COMMISSIONER OF GIFT TAX Vs. NIRMALA C K

JUDGEMENT

(1.) This is a reference under S.26(1) of the Gift-Tax Act at the instance of the Commissioner of Gift Tax, Trivandrum, The questions of law referred by the Income Tax Appellate Tribunal, Cochin Bench to this court for decision is extracted below:

(2.) The facts which are necessary for deciding the reference are summarised thus: The assessee was the proprietress of a trading concern known as 'M/s Gunbow Trading Company 'doing business in coir products. In the year 1979 the said establishment was transformed into a partnership firm, the assessee continuing as one of the partners. The other partners are her two major daughter and her husband in his capacity as trustee of a trust called 'Krishnadev Trust'. Three minor daughters of the assessee and two minor children of two married daughters are the beneficiaries of , the trust. A partnership deed was executed wherein the shares of each partners were specified. The assessee has 35% share and two major daughters, 15% each and the remaining 35% goes to the Trust. Three incoming partners had invested Rs. 10,000/-each and the said amount was treated as their respective share of capital in the partnership business in view of the terms of the deed. The Gift Tax Officer, however, completed the assessment for the year 1980-1981 under S.15(3) of the Act fixing the goodwill of the proprietary business at Rs. 28,754/-. The officer-further found that the assessee had gifted 65% of her right to share profits to the incoming partners. The contention of the assessee that transfer of interest was supported by consideration was rejected. Finally the Officer has passed an assessment order dated 31.12.1980 (Annexure-A) fixing the value of taxable gift at Rs. 58,750/-. As against the said order passed by the Gift-Tax Officer, the assessee filed an appeal which was rejected by the Appellate Assistant Commissioner as per his order dated 2.1.1982 (Annexure-B). The assessee filed a further appeal before the Income Tax Appellate Tribunal. The Tribunal agreed with the contention of the assessee that the transfer in question has not resulted in any gift assessable to tax and accordingly passed an order allowing the appeal on 31.10.1983 (Annexure - C). As against the said order the Revenue has filed an application under S.26(1) of the Gift-Tax Act requiring to state a case to this court. Accordingly, the Tribunal referred the questions stated above for the decision of this court.

(3.) When this reference came up before a Division Bench of this court, it was pointed out that there are two conflicting Division Bench decisions on the questions to be answered by this court in the present proceeding. Those decisions are: (1) Commissioner of Gift Tax v. Ganapathy Moothan (1972) (84 ITR 758) and (2) Commissioner of Gift Tax v. K.A. Abdual Razack and others ( 1992 (196) ITR 578 ). That is how this case same up for decision before this larger Bench.