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TMI Blog1981 (7) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee would retire from the partnership as soon as the parties decided it practicable, but in any case not later than 31st Dec., 1971. Bishanlal Ahuja, the party of the first part, had agreed to pay the assessee, the party of the second part, Rs. 1,50,000 towards half share of goodwill relating to the said partnership in terms of cl. 3. In terms of cl. 4, if the total sum due to the assessee plus the one-half share of goodwill referred to fell below Rs. 3,00,000, the difference was to be considered also as value of one-half share of goodwill. Further, there were cls. 5 and 6 which state as under: "5. The land and buildings in which the business is being carried on by the said partnership stand in the joint names of the first and second parties each having an equal share. The Second Party agrees to execute a proper conveyance deed in favour of the first party on his retirement conveying absolutely to the first party his one half share in the said land and building. 6. It is open to the first party to classify the sum payable to the second party as between movable and immovable properties and get necessary documents executed by the second party." 3. Next document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and his brother were partners and that the parties to the document had borrowed monies from the LIC of India by mortgaging their property and thereafter the document speaks of the assessee having agreed to release and relinquish in favour of his brother the entire half share in the firm for a consideration of Rs. 3,00,000 out of which Rs. 1,00,000 was already paid. In terms of the release deed, Rs. 50,000 was payable on execution of the deed and the balance in equal instalments of Rs. 75,000 on 1st Dec., 1972 and 1st Dec., 1973. This deed set out in particular, the details of the property admeasuring about 11, 690 sq. yds. in the schedule thereto. Stamp Duty was paid on the release deed in terms of an endorsement under s. 31 of the Indian Stamp Act wherein it was held to be a release deed and also a mortgage without possession falling under s. 16 of the Indian Stamp Act. 5. The GTO considered the aforesaid documents to determine whether there was any taxable gift. He has set out in his order the salient features of the aforesaid documents to which we have already referred. He pointed out that the partnership deed of 9th Jan., 1965 did not contain any special terms relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,380 . Less: Capital payments : . . Bishanlal Ahuja 1,43,055 . Jagatram Ahuja 1,40,732 . . 2,83,787 . . . 7,13,167 . . 22,52,567 50 per cent share : Rs. 11,26,283 Sri Jagatram Ahuja is entitled to Rs. 12,67,015 as shown below: Capital as on 21st Nov., 1971 Rs. 1,40,732 50 per cent share in surplus assets Rs. 11,26,283 . 12,67,015 Since the assessee had received only Rs. 3,00,000, the GTO proceeded to examine whether the balance of Rs. 9,67,015 constituted a gift or not. 7. The GTO referred to the provisions of s. 2 (xii) of the GTO Act as also the provisions of s. 4 and came to the conclusion that the assessee had foregone an amount of Rs. 9,67,015 in the process referred to which he was entitled and there was clearly a gift. This amount was, therefore, brought to tax in addition to the amount taxed in the original assessment. 8. The assessee appealed to the CGT (A) who set out the background of the case referred to. The CGT (A) (hereinafter referred to as the 'Commr'), observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the value of the main building taken at Rs. 50,000, or the depreciated value of the front mulgies at Rs. 18,788, to the value of the prayer hall taken at Rs. 14,962 or the compound wall taken at Rs. 11,000. There was a dispute regarding the value of the other structures taken at Rs. 1,04,159 which consisted of cycle sheds. According to the assessee, only the scrap value should have been taken, but according to the departmental valuer, these were recent constructions and, therefore, there was no justification for taking the scrap value. The Commr. was of the view that there was no justification to interfere with the valuation of the aforesaid structures and he confirmed the value of the same at Rs. 2,10,000 in round figures. 10. Coming to the value of the land of 11,600 sq. yds. taken by the Deptl. Valuer at Rs. 175 per sq. yds. the Commr. referred to the three cases which the Deptl. Valuer had referred to in his valuation report, viz., Metro Estate. Hindustan Builders property and Tajmahal Hotel property. According to the Commr., the first two properties were more advantageously situated and were not at all comparable and the last property could not be taken as comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 349 : (1971) 82 ITR 599 (SC) and in particular the observations of the Supreme Court at page 605. According to the ld. counsel, even the term 'disposition' as occurring in s. 2(xxiv) of the GT Act could not convert the present sequence of events as far as the assessee was concerned, into a transaction of gift. He submitted that the assessee together with his brother was a partner in a firm. What had happened was that the firm was dissolved and when the firm was dissolved, he emphasized, what took place was a mutual adjustment or settlement of rights. To support this contention, he referred to the decision of the Supreme Court in the case of Malabar Fisheries Co. vs. CIT (1979) 12 CTR (SC) 415 : (1979) 120 ITR 49 (SC). The ld. counsel stated that the assessee, on the dissolution of the firm, received only the amount of Rs. 3,00,000 and he had not given up any consideration thereof any property to which he was entitled for the Revenue to urge that property had been surrendered at less than its market value. According to the ld. counsel, this is also not a case where, even if s. 4(1) could be said to be attracted, there was a deemed gift because no property had been transferred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rference. 13. In making the aforesaid submissions, the ld. counsel submitted that the Tajmahal Hotel Property had an entrance straight on Abid Road whereas in the case of the assessee's property, it was only through a narrow opening that there was entrance into Abid Road. He submitted that the assessee had purchased in 1973, 3,705 sq. yds. of land appurtenant to the present property for Rs. 80 per sq. yd. and in 1972, 7,500 sq. yds. of another appurtenant land was sold at Rs.63 per sq. yd. Looked at from all these angles, he submitted that there was no justification for adopting any value higher than that adopted in the case of Tajmahal Hotel. 14. Coming to the value of goodwill, the ld. counsel placed before us figures of profit according to the profit and loss account from 1967-68 to 1971-72. The aggregate profit for five years came to Rs. 3,28,057. Deducting salary at Rs. 1,500 per month for each of the partners, the profit came to Rs. 1,48,057 and the average profit was Rs. 29,611. The ld. counsel submitted that the average return should be taken at 12 per cent of the average capital which came to Rs. 48,211, and the actual profit being Rs. 29,611 there was no super profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... away or giving up by a person of something which was his. 17. Coming to the merits, the ld. Deptl. Rep. submitted that the Commr. had considered all the relevant facts in fixing the value that he did for the land and no further reduction was warranted. So also, he emphasized that when partners who are in the know of things more than anybody else arrived at a figure of goodwill, there was no warrant for interfering with the same based on a hypothetical calculations. 18. The ld. Deptl. Valuer who was given notice in the present case, submitted that he had placed all material on which he wanted to rely before the Commr. and he would rely on the same material before us to support the valuation. According to him, the mere fact that a lower value has been taken for land eventually in the case of the Tajmahal Hotel property, could not affect the factual position of the valuation of the land in the present case and he pleaded for the order of the Commr. being upheld on the point of valuation. He also stressed that as far as the cycle stand etc. was concerned, since it was recently built, the valuation placed by him was reasonable and there was no justification for taking any scrap val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Malabar Fisheries Co. having regard to the earlier decision in Addanki Narayanappa vs. Bhaskara Krishnappa, (1966) 3 SCR 400 : AIR 1966 SC 1300, that the partnership property vests in all the partners and every partner has an interest in the property of the partnership and during the subsistence of the partnership no partner can deal with any portion of the property as his own. His right is to obtain profits as fall to his share form time to time and upon dissolution a share in the assets of the firm which remain after satisfying the liabilities which can be decided by agreement in which event the rules or s. 48 of the Indian Partnership Act do not apply. In the present case the agreement to dissolve the firm and the dissolution deed executed in pursuance thereof spell out the agreement of apportionment. A coparcener in an HUF does not have any definite share in the family property before division as observed by the Supreme Court in Getti Chettiar's case. The Court observed therein that a member of an HUF who had no definite share in the family property before division, could not be said to diminish directly or indirectly the value of his property or to increase the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction entered into by the assessee with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person in receiving an amount of Rs. 3,00,000 as his share in the partnership assets on dissolution. Hence, what has happened in the present case would not fall within the definition of 'transfer of property' in s. 2 (xxiv) (d). 22. We have already held the case does not fall under s. 2(xxiv)(d). It is further clear that on the facts the case falls outside the purview of s. 2(xxiv) (a),(b) or (c) also. 23. Out of the remaining expressions used in s. 2(xxiv), we only have to examine whether any 'disposition' has resulted or there has been any 'other alienation of property'. The term 'disposition' has been explained by the Supreme Court in Getti Chettiar's case to mean giving away or giving up by a person of something which is his own. In the present case, prior to dissolution, it could not be said that the assessee had an interest in the assets of the firm which was his own. Therefore, his share being indeterminate therein, it could not be said that on a mutual adjustment consequent to dissolution, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich read as under, are attracted. "4. (1) For the purposes of this Act, (a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor: Provided that nothing contained in this clause shall apply in any case where the property is transferred to the Government or where the value of the consideration for the transfer is determined or approved by the Central Government or the Reserve Bank of India; (b) where property is transferred for a consideration which, having regard to the circumstances of the case, has not passed or is not intended to pass either in full to in part from the transferee to the transferor, the amount of the consideration which has not passed or is not intended to pass shall be deemed to be a gift made by the transfer; (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender forfeiture or abandonment, to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid provision. This is because no property has been 'transferred' which is a pre-requisite for cl. (a) and cl. (b) of sub-s (1) of s. 4 to apply. We have given due consideration to the fact that a document styled as "release deed" and registered as such dt. 10th March, 1972 was executed by the assessee. This document cannot be read in isolation and has to be r/w the deed of dissolution. By the said deed the firm stood dissolved w.e.f. 22nd Nov., 1971 and on such dissolution by the said deed by agreement of parties the immovable properties vested in the brother of the assessee. Merely because the parties considered further formalities were necessary to vest the properties in the brother, and the assessee executed the release deed, it does not alter the position that the immovable property which may have been originally purchased jointly, but which was treated as firm's property, had consequent to the dissolution of the firm and the terms of agreement applicable thereto, already vested in the brother of the assessee. Thus, there was no debt, contract, actionable claim or other interest in property which the assessee had parted with as a result of allocation of shares on dissolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s property into Abid Road and the fact that Tajmahal Hotel itself is situated at King Kothi Road a little distance away from T junction on Abid Road to be similar factors in determining the value of the property Tajmahal Hotel property had a somewhat larger frontage Therefore in our view both the properties can be considered as similar The property relied on by the Commr. as similar is one in which there was a disclosure etc. and the price taken is with reference to the disclosed amount also In view of this it cannot straight away be considered as comparable. The ld. counsel for the assessee submitted that the Deptl. Valuation Officer had taken a lower value for the assessee s property i.e. Rs. 175 per sq. yd. when he took the value of Tajmahal Hotel Property at Rs. 220 per sq. yd. and therefore when the Tribunal had taken a value of Rs. 68.per sq. yd. he submitted the value taken by the assesses valuer at Rs. 60 per sq. yd. would be in order. We have given very careful consideration to this argument. Once we have held that the values of the two properties would be comparable, the question of our making any further adjustment would not arise since we have given weight ..... X X X X Extracts X X X X X X X X Extracts X X X X
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