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The Secretary to the Board of Revenue (Separate Revenue) Vs. R.M.P.i.N.R.M. Alagappa Chettiar and anr. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in167Ind.Cas.439
AppellantThe Secretary to the Board of Revenue (Separate Revenue)
RespondentR.M.P.i.N.R.M. Alagappa Chettiar and anr.
Cases ReferredChoturam v. Ganesh
Excerpt:
stamp act (ii of 1899), section 2(15), schedule i, article 46 - 'instrument of partition', meaning of--instrument by which partners divide their joint property on dissolution of partnership, whether liable to be stamped as instrument of partition or as instrument of dissolution of partnership--partners, whether co-owners. - .....of dissolution of partnership the collector of ramnad was of opinion that the document should be stamped as an instrument of partition.3. the board's reference indicates the difficulty which the board felt in agreeing with the collector's view. in section 2, clause (15) of the stamp act, an instrument of partition is defined as 'any instrument whereby co-owners of any property divide or agree to divide such property in severalty,' and it includes also 'an award by an arbitrator directing a partition'. having regard to the meaning of the word 'severally' as given in the concise oxford dictionary, the board thought that the division could be said to be one in 'severalty' only if the allotments had been made to each individual sharer and not when the allotments were made as between.....
Judgment:

Varadachariar, J.

1. The nature of the document with reference to which this reference under Section 57 of the Stamp Act has been made is briefly described as follows in para. 2 of the Board's reference. It is

an award, by arbitrators and purports to direct a partition of two firms (A.L. Rm. of Nattanjan and A,L. RM. of Kayan in Burma) between the five parties to the deed named therein. Of these five parties, Nos. 1 to 3 are undivided members of a family, No. 4 is their distant and separated coparcener and No. 5 is a stranger. The arbitrators after examining the parties orally and looking into the accounts have assigned, by casting lots, the A.L. Rm. firm at Nattanjain with all its assets and liabilities to the first group of parties Nos. 1 to 3, and the other firm at Kayan to the parties Nos. 4 and 5.

2. The document was executed in Burma on a stamp paper of Rs. 5 as a deed of dissolution of partnership The Collector of Ramnad was of opinion that the document should be stamped as an instrument of partition.

3. The Board's reference indicates the difficulty which the Board felt in agreeing with the Collector's view. In Section 2, Clause (15) of the Stamp Act, an instrument of partition is defined as 'any instrument whereby co-owners of any property divide or agree to divide such property in severalty,' and it includes also 'an award by an arbitrator directing a partition'. Having regard to the meaning of the word 'severally' as given in the Concise Oxford Dictionary, the Board thought that the Division could be said to be one in 'severalty' only if the allotments had been made to each individual sharer and not when the allotments were made as between several sub groups of sharers, all of when together originally owned the properties in common. We do not think there is any force in this distinction. The true antethesis is between the original common ownership and the subsequent cessation of that common ownership. Whether the substituted ownership is created by way of allotments to each individual amongst the original common owners or to groups of individuals is not really the point for consideration but whether the original common ownership has ceased to exist or not.

4. Before us, however, the objection has been stated in a different form by Mr. K. Rajah Ayyar who appears for the party He contended that there being a special article, namely Article No. 46, providing for an instrument of dissolution of partnership, there is no reason why the document in the present case should be held to fall by a strained construction under the definition of an instrument of partition. This argument ignores the provision in Section 6 of the Stamp Act which enacts that wherever an instrument is so framed as to come within two or more of the descriptions in Schedule 1 and the duties chargeable there under are different, that document will be chargeable only with the higher of such duties. It is, therefore no argument, to say that the instrument in question is one relating to the dissolution of a partnership, if according to its terms, it also falls under the definition of an instrument of partition. The decisions in Christie v. Inland Revenue Commissioners (1867) L.R. 2 Ex. 66 : 36 L.J. Ex. 11 : 4 H. & C. 664 : 15 L.T. 282 : 15 W.R. 258 and Phillips v. Inland Revenue Commissioners (1867) L.R.2 Ex. 839 : 33 L.J. Ex. 199 : 16 L.T. 839 indicate that even according to the English practice, where a dissolution of partnership is carried out by a document which in form effects an assignment of a partner's share to another partner, the document is charged to stamp duty as a 'conveyance'. This shows that the fact of its being part of a scheme for the dissolution of a partnership does not prevent its being chargeable to stamp duty under other heads as well, if the terms of the document fall under some other head.

5. Mr. Rajah Ayyar next contended that the document is not an instrument of 'partition' because it would not be proper to regard partners is co-owners of the partnership property. The alternative views of this question have, been staled in Venkatarathnam v. Svbla Rao 49 M. 738 : 96 Ind. Cas. 881 : A.I.R. 1926 Mad. 1040 : 51 M.L.J. 410 : (1926) M.W.N. 732 : 24 L.W. 529 and Samuier v. Ramasubbier 60 M.L.J. 527 : 132 Ind. Cas. 305 : A.I.R. 1931 Mad. 580 : 33 L.W. 576 : Ind. Rul. (1931) Mad. 657 respectively. As pointed cut in the latter case, there was a specific provision ins. 253 of the Contract. Act declaring the partners to be the 'joint owners' of the partnership property in the absence of any contact to the contrary. It will not, therefore, be correct to say that partners can not be regarded as joint owners of the partnership property. It is true that the wording of Section 14 of the Partnership Act of 1132 is slightly different but it does not appeal to us that it was intended to indicate any difference in principle (See Lindley en Partnership, Book III, Ch. V, Section 1). Mr. Rajah Ayyar instanced the possibility of a person being a working partner without any share in the partnership properly but this involves no inconsistency with the above conception because the conception of co-ownership will be only in proportion to their shares in the partnership and is always qualified by 'contracts to the contrary', if any. The difficulty in applying the conception of co-ownership to individual items of partnership assets, is no reason against applying that description to the net assets of the partnership on a dissolution. Section 265 of the Contract Act was worded in a form suggesting that it was for the Court to distribute the net assets as amongst the partners; but Section 46 of the Partnership Act of 1932 puts it clearly as a right of the partners to claim to have the surplus distributed amongst them or their representatives according to their rights. There is, in our opinion, accordingly no inherent incompatability between the conception of co-ownership and the position of partners. On what basis the valuation is to be made for the purpose of assessing stamp duty is a matter on which we are not called upon to express any opinion.

6. our attention was drawn to a case in Annamalai Chetty v. Annamilai Chetty 10 L.W. 67 : 52 Ind. Cas. 456 : A.I.R. 1919 Mad. 146 where a Bench of this Court laid down that no partner has a right to claim a division of any specific item of partnership property. This case does not touch the question whether, taking the partnership assets as a whole, the partners are co-owners or not. On the other hand, in Choturam v. Ganesh 3 Bom. L.R. 132. where an arrangement had been made between partners dividing certain items of partnership assets between themselves without dissolving the partnership, a Bench of three Judges held that, the document amounted to an instrument of partition. We do not see any reason for applying a different principle merely because such an allotment takes place as part of a scheme of dissolution.

7. Our answer to the reference is that the document is liable to be charged to stamp duty as an instrument of partition.


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