COMMISSIONER OF INCOME TAX Vs. WALJI DAMJI

JUDGEMENT

(1.) THE assessee is an unregistered firm and it was dissolved on 15 -6 -1944. Receivers were appointed to sell the partnership assets and they sold them on 10 -3 -1947. The partnership assets realised a gain of Rs. 30,447/ -, and the Income -tax Department, contended that this sale had resulted in a 'capital gain' within the meaning of Section 12 -B and that the firm was liable to be assessed to tax on this capital gain. The contention of the assessee was that its case fell within the third proviso to Section 12B. This contention was rejected by the Tribunal and the matter comes before us on this reference.

(2.) THE third proviso would only apply if the transfer is made on the dissolution of a firm or other association of persons, and the transfer is in the nature of distribution of capital assets. It is difficult to accept the contention that when the receivers sold the partnership assets on 10 -3 -1947, they were distributing capital assets to the partner on the dissolution of the partnership firm.

(3.) IT was first contended that the tax is imposed not upon the Receivers but upon the unregistered firm, and the answer to that contention, is to be found in Section 41(2), Income -tax Act which permits the taxing authorities to assess directly the person or persons on whose behalf income, profits or gains are received, and the amount in question was received by the Receivers not in there own right but on behalf of the partnership firm.