9911796707
TMI Blog1985 (4) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... tnakar's share went down from 60 per cent to 40 per cent and that of Anil from 40 per cent to 30 per cent. Ashok had a 30 per cent share. The GTO held that there has been a gift to the extent of 20 per cent of his share by Ratnakar and to the extent of 10 per cent of his share by Anil. The GTO took the average profit for 5 years (Rs. 93,262) and reduced therefrom interest on capital at 12 per cent (Rs. 19,427) and 15 per cent of the profits as managerial remuneration (Rs. 13,989). The balance amount came to Rs. 59,746. This was capitalised by three times and treated as the value of the right to share the profits of the firm. 10 per cent of the amount was brought to tax as gift in the hands of Anil and 20 per cent of the amount in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above effect. He also relied upon the decision of the Kerala High Court in V.O. Markose v. CGT [1975] 98 ITR 504, wherein it was held that when one of the partners transferred 50 per cent of his interest in the assets of the firm to a newly admitted partner, there was a transfer amounting to gift. Reliance was also placed on the decision in CGT v. V.A.M. Ayya Nadar [1969] 73 ITR 761 (Mad.), wherein it was held that when there is a realignment of profit sharing ratio by the partners of a firm, there is a transfer of property amounting to gift. The decision of the Kerala High Court in CGT v. Ganapathy Moothan [1972] 84 ITR 758, was relied upon in support of the position that the capital contribution by the incoming partner was only for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present right to gift. In the light of the decisions referred to earlier, the right to share profits cannot be treated as a non-existent property merely because the accounts are to be closed on a subsequent date. 7. Lastly, it was contended by the learned counsel for the assessee that in view of the contribution of capital by the incoming partner and also the fact that he had previous experience in the business and had become a working partner, there was sufficient consideration and that there was, therefore, no gift. In support of the contention, the learned counsel relied upon the decision of the Madras High Court in CGT v. Ali Hussain M. Jeevaji [1980] 123 ITR 420. In this case, following the decision of the Gujarat High Court in CGT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case, the assessee had converted a proprietary concern into a partnership by transferring 50 per cent of his interest to his son, who was taken in as a partner. The son had contributed a sum of Rs. 1 lakh as capital. The High Court noticed that the father had entered into the partnership agreement with his son for the purpose of taking over the plantation business and that the son had contributed Rs. 1 lakh as capital. It was held by the High Court that : " On the face of this transaction no gift is involved. But the finding of the Gift-tax Officer as to the existence of a gift and the liability to pay tax thereon was not challenged by the assessee. Assuming, therefore, that the transaction was in the nature, of a gift, even so, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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