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Issues: Whether money received by a partner on dissolution of a firm, in lieu of his share in the firm's capital assets, is exempt under section 47(ii) of the Income-tax Act, 1961.
Analysis: The assessment year was 1963-64 and the firm stood dissolved on 31 March 1963. On dissolution, the assessee received money representing his share in the firm's assets. The statutory exemption under section 47(ii) applies to any distribution of capital assets on the dissolution of a firm. A distribution in money in lieu of the partner's share in capital assets is treated as part of such distribution when it represents the partner's entitlement on dissolution.
Conclusion: The amount received by the assessee was covered by section 47(ii) and was not taxable as capital gains. The answer to the reference was therefore in the affirmative, in favour of the assessee and against the revenue.
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