1993 (8) TMI 107 - AT - Income Tax

Summary

Issues:
1. Whether the firm is liable for gift-tax on the transfer of flats to retiring partners.
2. Interpretation of the term 'person' under the Gift Tax Act, 1958 regarding the assessability of a firm.

Analysis:
1. The appeal concerned the liability of a registered firm for gift-tax on the transfer of five flats to retiring partners during the assessment year 1985-86. The Assessing Officer treated the transactions as gifts due to the non-recovery of the amount from the retiring partners. The CGT(A) held that the firm was not liable for gift-tax based on the firm's claim that the flats were purchased in the name of partners using funds from the retiring partners' account. The arbitration award confirmed the transfer of flats to the partners, and the CGT(A) found no evidence to suggest a sham dispute regarding ownership. The CGT(A) relied on precedent to support the non-assessability of a firm for gift-tax.

2. The Departmental Representative argued that a firm should be considered a 'person' under the Gift Tax Act, 1958, based on the definition and the inclusive nature of the term. Citing various cases, the representative contended that a firm falls under the category of 'persons' for gift-tax purposes. However, the counsel for the assessee maintained that the flats belonged to the partners individually, not the firm. Referring to the arbitration award and the CIT(A) order, it was argued that the partners were the rightful owners of the flats, and the payment to one partner was for past services.

3. The tribunal noted a lack of clarity in the records regarding the ownership of the flats, the purchase details, and the arbitration process. Without sufficient information, a decision based on facts was deemed difficult. Considering the definition of 'person' under the Gift Tax Act, the tribunal acknowledged conflicting judicial opinions on whether a firm is assessable for gift-tax. Following the principle of adopting a construction most beneficial to the subject, the tribunal upheld the decision that a firm is not assessable as an entity under the Gift Tax Act, aligning with the Calcutta High Court's ruling.

In conclusion, the tribunal dismissed the Revenue's appeal, upholding the decision that the firm was not liable for gift-tax on the transfer of flats to retiring partners based on the interpretation of the term 'person' under the Gift Tax Act, 1958.