COMMISSIONER OF GIFT-TAX Vs. C S PATIL

JUDGEMENT

(1.) This is a reference under section 26(3) of the Gift-tax Act, 1958. The question referred for the opinion of this court reads :

(2.) The fats of the case are these : The assessee was a partner in the firm, Shree Milk supply. During the accounting year relevant to the assessment year 1975-76, there was realignment of shares in the firm on the admission of new partners. Prior to April 1, 1974, there were four partners in the firm including the assessee. The share of profit each of them was 25 per cent. By a partnership deed dated April 14, 1974, a change in the constitution of the firm was brought about by admitting six more partners. The original four partners had the following credit balances to their capital account as on April 1, 1974. <FRM>JUDGEMENT_49_TLKAR0_1989Html1.htm</FRM>

(3.) Under the partnership deed dated April 14, 1974, six new partners were admitted. While doing so, under the agreement, C. S. Patel reduced his profit-sharing ratio from 25% to 15%. Out of the 10% of the share reduced, 5% went to Sita Patel and another 5% to Rajnikant P. Patel. Similarly, the share of C. B. Fatakia was reduced by 10% and it went to Yasmin K. Patel. Out of the reduction of share of 10% of P. N. Sharma, 5% went to Suresh Sharma and another 5% to Dinesh Sharma. The reduction of share of 10% of R. C. Patel went to Saroj V. Patel. The incoming six partners also brought in their capital. In the changed set up, the capital contribution and profit-sharing ratio of the ten partners was as below : <FRM>JUDGEMENT_49_TLKAR0_1989Html2.htm</FRM>