Partnership asset allotment on dissolution is not a sale where no transfer between distinct parties exists.

Transfer of a motor car by a partnership firm to a partner on dissolution was held not to be a sale under the Bombay Sales Tax Act. The court reasoned that a firm is not a separate legal entity from its partners, partnership assets are jointly owned, and allotment of assets on dissolution is a mutual adjustment of rights rather than a transfer between distinct parties for money consideration. As the essential elements of sale were absent, the transaction did not attract sales tax. Authorities relied on by the Revenue were distinguished, and the principle that distribution on dissolution is not a sale was applied.

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Issues: Whether the transfer of a motor car by a partnership firm to one of its partners on dissolution constitutes a sale under Section 2(28) of the Bombay Sales Tax Act, 1959 and is liable to tax.

Analysis: The firm is not a distinct legal entity separate from its partners, and partnership assets are jointly owned by the partners. On dissolution, distribution or allotment of assets to a partner in satisfaction of his share is a mutual adjustment of rights and not an extinguishment of the firm's rights amounting to a transfer in the sense required by the definition of sale. A sale requires an agreement between distinct parties, money consideration, and passing of property as goods; those elements were not present where the car was allotted to a partner as part of the dissolution process. The authorities relied upon by the Revenue were distinguished on the facts, while the principle that allotment on dissolution is not a sale was accepted.

Conclusion: The transfer of the motor car to the partner on dissolution did not constitute a sale under Section 2(28) of the Bombay Sales Tax Act, 1959 and was not liable to tax.

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