1955 (9) TMI 74

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....ax on this capital gain. The contention of the assessee was that its case fell within the third proviso to section 12B. This contention was rejected by the Tribunal and the matter comes before us on this reference. The third proviso would only apply if the transfer is made on the dissolution of a firm or other association of persons, and the transfer is in the nature of distribution of capital assets. It is difficult to accept the contention that when the receivers sold the partnership assets on the 10th of March, 1947, they were distributing capital assets to the partners on the dissolution of the partnership firm. It was only after the partnership assets had been sold that the question of distribution of these capital assets to the par....

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....and therefore the case falls under the third proviso, and he has relied for this purpose on section 48 of the Partnership Act. Sub-section (b) of that section provides: "The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner............................", and then the order is set out: payment of debts, payment of partnership dues to the partners for advances made by them by way of capital and so on; and Mr. Kotwal contends that in order to give effect to the provisions of this sub-section in the case of every dissolution the partnership assets have of necessity to be sold, and therefore the sale of the partnership assets is part of the dist....