TaxTMI 
TaxTMI 
2010 (5) TMI 764
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....tnership firm engaged in the business of buying and selling yarn. The said partnership firm was dissolved on 29.12.1989. At the time of dissolution, all three partners executed a Dissolution Deed. The said firm was assessed for the period from 01.04.1989 to 29.12.1989 by the Sales Tax Officer by an order of assessment dated 15.03.1993. The Sales Tax Officer held that there was sale of car from the firm to its partner and taxed the transaction by raising a demand of Rs.28,040/­ including interest charged under Section 36(3)(b) of the Bombay Sales Tax Act, 1959 (in short "the BST Act, 1959"). 4. Against the aforesaid order of assessment dated 15.03.1993, the Applicant-Assessee filed first appeal before the Assistant Commissioner of Sales Tax (Appeals), P­III, Mumbai who vide order dated 18.07.1994 partly allowed the said first appeal and redetermined the sale price of car at Rs.70,000/­ in place of Rs. 1,06,935/­ and determined the tax payable at Rs.10,190/­ to which interest of Rs.8,500/­ was added and the final amount of Rs. 18,690/­ was demanded in place of Rs.28,040/­. 5. Being aggrieved by the order dated 18.07.1994, the Applicant-Assessee p....
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....sioner. 8. The said Second Appeal No. 591/1995 was decided by the 3rd Bench of the Tribunal vide judgment dated 07.03.1998 holding that there was no apparent mistake in the order passed by the Assistant Commissioner (Appeals) on rectification application. The Tribunal held that the original order in first appeal passed by the lower Appellate Authority dated 18.07.1994 will hold the field and, therefore, confirmed the tax on motorcar at Rs. 10,500/­ and consequential interest under Section 36(3)(b) of the BST Act, 1959 at Rs. 8,190/­. 9. Being aggrieved by the order dated 07.03.1998, the Applicant/Assessee filed Reference Application No.34/1998 before the 4th Bench of the Maharashtra Sales Tax Tribunal, Mumbai under Section 61(1) of the BST Act, 1959 and the Tribunal vide its judgment dated 27.09.2002 referred the above mentioned question of law for the opinion of this Court. DEFINITION OF SALE 10. Before considering the submissions of the parties, it is necessary to reproduce the definition of "sale" as appears under Section 2(28) of the BST Act, 1959 which reads thus:­ ""sale" means a sale of goods made within the State for cash or deferred payment....
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....He further submitted that the Tribunal has erred in rejecting the contention of the Applicant that there was no sale because the firm and partners are one and same entity. He further submitted that the Applicant had placed on record the judgment in case of Commissioner of Sales Tax, M.P. vs. Khurana & Co. (46 STC 39(MP)) on an identical question of law, but the Tribunal distinguished the same by observing that it is no where stated before the Assistant Commissioner (Appeals) that Mr. Parekh was retiring and car was allotted to him in satisfaction of his claim. 12. Mr. Surte further submitted that in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course pre­supposes capacity to contract, that it must be supported by money consideration and that as a result of the transactions, the property must actually pass in goods for consideration of money. In the present case, the Mr. Parekh received the car in consideration as a partner of the firm. In support of this submission, Mr. Surte relied on the judgment in the matter of Commissioner of Income Tax, U.P. Vs. Bankey Lal Vaidya....
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....he asset (car) was valued at Rs. 70,000/­ and transferred to one partner Mr. Kamlesh Parekh by debiting his account for Rs. 70,000/­ by way of sale and his personal account was also credited by depositing the money from the Bank. Mr. Sonpal further submitted that in the profit and loss account, interest received was shown as Rs. 11,103/­, moreover the profit by sale of car was shown at Rs. 28,350/­. After considering the expenses made for the period of assessment, the net profit of Rs. 4,067/­ was transferred to each partners capital account. Thus, the profit received from the sale of car was distributed amongst the partners. He, therefore, submitted that this itself shows that there was transaction of sale and purchase and therefore, the provisions of the BST Act, 1959 are applicable in the present case. 16. Mr. Sonpal further submitted that the firm and partners are two different legal entities and there can be a sale by firm to its partner. In support of this submission, he relied on the judgment in case of State of Gujarat Vs. Patel Oil Mills reported in 91 STC 25 (Guj.) in which the Gujarat High Court held that under the Indian Partnership Act or under a....
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....red in the name of one of its partners in lieu of his share in the partnership firm in the proximity of the process of dissolution of the firm. 23. Whatever may be the character of the property which is brought in the partnership when the partnership is formed or which may be acquired in the course of business of the partnership, it becomes the property of the partnership firm and what a partner is entitled is his share of profit if any accrued from the partnership from the realization of the said property and upon dissolution of the partnership, his share in the money representing the value of property. Therefore, whenever there is dissolution of the partnership firm each partner gets his share in the profit and loss as well as in the property of the firm. 24. Whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever brought in the partnership would cease to be exclusive property of a person who brought the property in partnership. It would be trading assets of the partnership in which all the partners would have interest in proportion to their sha....