9911796707
TMI Blog2003 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ABU., S. R. SINGHARAVELU. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J. -This reference is under the Gift-tax Act which has since been repealed. A partnership firm, which originally consisted of five partners, was reconstituted on October 1, 1982, by admitting the company as a partner and allotting to it a 60 per cent, share in the profits and losses after it brought in fresh capital of Rs. 30,000. The shares of the original five partners were at the time of reconstitution reduced from 20 per cent, to 8 per cent. each. Subsequently, on December 31, 1982, the original five partners retired, and received at the time of retirement their capital as shown in the books of account of the firm. The genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as a partner. He held, therefore, that the admission of the company as a partner was for a consideration and there was no gift or deemed gift as on October 1, 1982. The Commissioner, however, upheld the order of the Assessing Officer who had sought to levy gift-tax on the difference between 40 per cent, of the market value and the amount paid to the retiring partners/releasors after they had released their rights in the firm's properties. While concluding his order, he erroneously stated that the appeal was dismissed, while, in fact, the appeal should have been allowed in part. On further appeal by the assessee to the Tribunal, the Tribunal held that no gift-tax was payable either on account of the admission of the company as a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities of the firm and, there was no material at all to hold that what was paid to the retiring partners was an amount which was less than the amount they would have been entitled to on taking into account all the assets and liabilities of the firm on the date of their retirement. When a partnership is constituted, it is open to the partners to agree among themselves the terms subject to which they will carry on business as a firm. It is also open to them to agree on the terms on which they will agree to relinquish their interest in case any one of them decides to do so. So long as the terms of the agreement are not incompatible with any statutory requirement, the terms agreed among the partners are the terms that bind them. It was ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here a partner had retired from two firms. He was sought to be taxed under the Gift-tax Act on the ground that the amounts taken by him from the firms for his share was less than the market value thereof, as the goodwill of the firm had not been taken into account. The court held that when a partner retires, all that he gets is the value of his share in the firm's assets less its liabilities and that, in such circumstances, it cannot be held, assuming that the retiring partner received less than what was due to him, that the difference was something that he had transferred to the continuing partners within the meaning of "transfer of property" for the purposes of the Gift-tax Act. Though in this case the firm did not continue, as all the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
