COMMISSIONER OF GIFT TAX Vs. MANEKLAL HARGOVANDAS PATEL

JUDGEMENT

(1.) IN this reference at the instance of the Revenue, the following question has been referred for our opinion in respect of the asst. yr. 1981-82 :

(2.) THE assessee reduced his share from 25 per cent in a partnership firm to 4 per cent with the result that the shares of the other three partners correspondingly went up to exactly the percentage by which the assessee's share was reduced. The GTO valued this 21 per cent share by taking into account the average 5 years' profit and debiting three years' purchase thereon ultimately arriving at a figure amounting to Rs. 90,247. The assessee had already declared a gift amounting to Rs. 25,000 and, therefore, the GTO totalled up both these figures and after giving the basic exemption, arrived at a figure of Rs. 1,10,247. The GTO also applied aggregation on the basis of last 4 years gift of Rs. 45,000. The AAC confirmed the order made by the GTO. The Tribunal relying on its earlier decision in the case of Sakerchand Manilal (Decd) vs. GTO, held that there was no gift in this case. Hence, this reference at the instance of the Revenue.

(3.) HAVING heard Mr. Tanvish Bhatt, the learned standing counsel for the Revenue and having considered the decisions of the Supreme Court in CGT vs. Chhotalal Mohanlal (1987) 61 CTR (SC) 263 : (1987) 166 ITR 124 (SC) : TC 35R.551, CGT vs. T.M. Lowiz (2000) 163 CTR (SC) 359 : (2000) 245 ITR 831 (SC) and also CGT vs. D.C. Shah (2001) 169 CTR (SC) 92 : (2001) 249 ITR 518 (SC), we are of the view that in the facts and circumstances of the case, the finding given by the Tribunal in favour of the assessee that there was no gift in respect of the partnership share for the year under consideration cannot be faulted with. In CGT vs. D.C. Shah (supra), the apex Court has held in no unmistakable terms that when the share of one partner in a firm is decreased and that of another partner correspondingly increased, it does not necessarily lead to the inference that the former had gifted the difference to the latter. The profits-sharing ratio in a firm can vary for a number of reasons, among them, the ability of the partners to devote time to the business of the firm. The gift of a part of a partner's share to another has to be established by relevant evidence and the onus of doing so is on the Revenue. In the facts of the instant case, apart from the Revenue not discharging the onus, the facts brought on record by the assessee are that the partner whose share was reduced from 25 per cent to 4 per cent was 80 years of age and was totally blind and, therefore, was physically unfit for continuing as a partner of the firm and, therefore, it was necessary to transfer his right to share partnership profits to the other partners. In view of the aforesaid facts, the aforesaid decision of the apex Court in the case of D.C. Shah (supra) is squarely applicable. The decisions of the apex Court in Chhotalal Mohanlal's case (supra) and T.M. Louiz's case (supra) have already been considered and explained by this Court in the decision in CGT vs. Arunbhai Hargovandas Patel (GT Ref. No. 2 of 1987, dt. 25th Sept., 2001).