RAMESH ENTERPRISES Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THREE questions have been referred to us at the instance of the assessee. They are :

(2.) THE assessee, a firm, was initially constituted under a deed dated March 30, 1974. One of the partners retired on April 1, 1977. THE firm was carrying on a business in money-lending and was also engaged in the export of coffee seeds. On May 2, 1977, a company with the name similar to that of the firm, viz., Ramesh Enterprises Pvt. Ltd., was registered. Between May 2, 1977, and July 8, 1977, that company lent a sum of Rs. 64,66,650 to the firm. On July 8, 1977, under an agreement between the firm and the company, the entire coffee export business together with the goodwill, the exclusive right of the use of the name, as also the stock of 509.460 tonnes of coffee seeds were transferred to the company. Though the agreement mentioned that the excess of the assets over liabilities of that firm as on the date of transfer would be paid over to the firm, no proof of such payment was at any time produced by the assessee.THE amounts borrowed by the firm from the company were not treated as consideration for the transfer and that amount continued to be shown as outstanding arid due by the firm to the company.

(3.) WE have already referred to the fact that there was no proof produced by the assessee that any consideration was paid for the transfer of the entire export business in coffee by the firm to the company. It was never the case of the assessee that what was transferred did not have a value. A valuable running business having been transferred for no consideration at all, it clearly amounted to a gift and the tax levied thereon under the provisions of the Gift-tax Act was perfectly proper. "Gift" is defined in Section 2(xii) of the Gift-tax Act as meaning a transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth. The transfer of the movable properties including the coffee stocks as also the goodwill of the business together with the right to use the name without any consideration, was a gift liable to be brought to tax under Section 3 which imposes the charge of gift-tax. The answer to the second question has to be and is in favour of the Revenue and against the assessee.