SUBHASH DHANRAJ CHOUDHARI Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) IN this reference at the instance of the assessee relating to asst. year 1969 70, the Tribunal has referred to this Court the following questions of law under S. 26(1) of the GT Act, 1958:

(2.) BRIEFLY stated, the relevant facts are that upto the commencement of the previous year relevant for the asst. year 1969 70, there were two partners in the assessee firm with 10 annas and 6 annas share respectively. On and from the first day of the previous year, a son of one of the partners was taken as a working partner, with the result the share of that partner got reduced from 10 annas to 6 annas and the son who joined the partnership as a working partner became entitled to 4 anna share. It is on record that the incoming partner was B. Com. at the time he was taken as a partner. The age of his father the assessee herein, at the relevant time, was 65 years. He was stated to be suffering from asthama and it appears that he died sometime in February 1972, that is, the Tribunal passed its appellate order, and the filing of the reference application.

(3.) SHRI Inamdar, the learned counsel for the assessee, and Shri Deodhar, the learned counsel for the Revenue, have been heard at length. They have referred to and relied upon a number of decisions. In our opinion, however, it is not necessary to refer to each and every case they have referred to and relied upon as the question before us can be answered following our Court's decisions in the cases of CGT vs. Smt. Lalita B. Shah 1976 CTR (Bom) 158 : (1979) 118 ITR 794 (Bom) : TC35R.454 and CGT vs. J.N. Marshall (1979) 120 ITR 613 (Bom) : TC35R.329. The facts in those cases, it must be conceded, were not identical. They could not be. In fact, facts in every case are bound to differ to some extent. The principle laid down in those case which emerges from the observations at page 626 in J.N. Marshall's case (supra) is that by an agreement of partnership there is a conferment of mutual rights and the undertaking of reciprocal obligations which would constitute for each of the parties the respective consideration for his share in the profits and assets. It would be impermissible in this view of the matter to consider the transmission or transfer of the goodwill de hors the formation of the partnership. It is to be considered as part and parcel of the same transaction, and considered as such, it would be impossible to come to the conclusion that the formation of a partnership, particularly a professional partnership, as arose in that case was one without any consideration. The cases relied upon by Shri Deodhar, it may be stated, broadly fell in two categories. In one category of cases, the giving up of shares by a major partner was in favour of the minors who were admitted to the benefits of the partnership. In another category of cases, the facts were that there was a renunciation by one partner of a part of his share in favour of other partners by execution of a document. These cases, therefore, have no bearing on the question before us. The facts in the case before us, as we have already pointed out, are that the incoming partner is major; he shares both profits and losses; he was a graduate; his father was 65 and suffering from asthama, and eventually died. In the circumstances, we consider it quite reasonable to infer that he was taken as a partner for consideration, particularly in the light of the observations of our Court in the two cases referred to above.