COMMISSIONER OF GIFT TAX Vs. NARAYANA CHANDRIKA TRUST

JUDGEMENT

(1.) This reference is at the instance of the Revenue under S.26(1) of the Gift Tax Act. The questions referred to are:

(2.) The assessee in this case is M/s. Sree Narayana Chandrika Trust (hereinafter referred to as 'the Trust'). The Trust is a partnership Firm and the Trust was having 45% profit in the partnership as per the deed executed on 1.4.1980. The Firm was reconstituted under a deed executed on 1.10.1982. As per the deed, the assessee's share in the profit of the Firm was reduced to 30% form the earlier 45%. On the view that the assessee surrendered 15% right in the profits of the Firm in favour of the other partners, the Gift Tax Officer initiated proceedings and issued notice under S.16(1) of the Gift Tax Act, requiring the assessee to file a return of gift.

(3.) Accordingly, the assessee filed the return showing the net taxable gift at nil. The Assessing Officer completed the assessment by Annexure A order. He found Rs. 7,36,650/- as the average profit of the Firm taking into consideration the profits for the years 1978-79 to 1982-83. After adjustment, three years purchase price was arrived at Rs. 21,16,000/-. The value of 15% share surrendered by the assessee was put at Rs. 3,17,400/-. The Assessing Officer fixed the gift tax at Rs. 59,600/-.