TMI Blog1994 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... the capacity of co-owners in the same ratio in which they shared the profits and gains from the business of the firm without going through the requirement of section 17(1)(b) of the Registration Act?" The brief facts of the case are that the assessee is a partnership firm and had 17 partners. The firm had nine godowns and it was decided by the partners that the godowns should no longer be part of the assets of the firm but should be owned by the respective partners in the same ratio in which they shared the profits and gains from the business transacted by the firm. The partners decided to close down the letting out of godowns which was done by means of a partial dissolution deed dated January 31, 1979. The godowns were let out by the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions, the appeal was dismissed. In the second appeal before the Income-tax Appellate Tribunal, the provisions of sections 14 and 15 of the Indian Partnership Act were taken into consideration where the property of the firm has been defined. The decision of this court in the case of CIT v. Amber Corporation [1981] 127 ITR 29 was relied upon. That was a case where property contributed by the partners was immovable property of which all the right, title and interest was brought into the common stock as their contribution to the common business as partnership property. It was held that no registration is necessary for transferring the property to the partnership. In the present case, the property of the firm has been given to the partners thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have an interest in the property or asset of the firm, but during its subsistence no partner can deal with any portion of the property as belonging to him, nor can he assign his interest in any specific item thereof to any one. By virtue of the implied authority conferred as agent of the firm his action would bind the firm if it is done to carry on, in the usual way, the business of the kind carried on by the firm, but the act or instrument by which the firm is sought to be bound must be done or executed in the firm name or in any other manner expressing or implying an intention to bind the firm. His right is merely to obtain such profits, if any, as may fall to his share upon the dissolution of the firm which remain after satisfying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners in the proportion in which they were entitled to a share in the profits of the firm. So viewed, it becomes obvious that the residue would, in the eye of law, be movable property, i.e., cash, and hence, distribution of the residue among the partners in proportion to their shares in the profits would not attract section 17 of the Registration Act. Viewed from another angle, it must be realised that since a partnership is not a legal entity but is only a compendious name and each and every partner has a beneficial interest in the property of the firm even though he cannot lay a claim on any earmarked portion thereof as the same cannot be predicated. Therefore, when any property is allocated to him from the residue, it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dissolution of a partnership takes place and the residue is distributed among the partners after settlement of accounts there is no partition, transfer or extinguishment of interest attracting section 17 of the Registration Act." From the above elucidation of law propounded by the apex court it is clear that the property which has come to the share of the partners on the dissolution of the firm does not require registration under section 17 of the Registration Act. The dissolution deed dated January 31, 1979, has the effect of divesting the firm of the property to the partners as co-owners. The question is whether there can be a partial dissolution of the firm. It has been provided under Chapter VI of the Partnership Act as to how a fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm by purchase or otherwise. All such properties have to be treated to be the properties of the firm, but this is subject to the contract between the partners. This section contemplates that there could be a contract contrary to the general proposition with regard to the property of the firm. A contract could be entered into between the partners with regard to the property of the firm. The observations of the apex court in the case of S. V. Chandra Pandian [1995] 212 ITR 592 also contemplate that regardless of its character the property brought into the stock of the firm or acquired by the firm during its subsistence for the purposes and in the course of the business of the firm shall be considered to be the property of the firm unle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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