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Issues: Whether, on dissolution of a partnership firm, the taking over of stock by one or more partners in adjustment of their share in the partnership assets constitutes a sale liable to sales tax and penalty.
Analysis: Dissolution of a firm ends the mutual agency between the partners, and the subsequent accounting is only a process of winding up and adjustment of rights in the surplus assets. Under the law of partnership, the property of the firm is to be applied in discharge of liabilities and the balance distributed according to the partners' rights. Where stock is allotted to a partner in lieu of his share on dissolution, the transaction is one of division and adjustment of partnership assets and not a transfer of property for money consideration. Such a transaction does not answer the ordinary legal meaning of a sale.
Conclusion: The taking over of stock by partners on dissolution did not constitute a sale and could not be brought to sales tax or support penalty.
Final Conclusion: The turnover arising from the dissolution adjustment was not taxable as sales turnover, and the related penalty also failed.
Ratio Decidendi: Distribution or allotment of partnership assets on dissolution in adjustment of partners' shares, without money consideration, is not a sale within sales tax law.
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