Transfer of machinery on alleged dissolution treated as a sale where the factual record did not support dissolution.

Transfer of machinery from a firm to a partner was not accepted as a transfer on dissolution where the record showed no dissolution agreement at the relevant time, no contemporaneous disclosure of stock transfer, the partner was already carrying on the same business at the same address, and the assessee's own statement did not support the claim. The Tribunal failed to examine or dislodge these factual findings before rejecting the Revenue's appeal. The transaction was therefore treated as a sale rather than a dissolution-related transfer, and the Revenue's position prevailed.

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Issues: Whether the transfer of machinery from the firm to one of its partners was a sale or merely a transfer of assets on dissolution of the firm.

Analysis: The Tribunal accepted the assessee's case that the machinery had been transferred on dissolution and, on that basis, treated the transaction as not amounting to a sale. The assessment record, however, showed that there was no dissolution agreement at the relevant time, no contemporaneous disclosure of any stock transfer, and the partner concerned was already carrying on business in the same commodity at the same address. The assessee's own statement during enquiry also did not support the claim of stock transfer. The Tribunal did not examine or dislodge these factual findings before rejecting the Revenue's appeal.

Conclusion: The transaction could not be accepted as a transfer on dissolution and the Tribunal's dismissal of the Revenue's appeal was unsustainable; the issue is answered in favour of the Revenue.

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