TaxTMI 
TaxTMI 
1968 (6) TMI 6
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....ither party by notice of a specified period. The net profits and losses of the partnership were to be divided or borne by the partners in the proportion of 9 annas and 7 annas in the rupee as between the assessee and the other partner respectively. Each partner was to contribute a sum of Rs. 4,000 towards initial capital of the firm. Any additional capital needed for the purposes of the partnership business was to be contributed equally by the parties. The three lorries were brought into the assets of the firm and the clause in the partnership deed relating to it reads: "The capital account of the party of the first part shall be credited with a further sum of Rs. 15,000 being the agreed value of the three lorries handed over to the partnership business by the party of the first part on the 1st day of April, 1959." In the accounts of the firm, the assessee's capital account was credited with a sum of Rs. 15,000 and the lorry purchase account was debited with a similar amount. It will be seen that there was thus a difference of Rs. 12,442 between the value at which the lorries have been taken over by the firm and their written down value. This sum of Rs. 12,442 was treated as ....
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....making over the lorries to the firm. The lorries are transferred or handed over at the commencement of the firm's business, though the contract of partnership has been entered into on a subsequent date. The preamble to the partnership deed recites, and this has been noticed in the statement of the case, that the partnership has been thought of because of the indifferent health of the assessee and his inability to attend to the business. That was the reason why, while the assessee wanted to continue the business, he sought the assistance of the other partner in achieving that object. No doubt, a partnership is treated as an entity for certain purposes, as for instance by the Income-tax Act for purposes of assessment of firms of partnership or the Code of Civil Procedure for purposes of procedural matters or the law merchant. But barring the exceptional cases of limited recognition of a firm of partnership as an entity, the normal position in law of a firm is that it is not a legal entity, unlike an incorporated company. A firm is but a convenient and compendious name given to a contractual relationship in which two or more persons combine their efforts and conjointly apply the same ....
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....ns, in substance and fact and in a commercial sense there was no sale but there was only a readjustment for the purpose of carrying on the business in another form. On that view, they held that the charge could not be sustained. The learned judges derived support from Rogers and Company v. Commissioner of Income-tax for the view they took. We find that Liquidators of Pursa Ltd. v. Commissioner of Income-tax shares the view. The Patna High Court in Maharaiadhiraj Sri Kameshwar Singh v. Commissioner of Income-tax has struck a different note and took the view that in such a case the corporate personality cannot be allowed to be pierced so as to allow the identification of the individual with the company, in order to promote his own benefit or advantage. But we are inclined to think that the assessee, having regard to the circumstances in which he entered into the partnership, did not intend a transfer of the lorries with a view to completely divest himself of his interest therein. Whatever may be the position when an association of persons converts itself into an incorporated company, in the case of one or more persons forming a firm of partnership, the question of transfer does not m....
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....e assessee actually getting in his hands the sum of Rs. 15,000. But we need not base our conclusion on this reasoning. Apart from the foregoing, there are other weighty reasons for concurring with the view of the Tribunal. Section 14 of the Indian Partnership Act shows the different process or methods by which a firm of partnership may come to possess property. The section says " the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm or acquired, by purchase or otherwise, by or for the firm. " This is, of course, subject to the contract between the partners. When a partnership is formed for the first time and one of the members of the partnership brings into the firm assets, they become the property of the firm, not by any transfer, but by the very intention of the parties evinced in the agreement between them to treat such property belonging to one or more of the members of the partnership as that of the firm. This view receives support from Firm Ram Sahay v. Bishwanath , Prem Raj Brahmin v. Bhani Ram Brahmin and Commissioner of Income-tax v. Dewas Cine Corporation. In the last of these cases, the Supreme C....