A transfer of property from one firm to another firm with identical partners does not constitute a sale attracting central sales tax.

RAMAKRISHNAN, J.

This revision case is filed against the order of the Madras Sales Tax Appellate Tribunal in T.A. No. 21 of 1963 by the petitioners who are the assessees. The petitioners are Mahendra Kumar Ishwarlal and Company, jaggery and foodgrains merchants at Tirupathur. The petitioners constitute a firm comprising of four partners, with shares noted against each as below :

1. Chunilal Bhagavandas ... Re. 0-2-0 2. Ranchoddas Ramdas ... Re. 0-2-0 3. Mahendra Kumar Chunilal ... Re. 0-6-0 4. Ishwarlal Ranchoddas ... Re. 0-6-0

It may be mentioned that No. 3 is the son of No. 1 and No. 4 is the son of No. 2. There is a Bombay firm known as "Chunilal Bhagavandas and Company", comprising of the same partners, but with this difference, namely, that the share of each of the aforesaid partners is 4 annas.

In the year of assessment, the Tirupathur firm claims to have transferred to the Bombay firm jaggery which has been valued at Rs. 4, 40, 675.87 nP. It is with this part of the transactions that we are concerned in this revision case. The department took the view that this transfer of jaggery of the aforesaid value represented a sale by the Tirupathur firm to the Bombay firm and should be assessed to Central sales tax. On the other hand, it was contended by the assessees that since the partners in both the firms are identical, in spite of the fact that their shares were different, there can be no sale at all, because one person cannot sell to himself.

In the Madras General Sales Tax Act, 1959, the definition of "dealer" includes a "firm". Section 2(n) of the same Act defines "sale" as a transfer of property in goods by one person to another in the course of business for cash or deferred payment or other valuable consideration. The Central Sales Tax Act contains definitions for "dealer" and "sale" but it does not provide for a similar extension of the meaning of the word "dealer" so as to cover firms as in the case of the Madras General Sales Tax Act. But in the case of "sale" substantially the same definition as in the Madras General Sales Tax Act is found, namely, a transfer of property in goods by one person to another for cash or for deferred payment.As already stated, the department took the view that the Tirupathur firm effected a sale of the jaggery to the Bombay firm within the meaning of the definition of "sale" in the Central Sales Tax Act and was assessable on that sale tax under that Act. The assessees appealed to the Appellate Assistant Commissioner, who confirmed the decision of the assessing authority. This Tribunal, to whom the assessees subsequently appealed, also confirmed that decision, holding that the transfer in this case amounted to a sale. In the view of the Tribunal, even though the tow firms had the same partners, the fact that the profit-sharing ratio of the partners in the two firms was different, made a difference and that this difference would enable the two firms being viewed as two different persons, with the result that one firm could effectively sell goods to another, thereby attracting the levy of sales tax on the transaction. Against this decision, the assessees have filed this revision case.

Several decisions have stressed the fact that a firm as such has no legal status as a person distinct from the partners who constitute the firm. It has been laid down often that the name "firm" is only a compendious mode of designating the persons who agree to carry on a business in partnership. The fact that they own shares will not enable them to claim any particular share in any particular asset of the firm at any given time. The question of their owning shares will be relevant only when the profit and loss of the firm have to be determined and distributed among the partners from time to time and at the time of the dissolution of the partnership. This point has been stressed in a decision of the Supreme Court in Narayanappa v. Bhaskara Krishnappa where the following observation is found :

"No doubt,