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G. Seshagiri Rao vs Income-Tax Officer on 20 September, 1983 cites

Commissioner Of Income-Tax, Bombay ... vs Tribhuvandas G. Patel on 8 September, 1977

... In the first place, a retiring partner while going out and while receiving what is due to him in respect of his share, may assign his interest by a deed or he may, instead of assigning his interest, take the amount due to him from the firm and give a receipt for the money and acknowledge that he has no more claim on his co-partners. The former type of transactions will be regarded as sale or release or assignment of his interest by a deed attracting stamp duty while the latter type of transaction would not. In other words, it is clear, the retirement of a partner can take either of two forms and apart from the question of stamp duty, with which we are not concerned, the question whether the transaction would amount to an assignment or release of his interest in favour of the continuing partners or not would depend upon what particular mode of retirement is employed and as indicated earlier, if instead of quantifying his share by taking accounts on the footing of notional sale, parties agree to pay a lump sum in consideration of the retiring partner assigning or relinquishing his share or right in the partnership and its assets in favour of the continuing partners, the transaction would amount to a transfer within the meaning of Section 2(47) of the Income-tax Act... (pp. 116-17) So from the above, it is clear that if the interest of the retiring partner is either released or assigned by a deed then it amounts to a transfer within the meaning of Section 2(47). But, if instead of the above mode, the retiring partner take the amount due to him from the firm and give a receipt for the money and acknowledges that he has no more claim on his co-partners, it does not amount a transfer within the meaning of Section 2(24). We have already extracted the receipt given by Shri G. Seshagiri Rao in favour of Whitefiled Industrial Corporation after receiving demand draft for Rs. 2,00,000. In that receipt, he acknowledged the receipt of the amount due to him from the firm and further acknowledged that he had no more claims on his co-partners in the firm. Therefore, the present is a case directly covered by one of the modes of retirement contemplated by the Bombay High Court in Tribhuvandas G. Patel's case (supra). Therefore, according to that decision, it does not amount to a transfer. It is noteworthy that the land was not brought in by Shri G. Seshagiri Rao as his capital. On the other hand, the land was purchased by the firm itself and it constituted the property of the firm even before Shri G. Seshagiri Rao was admitted as a partner. Thus, there is no question of transferring his interest in favour of his other partners in the firm.
Bombay High Court Cites 37 - Cited by 42 - V D Tulzapurkar - Full Document
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