Assigning Share In Profit In Partnership Firm Different From Constituting A Sub-Partnership: Gujarat HC

[14 February 2022] There is a fine distinction between a case where a partner of a firm assigns their share in favour of a third person and a case where a partner constitutes a sub-partnership with their share in the main partnership, the Gujarat High Court has held.
The observation was made by a bench of Justice JB Pardiwala and Justice Nisha Thakore while hearing a Writ Petition filed by a Partnership Firm, seeking to quash an order of the Income Tax Department which attached the land of the firm as the property of an Assesse.
In the instant case, the IT Department conducted a search and seizure operation under Section 132 of the Income Tax Act at the premises of the Assesse. The Department, thereafter, directed the provisional attachment of various properties of the Assesse.
The Court made a plain reading of Section 281B of the Act which provides for attachment of property. It noted that the same provides for attachment of the property of the assesse only and of no one-else. It observed, “The assesse in the case on hand is Arnav Savaliya. The provisional attachment is of the property, which belongs to the writ-applicant – Partnership Firm…..The case on hand indisputably is not one of a sub-partnership though in view of Section-29(1) of the Partnership Act, Arnav Savaliya as an assignee may become entitled to receive the assigned share in the profits from the writ-applicant – Firm, not as a sub-partner because no sub-partnership came into existence, but as an assignee to the share of profit of the assigner-partner.”