9911796707
TMI Blog1985 (7) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... his partnership is evidenced by a deed partnership dt. 3rd Now., 1967. There was a change in the constitution of the firm by which one Shri Rasiklal D Patel was admitted as third partner which is evidenced by a deed of partnership dt. 1st April, 1974. As per this deed the shares of the assessee, Shri mahendra R. Patel and Rsaiklal D, Patel were 40 per cent, 40 per cent and 20 per cent respectively. According to the GTO the surrender of shares of 27 per cent in favour of the other two partners should be deemed to be gift in terms of s. 4(c) of the GT Act and he has determined the value thereof at Rs. 70,000 roundly on the basis of super profit earned in the past five years after adjusting the interest on the capital and remuneration. This am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of the Madrs High Court decision in the case of CGT vs. Ali Hussain M. Jivaji and Another (1980) 123 ITR 420 (Mad). Reliance was also placed on the decision of the Tribunal C-Bench, Madras in the case of Second GTO vs. Smt. G Saraswathi Ammal (1984) 10 ITD 198 (Mad) wherein in similar circumstances, following the decision of the Madras High Court in CGT vs. Ayya Nadar (1969) 123 ITR 420 (Mad), the Tribunal held that the relinquishment of share in favour of new partners did not constitute gift liable to tax. 5. The ld. Departmental Representative refaced his submission stating that there could be no quarrel over the proposition laid down by the Madras High Court in the case of Ali Hussain M. Jivaju and Another (1980) 123 ITR 420 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the other partners within six months of his or her account in the books of the firm on the date of the retirement together with his or her share of profits if any till the date but shall not be entitled to any share in the assets or goodwill of he firm. According to him a partner retiring from the partnership was entitled to be paid not only his capital and his share of profit and this showed that the agreement to share the profits or loss of the business by the incoming partners was not bona fide and true. therefore the agreement to share the loss of partnership which was in the nature of executor contract was not fulfilled when the retiring partner walked away with his share of capital and share of profit. Therefore, he urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of four minor sons who were admitted to the benefits of partnership and the Court held that the transaction amounted to a gift, as there was no consideration at all, for the admission of minors. As has been stated earlier, the learned Departmental Representative prefaced his argument by conceding the principles laid down by the Madras High Court in the case of Ali Hussain M. Jivaji cited supra. In that case two of the partners relinquished 50per cent of their shares in favour of their sons but there was consideration therefor and hence there was no gift attracting liability to gift-tax. The High Court held that the contribution of capital, rendering of service, sharing the future liabilities or losses of the firm would all constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds profits, if any are of significance which denotes that only if the business results in profits, the retiring partners would be entitled to it and not otherwise. Further the amount was to be paid within six months of the date of retirement. Therefore within a period of six months whatever be the profits or losses upto the date of retirement were bound to be accounted for and adjusted before the retiring partner was paid off. The clause applies equally to the assessee who was the ex-propritrix and, therefore, the provisions of this clause are genuine and meant to be applied for all he partners of the firm therefore, there is no warrant for the contention of the learned Departmental Representative that a retiring partner could walk away ..... X X X X Extracts X X X X X X X X Extracts X X X X
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