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TMI Blog1984 (5) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. G. Saraswathi Ammal, was also admitted to the benefits of the partnership. The new partnership came into existence under the partnership deed dated 4-4-1976 in order to 'instil young blood in the business'. According to this partnership deed, the new partners were also to contribute capital to the firm. The shares of the partners in the profits and losses of the firm were as follows : ------------------------------------------------------------------------ Sl. No. Name of the partner Ratio Ratio from 3-3-1976 up to 2-3-1976 Profit Loss -------------------------------------------------------------------------- i) Smt. G. Saraswathi Ammal 50% 30% 50% ii) Shri G. Jayakannan [minor 20% -- -- son of (i)] iii) Shri A.M.S. Guru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-8-1976 by transfer entry from Majestic Match Industries. It has been held by various High Courts that rendering of services and sharing of future liabilities would be sufficient consideration in the admission of a new partner. In the present case it is true that the new partner being a minor has no right to share losses. But he is a young and dynamic person whose services to the firm in future cannot be ignored. Admittedly the existing partners were getting old and they wanted young blood for the promotion of business. Shri Jayakannan being a member of the family and conversant with the trade practices was best suited for the future expansion of the business. Therefore, one of the main conditions, namely, rendering of services to the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 per cent share, had already a credit balance with the firm, Arasan Match Industries. On 31-3-1977 the above credit balance along with funds brought in by the partner has been treated as his capital of Rs. 35,000. The account copy of Shri Parthasarathy reveals that he has brought in capital in view of his admission as a partner in the firm. It has been held by various High Courts that contribution of labour and share in future losses would be ample consideration for the admission of a new partner. In the instant case there is no dispute regarding the appellant's right to share future losses. His induction in the partnership was made with a view to admitting new blood which presupposes contribution of labour and skill by the incoming part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 5(1)(xiv) of the Act. The learned representative of the department also referred to the decision of the Madras High Court in CGT v. V.A.M. Ayya Nadar [1969] 73 ITR 761 and that of the Kerala High Court in CGT v. Ganapathy Moothan [1972] 84 ITR 758. According to him, therefore, the orders of the GTO deserved to be restored. 8. The learned representative of the assessee, on the other hand, submitted that both Shri C. Jayakannan and Shri G. Parthasarathy were to contribute capital in the firm, that Shri G. Parthasarathy was also to render services to the firm and bear the losses of the business and that these factors constituted valid consideration for admitting them into the partnership. According to him, therefore, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. It has been held by the Madras High Court in the case of A.A. Annamalai Nadar that contribution of capital, rendering of services and sharing in future liabilities and losses would all constitute consideration for the admission of new partners into the firm and there would be no question of any gift liable to tax where the major and minor sons of a partner are admitted into the partnership in lieu of capital contributed by them and the services rendered by major partners. This authority further lays down that so far as the minor partners are concerned, there is no transfer of any assets as such to them so that there could be no gift of any goodwill in their favour. This view has been endorsed by the Madras High Court in another ..... X X X X Extracts X X X X X X X X Extracts X X X X
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