9911796707
TMI Blog2000 (6) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... artner took over the business of the firm along with its assets and liabilities as per account books, w.e.f. 1-4-1992. The assessee-respondent, being the retiring partner was not given any consideration for goodwill. The G.T.O. considered that the assessee's share of goodwill was relinquished without any consideration, and so he treated the assessee's share of goodwill as constituting deemed gift, which he accordingly brought to gift tax vide his order dated 13 -2- 1995. The Ld. CGT(A) vide his impugned orders dated 21-7-1995 held that the relevant partnership deeds did not provide for the entitlement of retiring partners to goodwill and the partnerships were at Will. He also held that in the business involved the profits were merely due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the profits of three years for gift valuation. He has cited the following decisions in his support 1. CGT v.Karnaji Lumbaji [1969] 74 ITR 343 (Guj.) 2. CGT v. V.A.M. Ayya Nadar [1969] 73 ITR 761 (Mad.) 3. CGT v. A.M.AbdulRahman Rowther [1973] 89 ITR 219 (Mad.) 5. As against the above, the Ld. A.R. of assessee has contended that because of the difference among the partners five firms, namely (A) M/s. Himmatmal Harak Chand (B) M/s. G.M. Sales Corpn. (C) M/s. Luxmi Timber Mart (D) M/s. Gautam Timber Mart (E) M/s. Mohanlal Veerchand were dissolved on 1-4-1992. He has contended that in these firms there is no immovable property in their balance-sheet and there are no reserves as well. He has contended that even if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the relevant material on record, and have also gone through the cited decisions, whose copies have been furnished on record. 7. In V.A.M. Ayya Nadar's case there was realignment of profit sharing ratio by partners of the firm and it was not a case of any partner retiring from the firm. This case has been distinguished in P. Krishnamoorthy's case wherein it has been held that on a partner retiring from the firm when entire moneys due to the partner from the firm including capital invested along with profits and shares to his credit have been taken away by that partner, then the retiring partner has no right to receive any future profits in that firm and hence there is no question of his giving up any such right. in Karnaji Lumbaji's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aghu the Hon'ble Kerala High Court has relied on Addl CIT v. Mohanbhai Pamabhai [1987] 165 ITR 166 wherein the Hon'ble Supreme Court has held as under : "When a partner retired from the firm and received his share of an amount calculated on the value of the net partnership assets including goodwill of the firm, there was no transfer of the interest of the partner in the goodwill.' 11. In Chalasani Subbayya's case the Hon'ble A.P. High Court has held that future profits is not property. It has further been held therein as under : "It is not open to the department to pick out one of the assets of the firm, namely, the goodwill, and say that a retiring partner has relinquished his share in the goodwill and levy gift-tax thereon. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er due to retirement of some partners and/or introduction of some new partners or due to re-adjustment of the profit sharing ratios of the very same existing partners. In the latter situation on reduction of a partner's profit sharing ratio, there is a transfer of right to share in profits and in turn transfer of an interest in property,. and if the same takes place, without any consideration, the transaction may well be treated as gift, or for that matter a deemed gift and in turn eligible to gift tax. However in the former situation of the partner retiring from partnership firm, then if the retiring partner has taken away all that he is entitled to from the firm, that is his capital investment together with his share in the assets of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended by the Ld. A.R. of the assessee before us that the G.T.O. while working out the value of goodwill has not taken into consideration the salary as also the interest referred to above and that if the same are considered, then the value of the goodwill comes to almost nil or negligible. Considering the above contention of the Ld. A.R. as also the fact that the partnerships were at Will and that there is no mention of any retiring partner's entitlement to any share in goodwill in the partnership deed nor in the dissolution deed as submitted by the Ld. A.R. of assessee and also considering the fact-situation of the cases in hand as revealed from the materials on record, we find no fault with the impugned orders of the Ld. CGT(A) in holding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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