) of the Act, in these cases : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in upholding the inclusion of the entire value of the immovable property of the firm in the hands of the assessee ? " The facts giving rise to these reference cases may briefly be referred to here. The assessee is a partner in the firm, viz., 3 Aces, Abids Road, Hyderabad. The said firm had originally two partners, the petitioner and his brother, one Shri Jagatram Ahuja. The assessee purchased the share and interest of his brother with effect from April 1, 1971, and thus became the absolute owner of the said property. On January 4, 1972, he converted the said property into a partnership property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Tribunal did not record a finding on relevant questions of fact and, therefore, the Tribunal has to be directed to record a finding on all the relevant aspects of the case. On the other hand, learned standing counsel for the Revenue submits that rule 2 of the Rules has been properly invoked by the authority and the net wealth was correctly determined and, therefore, the order of the Tribunal cannot be found fault with. Inasmuch as the entire case rests on an interpretation of rule 2 of the Rules, it would be useful to extract that rule here : " 2. (1) The value of the interest of a person in a firm of which he is a partner or an association of persons of which he is a member, shall be determined in the manner provided therein. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h among the partners or members : (a) in accordance with the agreement of the partnership or association for the distribution of the assets in the event of dissolution of the firm or association ; or (b) in the absence of any such agreement, in the proportion in which the partners are entitled to share the profits. The sum total of the amounts so allocated, would be the value of interest of each of the partners or members. We shall explain the operation of the rule by the following example suppose the net wealth of the firm or association of persons, consisting four persons, A, B, C and D, is Rs. 30 lakhs and its capital is Rs. 20 lakhs. Out of the said amount of net wealth, an amount of Rs. 20 lakhs will have to be allocated among the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have the first option to take over the assets at the book values on the date of dissolution and/or distribution of assets. If the first party does not exercise his option to take over the assets of the partnership firm, it may then be open to all or any of the other parties to take over the assets of the partnership and not otherwise." A plain reading of the above clause shows that it is in two parts. The first part makes it clear that in the event of the dissolution of the firm or distribution among the partners, of the assets of the partnership firm including the building in question, the assessee has the first option to take over the assets at the book value on the date of dissolution or distribution of the assets ; the second part d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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