G.G. Sohani, J.
1. By this reference under Section 44 of the M. P. General Sales Tax Act, 1958, hereinafter referred to as the Act, the Board of Revenue has referred the following question of law to this Court for its opinion :
Whether the assessee-firm who had purchased timber at a concessional rate of tax on furnishing a declaration in form XII-A is liable to a penalty under Section 8(2) of the M. P. General Sales Tax Act, 1958, by the transfer of such timber without payment of any further tax to a partner who retired from the firm and started his own separate business, the retiring partner not having acquired the timber on furnishing a declaration in form XII-B ?
2. The material facts giving rise to this reference are as follows : The assessee, M/s. Khurana & Co., was, at the material time, a firm registered as a dealer under the Act. By an order dated 29th December, 1967, the Sales Tax Officer, Shajapur, levied a penalty on the assessee under the provision of Section 8(2) of the Act on the ground that timber worth Rs. 10,148.82 was transferred by the assessee to Jagannathsingh, a retiring partner of the firm, in accordance with the terms on which Jagannathsingh had retired from the firm. The assessing authority held that as timber was transferred by the assessee-firm to Jagannathsingh, the assessee-firm was liable to pay penalty as the timber assessed under a concessional rate in accordance with Section 8(1) of the Act was utilised by the assessee for a purpose other than that specified in form XII-A submitted by the assessee. On appeal, the order imposing the penalty was upheld by the appellate authority. On second appeal, the Board held that the goods received by a retiring partner as a result of division of assets amongst the partners could not be considered to be utilisation of the goods for a purpose other than that specified by the assessee. In this view of the matter, the Board set aside the order imposing penalty. At the instance of the Commissioner, the Board has referred the aforesaid question of law to this Court for its opinion.
3. The short question for consideration is whether the property of the firm allotted to a retiring partner in satisfaction of his claim to his share amounts to a sale or transfer of that property to the retiring partner by the petitioner. It has been held by the Supreme Court in Commissioner of Income-tax v. Dewas Cine Corporation A.I.R. 1968 S.C. 676 that the distribution of the surplus of a dissolved partnership for the purpose of adjustment of the rights of the partners does not amount to transfer of assets. In Commissioner of Income-tax, U. P. v. Bankey Lal Vaidya A.I.R. 1971 S.C. 2270 , the Supreme Court observed that when the rights of the parties were adjusted by handing over to one of the partners the entire assets and to the other partner the money-value of his share, such a transaction was not a sale, exchange or transfer of assets of the firm. In view of these decisions, it must be held that property of a firm received by a retiring partner in. satisfaction of his claim to his share cannot be considered to be a transfer or a sale. As there is no transfer in the instant case, the firm cannot be held liable to a penalty under Section 8(2) of the Act.
4. Our answer to the question referred to us is, therefore, in the negative and against the department. In the circumstances of the case, the parties shall bear their own costs of this reference.