(1.) THIS is a reference made to us by the Chief Controlling Revenue Authority under section 54(1A) of the Bombay Stamp Act, 1958. The question which arises for consideration on the reference is as to what is the proper article of the Act under which a creation instrument executed between the partners of Messrs. Velo Industries is chargeable. To determine the question it is necessary to refer briefly to a few facts giving rise to the reference. Prior to Aso Vad Amas Samvat year 2021, ten persons carried on business in partnership in the firm name of Messrs. Velo Industries. Three of them retired from the firm with effect from Aso Vad Amas Samvat year 2021 leaving the other seven as continuing partners of the firm. The terms and conditions of retirement were recorded in an instrument dated 24th October, 1963, executed by and between the partners and, since the entire controversy between the parties has turned on the true interpretation of this instrument, it would be desirable to set out some of its material provisions in extenso. They read, according to their English translation :
(2.) THIS instrument was submitted for registration at the office of the Sub -Registrar of Assurances on 15th November, 1965. The Sub -Registrar registered the instrument but took the view that it was a conveyance on sale and, therefore, chargeable to stamp duty under article 25 of Schedule I of the Act and, since the stamp of Rs. 30 which was fixed on the instrument was insufficient, he impounded the instrument under section 33 and sent it to the Collector under section 37(2). The Collector acting under section 39 felt a doubt as to the amount with which the instrument was chargeable and he, therefore, submitted the case for the decision of the Chief Controlling Revenue Authority on 19th January, 1966, under section 53(2). the Chief Controlling Revenue Authority by a letter dated 4th October, 1967, intimated to the Collector his decision in the matter, namely, that the instrument was a conveyance for the amount of Rs. 2,25,632.35 on which stamp of Rs. 12,430 would be required under article 25, clause (b), of the Schedule I to the Bombay Stamp Act, 1958. Pursuant to the decision of the Chief Controlling Revenue Authority, the Collector passed an order dated 29th December, 1967, adjudicating that a sum of Rs. 12,430, should have been paid under article 25, clause (b) of Schedule I to the Act and, therefore, the amount of deficit of stamp duty of Rs. 12,400, together with fine of Rs. 500 aggregating in all to Rs. 12,900 should be recovered from Madanlal Makandas Valia, one of the continuing partners who had produced the instrument for registration. The firm was aggrieved by the decision of the Chief Controlling Revenue Authority and, accordingly, an application dated 1st February, 1968, was made by the firm to the Chief Controlling Revenue Authority, requiring him to draw up a statement of the case and refer it to the High Court and, on the application, the Chief Controlling Revenue Authority made the present reference for obtaining the decision of this court on the following two questions :
(3.) THE charging section in the Act is section 3 which provides, inter alia, that, subject to the provisions of the Act and the exemptions contained in Schedule I, every instrument mentioned in that Schedule, which is executed in the State on or after the date of the commencement of the Act, shall be chargeable with duty of the amount indicated in that Schedule as the proper duty for the instrument. Article 25 of Schedule I prescribes the amount of duty for 'conveyance'. It consists of two clauses : (a) and (b). It is not material for our purpose to notice the difference between the two classes since the common requirement in both clauses is that the instrument must be a conveyance and the only question before us is whether the instrument in the present case could be said to be a conveyance. Now, conveyance is defined in section 2(g) to include a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. The argument of the revenue was that the present instrument was a conveyance on sale since it transferred the interest of the retiring partners in the partnership assets to the continuing partners for a sum of money and the transaction, therefore, satisfied the essential elements of a sale. This argument was sought to be supported by reference to a recent Full Bench decision of the Mysore High Court in Venkatachalapathi v. State. But we do not think the argument is well -founded. It ignores the true nature of the transaction embodied in the instrument. We have already set out the relevant provisions of the instrument and it is clear from those provisions that the instrument is nothing but a simple deed of retirement recording the terms and conditions on which three partners retired from the firm. On retirement, the three partners undoubtedly ceased to have interest in the partnership assets and the partnership assets continued to belong to the firm consisting of the continuing partners, but there was no transfer of interest from the retiring partners to the continuing partners in consideration of a sum of money. The retiring partners merely took money representing their respective shares in the partnership and went out of the firm. This position becomes very clear if we consider what is the true nature of the interest of a partner in a partnership and what happens when a partner retires from the firm. The following statement of the law is to be found in Lindley on Partnership, twelfth edition, at page 375, where the learned author describes the nature of the share of a partner in a partnership :