COMMISSIONER OF GIFT-TAX Vs. NABE SHAH LATE

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Delhi, has referred the following two questions of law under Section 26(1) of the Gift-tax Act, 1958, hereinafter referred to as "the Act", for opinion to this Court. "1. Whether, on the facts and circumstances of the case, the Gift-tax Officer was legally correct in initiating proceedings under Section 16(1) of the Gift-tax Act, 1958, against the deceased assessee, Nabi Shah, for the assessment year 1976-77 on the basis of the report of the internal audit party ?

(2.) Whether, on the facts and in the circumstances of the case, there was a deemed gift leading its taxability in the hands of the deceased assessee in view of his retirement from the firm of M/s. Amjad Ali and Co. on September 30, 1974 ?" 2. Briefly stated the facts giving rise to the present reference are as follows :

(3.) The present reference relates to the assessment year 1976-77. The deceased late Nabi Shah was a partner in the firm, M/s. Amjad Ali and Co. During the assessment year 1976-77, he retired from the said firm. He did not charge anything for his share of goodwill. The Gift-tax Officer, Rampur, on the basis of the report of the internal audit party to the effect that on his retirement from the firm, M/s. Amjad Ali and Co., as the deceased assessee did not charge anything for his share of goodwill, there was a deemed gift on the part of the assessee to the remaining partners of the firm who remained in the partnership after September 30, 1974. On the basis of the said audit report the Gift-tax Officer issued a notice to the assessee under Section 16(1) of the Act. Pursuant to the notice the assessee filed a return of gift-tax declaring the taxable gift at nil. The Gift-tax Officer, however, worked out the taxable gift at Rs. 69,870 and subjected the same to tax. The legal heirs of the deceased preferred an appeal before the Appellate Assistant Commissioner of Gift-tax, Moradabad, who allowed the appeal and cancelled the assessment. The Revenue's appeal before the Tribunal has failed.