1982 (1) TMI 36

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e into existence with effect from April 27, 1966 ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the transaction between the old firm and the new firm involving the assets of the old firm does not carry the normal elements of sale in terms of the definition of sale under the Sale of Goods Act ? " The reference relates to the assessment year 1966-67 of a registered firm, M/s. Ramchand Daryanomal, which was constituted on 8th May, 1954. The firm consisted of seven partners. Two partners, namely, Daryanomal and Ammalmal, retired on 27th April, 1966, and a deed of dissolution was executed on the same date. The remaining five partners took a new partner, Thakurdas, and ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... firm because of the specific provision contained in sub-s. (2)(a) of that section (Vimal & Amar Talkies v. CIT-(MCC No. 335/75, decided on 30th September, 1981 [1982] 138 ITR 660 (M.P.)). Coming to the main question whether the transfer of assets and liabilities of the assessee-firm to the new firm constituted sale within the meaning of s. 41(2), it has to be kept in mind that a firm is not a legal entity, under the law, different from its partners and what is called the property of the firm is the property belonging to the partners collectively and what are called the debts and liabilities of the firm are their debts and liabilities: (see Lindley on Partnership, 12th Edn., p. 28, quoted with approval in CIT v. R. M. Chidambaram Pillai ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e partners who were also partners of the assessee-firm. As sale postulates a transfer of property from one person to another, there was no sale of the truck and the factory in these circumstances. The view taken by us is supported by a decision of the Madras High Court in CIT v. Abdul Khader Motor and Lorry Service [1978] 112 ITR 360 (Mad). In that case the firm consisted of two persons. Thereafter, it was reconstituted by taking two more persons as partners. The buses belonging to the old firm were transferred to the new firm and the question was whether there was any sale within the meaning of s. 41(2) of the Act. The Madras High Court answered this question in the negative. The learned standing counsel relied upon Chittoor Transport Co. ....