The dissolution of a partnership and the allocation of assets among partners does not constitute a transfer or conveyance.

N.V. Balasubramanian, J.

1. The Chief Controlling Revenue Authority (Stamp Act) has made a reference under Section 57(1) of the Indian Stamp Act, 1899 and sought a clarification regarding classification of the document in question and chargeability to stamp duty.

2. There is a firm, by name, M/s. Lakshmi Spinners constituted under the Indian Partnership Act, 1932 and M/s. Sampurna Spinning Mills Ltd. was admitted as a partner on 22.10.1986 and the profit sharing ration as well as capital investment was arrived at as under:-

Tmt. Sarojini Muthusamy 25% Rs. 1,81,250.00 Tmt. Vasantha Valayutham 25% Rs. 1,81,250.00 Tmt. Mallammal 20% Rs.1,45,000.00 Tmt. Amirtham 10% Rs.72,500.00 M/s. Sampurna Spinning Mills 20% Rs.1,45,000.00 The partners have decided to dissolve the firm on 12.11.1986 and the properties were shared as under:

1. Sampurna Spinning Mills Rs.15,59,600

2. Tmt. Sarojini Muthusamy Rs. 18,800

3. Tmt. Vasantha Valayutham Rs. 18,800

4. Tmt. Mallammal Rs. 15,400

5. Tmt. Amirtham Rs. 7,800

6. The Registering Authority was of the opinion that the assets were not divided at the agreed ration as per section 48 of the Indian Partnership Act and the deed of dissolution should be treated as a deed of conveyance. The respondents have not accepted the view of the Revenue Authority and hence, the reference has come before us.

7. We have perused the deed of dissolution dated 12.11.1986 and in the deed, it is stated that the partnership existed between the parties and it was dissolved with effect from 12.11.1986 and the assets and liabilities of the dissolved firm were divided among the five partners as detailed in the deed. In so far as M/s. Sampurna Spinning Mills Ltd. is concerned, the said concern was allotted certain properties and other partners were also allotted certain other properties. The Registering Authority was of the view that the value of the property allotted in favour of M/s. Sampurna Spinning Mills Ltd. was much more the the value of the properties allotted to other partners and the allotment was not in accordance with the provision of Section 48 of the Indian Partnership Act, and hence the deed in question should be treated as a deed of conveyance. It is relevant to mention here that in so far as liabilities of the firm are concerned, the entire liability of the firm was fastened on M/s. Sampurna Spinning Mills Ltd. as under the deed it is required to discharge all pending liabilities including income-tax, sales- tax, property-tax, excise duty, etc. whether existing at present or that may arise in future. In other words, in the document, it is made clear that M/s. Sampurna Spinning Mills Ltd. is solely responsible for the discharge of all liabilities of the erstwhile firm and all other partners were absolved from all the liabilities. The Registering Authority has focused its attention only on the value of the assets allotted in favour of M/s. Sampurna Spinning Mills Ltd. overlooking the fact that M/s. Sampurna Spinning Mills Ltd. is also required to discharge all liabilities of the erstwhile firm existing on the date of dissolution or that may arise in future and other partners were absolved of all liabilities of the firm. It is, in this factual situation, the question that has to be considered is whether the deed in question is a a deed of conveyance or a deed of release. It is also relevant to mention here that the parties have paid stamp duty on the basis that is a deed of partition.

5. In our opinion, the document in question is not a deed of conveyance. The Supreme Court in S.V.Chandra Pandian and others v. S.V. Sivalinga Nadar and others, 1993 (1) LW 612 considered the question whether allotment of properties to the partners on the dissolution of the firm would amount to transfer and after referring to its earlier decisions in Commissioner of Income Tax, West Bengal, Calcutta v. Juggilal Kamalpat, 1967 (1) SCR 784 : AIR 1967 SC 401, C.I.T. Madhya Pradesh v. Dewas Cine Corporation Bankey Lal