Partnership asset transfer by journal entries held valid without registration where partners' interest is movable property.

A partner's interest in partnership assets is treated as movable property, so relinquishment or transfer of that interest does not require registration merely because the firm's assets include immovable property. On that principle, journal entries crediting the value of partnership assets to the partners' accounts could validly extinguish the firm's interest and vest the assets in the partners without a registered conveyance. As a result, the transfer was effective, and income from the immovable properties was not assessable in the firm's hands after the transfer.

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Issues: Whether the firm's immovable properties could validly stand transferred to the partners by journal entries without a registered instrument, and whether the partners' interest in the partnership assets, though including immovable property, was movable property not requiring registration.

Analysis: The transfer was effected by crediting the value of the partnership assets and debiting the partners' accounts. The ruling in the later case relied on by the Revenue was not followed because the binding Supreme Court authority held that a partner's interest in partnership assets is a movable interest and that a deed relinquishing such interest does not require registration merely because the firm's assets include immovable property. On that principle, the extinguishment of the firm's interest and the vesting of the assets in the partners could be validly brought about without a registered conveyance.

Conclusion: The transfer in favour of the partners was valid without registration, and the Revenue's challenge failed.

Final Conclusion: The income from the immovable properties was not assessable in the firm's hands after the transfer, and the departmental appeal was rejected.

Ratio Decidendi: A partner's interest in partnership assets is movable property, and a deed or entry effecting relinquishment of that interest does not require registration merely because the partnership assets include immovable property.

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