The Supreme Court in CIT v. Dewas Cine Corporation (1968) 68 ITR 240 (SC) and CIT v. Bankey Lal Vaidya [1971] 79 ITR 594 (SC) held that the distribution, division or allotment of assets between partners of a firm consequent on its dissolution amounts to a mutual adjustment of rights of the partners and such transaction was neither a sale nor exchange nor transfer of assets of the firm. Further in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 (SC) it was held that there was no transfer in terms of extinguishment of rights of the
Firm in the Capital asset when the capital asset is distributed to the partner on dissolution. The relevant portion of said decision which explains the reason for said legal position is as under :
Source: Published in AIFTP Journal – Feb., 2021 Page No. 34
The Supreme Court in CIT v. Dewas Cine Corporation (1968) 68 ITR 240 (SC) and CIT v. Bankey Lal Vaidya [1971] 79 ITR 594 (SC) held that the distribution, division or allotment of assets between partners of a firm consequent on its dissolution amounts to a mutual adjustment of rights of the partners and such transaction was neither a sale nor exchange nor transfer of assets of the firm. Further in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 (SC) it was held that there was no transfer in terms of extinguishment of rights of the Firm in the Capital asset when the capital asset is distributed to the partner on dissolution. The relevant portion of said decision which explains the reason for said legal position is as under :
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Posted on: March 3rd, 2021
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