During the subsistence of a partnership, a partner does not possess an interest in specie in any particular asset of the partnership. During the subsistence of a partnership, a partner has a right to obtain a share in profits. On dissolution of a partnership or upon retirement, a partner is entitled to a valuation of his share in the net assets of the partnership which remain after meeting the debts and liabilities. An amount paid to a partner upon retirement, after taking accounts and upon deduction of liabilities, does not involve an element of transfer within the meaning of section 2(47) of the Act. Therefore, there is no transfer of capital asset by way of a distribution of the capital assets, on the dissolution of a firm or otherwise.
2) On retirement of assessee-partner from the firm there was no element of transfer of interest in partnership assets by the retired partner to the continuing partners and the excess amount received by him was not assessable to capital gains