V O MARKOSE Vs. CIT KERALA

JUDGEMENT

(1.) Two questions have been referred to us by the Income Tax Appellate Tribunal, Cochin Bench read as follows:

(2.) Sri. V. O. Markose was one of the two partners of the firm of M/s. Joseph and Markose for a fairly long period and Sri. V. O. Markose was entitled to a half share in the profits of the firm. The partners of the firm were members of the legal profession practising law. At the time of the transfer, Sri. V. O. Markose was 75 years old and his partner Sri Thomas Vellapally has had a serious heart attack and was not in full vigour of health. Sri V. O. Markose wrote two letters explaining the circumstances under which and the reasons that prompted the induction of the new partner. The new partner was a man with varied experience and quite elderly. He has been assisting the firm by doing part of the work of the firm for four years and he was being given remuneration by the firm for such work before he was taken as a partner in the firm. During the last two of those four years he had been paid substantial remuneration for the work that he did for the firm amounting to Rs. 18,000 for each of those years. It is thus clear that the person taken in was one competent to discharge the functions of a partner and was a person associated with the particular type of work that the firm has been doing, and a person who has had experience in handling the type of cases the firm had to deal with. There were only two partners in the firm as we indicated already and both were not in a good physical condition which would permit them to undertake arduous tasks which an advocate or counsel is often called upon to discharge and at times for continuous periods without any relapse. A need for assistance has therefore been clearly made out and the partners of the firm decided to take one who was associated with the firm and who had apparently proved to be useful to the firm.

(3.) In the above circumstances the senior partner decided to transfer one half of his interests in the assets of the firm to the person newly admitted without any consideration. This transfer certainly amounted to a gift and it was not seriously contended before us that the transfer did not amount to a gift. S.5(1)(xiv) is in these terms: