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TMI Blog1996 (7) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... 65. The GTO had proceeded to determine the value of the taxable gift at 20% of three years purchase price on the basis of the average profit of the business for the five preceding years with adjustment towards interest on capital and managerial remuneration. In the first appeal, the CIT(A) allowed deduction for managerial remuneration at Rs. 72,000 as against Rs. 24,000 allowed by the AO. The CIT(A) also allowed interest on capital @ 18% as against 12% allowed in the assessment. There was also a direction by the CIT(A) to allow deduction for the firm's tax in determining the taxable gift. Not satisfied with the relief allowed by the CIT(A), the assessee has preferred the second appeal before the Tribunal. 2. At the time of hearing, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la High Court in the case of K.K. Achuthan vs. CIT (1988) 69 CTR (Ker) 233 : (1988) 170 ITR 518 (Ker) for the view that surrender of 20% of the share of profit by the assessee would amount to a gift liable to tax in this case. He also drew our attention to the decision of the CGT vs. Chhotalal Mohanlal (1987) 166 ITR 124 (SC) and submitted that in the case of reconstitution of a partnership firm resulting in reduction in the share of profit of a partner, there is a gift within the meaning of s. 2(xii) of the GT Act, 1958. As regards the consideration, Sri George submitted that the new partners had agreed to contribute their share of capital or to share the future loss in the business or to work for the business of the firm, that is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engg. Co., Calicut, cannot be accepted. 5. As regards the contention that the surrender of the share by the assessee was for valid consideration, it is to be made clear that according to the learned representative, the consideration is "the new partners had agreed to contribute their share of capital, agreed further to share the loss if any in future and also to work for the business of the firm". These may be valid reasons for admitting the new partners to the partnership firm, but it is difficult to accept the claim that these are the considerations received by the assessee from the new partners when he surrendered part of the interest in the firm. If the new partners contribute capital or agreed to share loss in the business in futur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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