1976 (9) TMI 14

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....he father, and Mohamed Abdul Khader, the son. The firm was constituted under a partnership deed dated September 28, 1950. The firm was carrying on the business of motor transport, plying buses and lorries. The vehicles together with their route permits stood in the name of Abdullah Rowther, the father. The total cost of the buses in the accounts of the firm as on March 31, 1962, was Rs. 2,17,821. The liabilities of the firm as on that date came to Rs. 4,21,337. Because of financial difficulties, the firm felt that it was advantageous to enter into a partnership with two other persons to carry on the business of plying the motor buses. A new firm has come into existence with four partners on October 1, 1962, under the name and style of Messr....

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....after the new firm came into existence. On appeal, the Appellate Assistant Commissioner dismissed the appeal holding that the partnership consisting of four partners could not be identified with the partnership consisting of two persons and that, therefore, they were two different entities. Relying on the decision of the Supreme Court in the case of Commissioner of Income-tax v. B. M. Kharwar [1969] 72 ITR 603, he held that the transaction was a transfer of certain assets by an assessable entity to another assessable entity for consideration and that the transfer was for a stated price in money's worth so that the transaction was a sale. On further appeal, the Appellate Tribunal allowed the assessee's appeal holding that there was no ....

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....d it was held that when a person banded over his property to a firm of partners consisting of himself and others there was no transfer of property so as to constitute a sale of goods. This judgment has also been followed in D. Kanniah Pillai v. Commissioner of Income-tax [1976] 104 ITR 520 (Mad), a decision to which one of us was a party. In view of these decisions it would follow that the assessment under section 41(2) of the Income-tax Act, 1961, with reference to the sum of Rs. 54,691 cannot stand. We have now to consider the question whether the sum of Rs. 2,00,000 treated as capital gains is assessable to tax under the provisions of section 45 of the Income-tax Act, 1961. This point also is concluded by the decision in D. Kanniah Pi....