COMMISSIONER OF GIFT TAX Vs. LAL CHAND DEOMAL

JUDGEMENT

(1.) THE Tribunal has referred the following question of law arising out of its order dt. 9th Sept., 1980 in respect of the asst. year 1976 -77 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no deemed gift under S. 4(1)(c) of the GT Act, 1958 -

(2.) BRIEF facts of the case are that the assessee was a partner in the firm M/s Kamal Industries prior to asst. year 1976 -77. The assessee retired during the asst. year 1976 -77 and his son Shri Suraj Nankani was taken up as a partner in his place. The GTO considered that it is a deemed gift by the father to his son and the same is taxable in the hands of the assessee.

(3.) IN the appeal before the AAC, it was held that it was surrender of the interest of the assessee in the firm and, therefore, the said surrender of interest in the share of the firm was a deemed gift. In second appeal before the Tribunal, the appeal was allowed on the ground that there was no future right to receive share income with a retiring partner and since there was no right to receive any future profits from the said firm and hence there was no question of his giving up any such right to share the future profits. Relying on the decision of Madras High Court in Addl. CIT vs. V. Krishna Moorthy & Ors. 1977 CTR (Mad) 433 (1977) 110 ITR 212 (Mad) : (1977) Tax 48(3) -155, it was held that such non -existent right cannot be "property"as contemplated by the provisions of S. 4(1) (c) of the GT Act, 1958, (sic) are not applicable. Sec. 4(1)(c) of the GT Act is as under :