Gujarat High Court
Manthan Corporation ( A Registered ... vs State Of Gujarat on 26 August, 2019
Author: A.Y. Kogje
Bench: A.Y. Kogje
C/SCA/12958/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12958 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE A.Y. KOGJE Sd/-
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1 Whether Reporters of Local Papers may be allowed to No
see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
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MANTHAN CORPORATION ( A REGISTERED PARTNERSHIP FIRM )
Versus
STATE OF GUJARAT & 2 other(s)
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Appearance:
MR HASIT DAVE(1321) for the Petitioner
MR MEET THAKKAR, AGP for the Respondents
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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 26/08/2019
ORAL JUDGMENT
1. RULE. Learned AGP Mr.Meet Thakkar waives service of Rule on behalf of the respondents.
2. This petition under Article 226 of the Constitution of India is filed for setting aside orders dated 18.05.2012 and 13.04.2016 passed by respondent Page 1 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT Nos.3 and 2 respectively. The issue pertains to payment of stamp duty on a document, which is a sale deed executed by the partners of a partnership firm in favour of the petitioner-partnership firm. The Department had come to conclusion that as only part of the land belonging to the partnership firm was conveyed under the sale deed by three out of four partners of the partnership firm to the petitioner, the sale deed itself is also a document of dissolution of partnership firm and therefore, under Article 44(3), considering such dissolution also to be a conveyance, additional stamp duty was ordered to be paid.
3. Learned Advocate for the petitioner submitted that the partnership was not dissolved on the date on which the document of sale was executed. It is submitted that out of the four partners, three partners had conveyed their shares in the land belonging to the partnership firm to the petitioner. Therefore, the partnership, which cannot be treated to be a separate entity than the partners, the document of sale deed cannot be construed to be a deed of dissolution. It is submitted that the impugned decision is based on audit objection and the said objection is based on Article 44(3) of the Bombay Stamp Act and which has been read in light of certain recitals in the deed of conveyance. It Page 2 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT is submitted that the recitals in the conveyance deed only refer to notice of dissolution issued by a partner. However, there was no actual dissolution. Moreover, after the proceedings pursuant to audit objection, the petitioner had brought on record of the authorities that a suit also came to be filed for dissolution of partnership firm. However, such suit was thereafter disposed of and there was no dissolution of partnership firm. Moreover, the fourth partner has also conveyed his portion of share by a separate conveyance deed and that too after the order by the Civil Court. It is submitted that as a matter of fact, after the document of sale was executed, later on deed of dissolution has been executed and the authority, without taking this development into consideration, has passed the impugned order. 3.1 Learned Advocate for the petitioner relied upon judgment of Full Bench of this Court in case of Chief Controller Revenue Authority Vs. Chaturbhuj And Bachubhai Tribhovandas Thakkar, reported in 1976 GLR, 898, where, in identical set of circumstances, the Court has construed that dissolution between the partners is not deed or instrument of partition and therefore, not chargeable under Article 46 of the Bombay Stamp Act.
4. Learned AGP opposes grant of petition by referring to the affidavit in reply. It is submitted Page 3 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT that in the year 2007, Auditor General, during audit, had raised objection in connection with the document in question and by referring to Article 44(3)(a), where property is taken as a share of a partner upon dissolution of partnership then the partner who has not brought the property as his share or contribution to partnership, stamp duty is chargeable on such dissolution considering the same as conveyance. It is submitted that Auditor General's objection was justified in view of the chronology of events which took place in connection with the present case.
4.1 It is submitted that the petitioner had also filed SCA No.7815 of 2012, which came to be disposed of by order dated 13.06.2012, pursuant to which appeal was filed under Section 53(1) and in the decision of CCRA, it is held that as per sale deed bearing N.2401/2007, the property was purchased in the year 2003 by the vendor firm by Index Nos.2425, 2426, 3299, 3300 and 3595. Thus, the property belonged to the ownership of partnership firm and the immovable property is taken as a share of each of the partners and upon dissolution, when the partner leaves, the partner who has share of immovable property in the partnership firm, it is to be construed as conveyance under Article 20 and therefore, stamp duty as per the market value will have to be paid. The Page 4 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT decision of the CCRA was therefore legal and not required to be interfered with.
