1980 (9) TMI 143 - AT - Income Tax

Issues Involved:
1. Inclusion of Rs. 4,000 as the value of the deceased's share in the goodwill of the firm.
2. Inclusion of Rs. 30,000 thrown into the common hotchpot of the HUF under Section 10 of the ED Act.
3. Inclusion of Rs. 13,000 gifted by the deceased to his son, daughter-in-law, and granddaughter under Section 10 of the ED Act.

Issue-wise Detailed Analysis:

1. Inclusion of Rs. 4,000 as the value of the deceased's share in the goodwill of the firm:
The accountable person contended that the firm, M/s Rajputana Trading House, did not have any goodwill since it was merely trading in grocery articles. However, the tribunal rejected this contention, stating that the firm had been in existence for 25-30 years in a significant commercial locality, thereby earning some goodwill. The tribunal also addressed the computation of the goodwill value. It accepted the contention that interest on capital should be allowed at 12% instead of 10%, but upheld the remuneration to partners at Rs. 500 per month. Consequently, the average net income for three years was recalculated to Rs. 10,729, and the goodwill was valued at Rs. 16,000, with the deceased's share being Rs. 2,500.

2. Inclusion of Rs. 30,000 thrown into the common hotchpot of the HUF under Section 10 of the ED Act:
The accountable person argued that the Rs. 30,000 thrown into the common hotchpot by the deceased was not a disposition and hence not a gift, relying on decisions from the Madras High Court. The tribunal noted that the departmental representative contended that the transaction amounted to a disposition under Explanation 2 to Section 2(15) of the ED Act, making it a gift under Section 27, and thus, includable under Section 10. However, the tribunal referred to the Madras High Court decisions in A.N.K. Rajamani Ammal vs. CED and CED vs. Smt. Mookammal, which held that such transactions did not amount to a disposition. The tribunal concluded that Rs. 30,000 should be treated as belonging to the HUF and only the deceased's share therein should be deemed to have passed on his death under Section 7 of the ED Act.

3. Inclusion of Rs. 13,000 gifted by the deceased to his son, daughter-in-law, and granddaughter under Section 10 of the ED Act:
The tribunal addressed the inclusion of Rs. 13,000 gifted by the deceased to his son, daughter-in-law, and granddaughter. Although the gifted amounts remained in the firm where the deceased was a partner, the tribunal referred to the Supreme Court decision in CED vs. Kantilal Trikamlal, which held that mere enjoyment or benefit by the donor in the gifted property does not attract Section 10 unless it is clearly referable to the gift. Thus, the tribunal held that the inclusion of Rs. 13,000 was not justified and directed its deletion.

Conclusion:
The appeal was allowed in part. The tribunal directed that the assessment be modified to reflect the revised value of the deceased's share in the goodwill of the firm as Rs. 2,500, excluded the Rs. 30,000 thrown into the common hotchpot of the HUF from being deemed to have passed under Section 10, and deleted the inclusion of Rs. 13,000 gifted to the deceased's relatives.

← Previous Next →