COMMISSIONER OF GIFT TAX Vs. LEELADEVI MUTHA

JUDGEMENT

(1.) BOTH these references arise from the same order dated December 23, 1982, of the Income-tax Appellate Tribunal. The references have been made at the instance of the Revenue. For convenient disposal of these references, the facts given in M. C. C. No. 274 of 1987 are taken into consideration.

(2.) THE assessee was the partner of Jawanmal Anraj, Raipur, with 40 per cent. share of the profit. As a result of reconstitution of the partnership deed dated November 6, 1973, her share in the profit was reduced to 30 per cent. and the Gift-tax Officer held that as a result of settlement of the partnership, the assessee had forgone her share in the goodwill of the firm valued the same at Rs. 31,000. He relied upon the decision of the Madras High Court in CGT v. T. S. Shanmugham [1977] 110 ITR 237. On appeal, the Appellate Assistant Commissioner of Income-tax set aside the order of the Gift-tax Officer. It was further held that there was no gift by the retiring partner to the continuing partners as the retiring partner had no right to future profits. THEreafter, the Department filed an appeal. THE Tribunal affirmed the order of the Appellate Assistant Commissioner. THErefore, the following question has been referred by the Tribunal for answer by this court ;

(3.) THE Tribunal also held that "in the present case, there is absolutely no material to hold that the value of the assets of the earlier firm including the goodwill exceeded the total liability of the earlier firm. As far as the present case is concerned, one of the conditions laid down in this decision is satisfied, namely, the incoming partners including the minor have brought sufficient capital. We, therefore, find that having due regard to all the abovementioned decisions, there is absolutely no basis to levy gift-tax in both these cases. Accordingly, we confirm the orders of the Appellate Assistant Commissioner and dismiss the Departmental appeals."