5. Having considered the rival submissions of learned Advocates for the parties and having perused documents on record, it appears that the issue pertains to a document bearing No.2401, registered on 29.01.2007 with the office of Sub-registrar, Surat-2 for Udhna Zone. Under the said document, land admeasuring 3870 sq. mtr. was sought to be conveyed. The petitioner is purchaser of the said land, which was purchased in July 2006 by SM Corporation, consisting of four partners. Out of the four partners, three partners executed an agreement to sale on 05.07.2006 in favour of the petitioner with regard to 3/4th share of the land. The fourth partner appears to issued notice of dissolution. Thereafter, registered sale deed in question was executed on 29.01.2007. Accordingly, stamp duty of Rs.4,60,530/- was paid for the conveyance. It appears that subsequently, an audit objection was raised based on Article 44(3)(a), considering that the immovable property was taken as share of each partner upon dissolution of the partnership and the partners being other than the partners who got the property as their share or contribution to the partnership, stamp duty is chargeable, considering the same as conveyance under Article 20 of the Bombay Stamp Page 5 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT Act. On the basis of such objection, show cause notice came to be issued upon the petitioner. In response to the show cause notice, a stand was taken that the sale deed cannot be treated as dissolution of partnership firm and therefore, conveyance of the land in question under the sale deed cannot be treated as two separate sale transactions. A stand was also taken that there was no cause for considering the partnership to be dissolved. As a matter of fact, the partnership was dissolved much later. However, disregarding such stand, the Deputy Collector passed an order by which the petitioner was directed to pay deficit stamp duty of Rs.4,60,530/- and penalty of Rs.5,000/-. It appears that a petition came to be filed against this order. However, on account of provisions for appeal available to the petitioner, such petition was disposed of with liberty to the petitioner to file appeal. The petitioner filed appeal under Section 53(1) and paid 25% of the appeal deposit. By the impugned order dated 06.04.2016, the CCRA also dismissed the appeal, upholding the order of the Deputy Collector. While doing so, the authorities have failed to consider the aspect of dissolution of the partnership firm. The objection was raised by the Auditor General under audit report by considering recitals in the conveyance, more particularly on page Nos.13 and 16 of the conveyance deed. Page No.16 of the conveyance deed refers to one Page 6 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT notice date 21.08.2006 issued by partner Manoj Vasantlal Vaidhya, but the said recital does not establish the factum of dissolution. It only refers to notice and also refers to the fact that the partnership is continuing. Civil Suit No.293 of 2006 is filed by said Manoj Vasantlal Vaidhya against three partners for declaring the partnership SM Corporation to be dissolved, which, however, came to be withdrawn by a settlement pursis filed by both sides. In the settlement pursis, document bearing No.2401 dated 29.01.2007 is also referred to and the said document has been executed by fourth partner also. The Court thereafter refers to a document which is in the nature of dissolution of partnership firm, which is executed on 31.03.2012, a copy of which is produced on record at page No.113.
6. When the partnership has been dissolved by a dissolution deed dated 31.03.2012, the Court is inclined to hold that as on the date on which the document in question was executed, the partnership was not dissolved. Therefore, the authorities have erroneously deemed the sale deed, which contains share of the partnership, to be dissolution of the partnership firm. The remaining part of the share of fourth partner is also conveyed in the year 2011 by separate sale deed, which is also registered. This subsequent development also indicates Page 7 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019 C/SCA/12958/2016 JUDGMENT that there does not appear to be a dissolution of partnership firm.
7. Both the authorities have merely adopted the reasoning in the report of the Auditor General, but have not referred to subsequent development, which is on record and is an independent development in the direction of dissolution of partnership firm. By not considering this fact, the respondent authorities have committed an error.
8. The judgment of the Full Bench of this Court in case of Chaturbhuj And Bachubhai Tribhovandas Thakkar (supra) has clearly opined that instrument of dissolution between the partners is not a deed or instrument of partition within the meaning of Section 2(m) and is not therefore chargeable under Article 46 of Schedule-I of the Bombay Stamp Act and the same has to be considered as chargeable as instrument of dissolution of partnership. Therefore, in the facts of this case, no occasion had arisen for the authorities to construe the sale of part of the partnership property by some of the partners of the partnership firm to be a dissolution of partnership firm and therefore, attracting Article 44(3)(a). The Court is of the opinion that in absence of the fact of dissolution, Article 44(3)(a) cannot be attracted. Page 8 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019
C/SCA/12958/2016 JUDGMENT
9. In view of the aforesaid, the petition stands allowed. The impugned orders dated 18.05.2012 and 13.04.2016 passed by respondent Nos.3 and 2 respectively are quashed and set aside. Rule is made absolute. No order as to costs.
Direct service is permitted.
Sd/-
(A.Y. KOGJE, J) SHITOLE Page 9 of 9 Downloaded on : Tue Aug 27 21:15:32 IST 2019