TMI Blog1983 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 12-11-1971. It was a partnership at will. Some disputes arose between the assessee and his son on the one hand and the other partners on the other hand and on 10-8-1974, a notice of dissolution of the partnership with effect from 16-8-1974 was issued to the other seven partners on behalf of the assessee and his son. On the failure of the said partners to dissolve the partnership, the assessee and his son instituted on 30-9-1974 a suit being No. 924 of 1974 in the ordinary original jurisdiction of the Bombay High Court for a declaration that the partnership stood dissolved with effect from 16-8-1974 and other consequential reliefs. In the meantime, one of the partners, Mavji Ambaram Kathrani died on 23-9-1974. By a consent order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in respect of raw materials, land and building, machinery and furniture and motor vehicles belonging to the firm ......". This view of the ITO was upheld by the IAC in the directions given under section 144B(4) of the Act. Accordingly, he disallowed the assessee's claim in respect of these amounts. 3. An appeal was preferred against this decision. The Commissioner (Appeals) held that " there was only a retirement of the appellant and Shri Dilip Jadavji Kathrani from the partnership firm of Asian Chemical Works ". He was of the opinion that there was a gain to the extent of Rs. 95,950 as a result of transfer of capital asset. He, however, directed the ITO to bring this amount to tax as long-term capital gain. He did not discuss the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the assessee and his son Dilip Kathrani from the partnership firm and there was no dissolution of the firm as contended by the assessee. In support of this contention, be referred to para 10 of the partnership deed, dated 12-11-1971 and argued that the notice dated 10-8-1974 was a notice for retirement in accordance with the provision of this para in the partnership deed. In support of his contention he also relied upon the cases in CIT v. Tribhuvandas G. Patel [1978] 115 ITR 95 (Bom.) and CIT v. H.R. Aslot [1978] 115 ITR 255 (Bom.). He contended that according to the notice dated 10-8-1974, the retirement was to take effect from 16-8-1974 but was postponed to 23-9-1974 for the convenience of the parties. All these contentions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said partnership business and . . . . ." and contended that this goes to show that there was retirement of the assessee and his son from the partnership firm. We are unable to accept this view because in para 14 of the decision of the mediators, it was clearly stated that " the partnership accounts had been made up, adjusted and settled between the parties hereto up to the date hereof ". The operative part of this indenture dated 31-3-1977 states (at page 5) " NOW, THIS INDENTURE WITNESSETH : that in pursuance of the aforesaid decision of the mediators the said partnership existing between the parties hereto stands dissolved as and from 23-9-1974 ". So the Commissioner (Appeals) should have come to the conclusion that there was dissolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the capital assets and that is why he held that the amount received by the appellant would be taxable as capital gain. In the case reported in CIT v. Bankey Lal Vaidya [1971] 79 ITR 594 the Supreme Court categorically stated that : " In the course of dissolution, the assets of a firm may be valued and the assets divided between the partners according to their respective shares by allotting the individual assets or paying the money value equivalent thereof. This is a recognised method of making up the accounts of a dissolved firm. In that case the receipt of money by a partner is nothing but a receipt of his share in the distributed assets of the firm." So, there cannot be any doubt that what the assessee received under the three ..... X X X X Extracts X X X X X X X X Extracts X X X X
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