2004 (1) TMI 30

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..... as no gift. – Thus, we answer the common question in all the three references in the affirmative, i.e., in favour of the assessee - - - - - Dated:- 29-1-2004 - Judge(s) : M. S. SHAH., A. M. KAPADIA. JUDGMENT The judgment of the court was delivered by M. S. SHAH J. -All these references involve the following common question of law which has been referred to us for our opinion in respect of the assessment years 1979-80 and 1980-81: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that on reconstitution of partnership firm where the existing partner surrendered a portion of his share and the incoming partner brought in capital, the transaction did not amount to gift?" We have h .....

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..... st 15% Shri Pragjibhai Gandalal, Trustee of Naresh Trust 15% Shri Maheshkumar Ravjibhai (minor) 20% It would be seen from the above constitution that S/Shri Ravjibhai, Gandalal and Rameshchandra relinquished share to the extent of 5 per cent., 10 per cent, and 5 per cent, in favour of the new partners admitted to the benefits of partnership respectively. The Assessing Officer held that relinquishment of right in share of profit is a deemed gift. On appeal it was claimed that the new partners brought capital to the partnership as under: Parul Trust Rs. 40,000 Naresh Trust Rs. 40,000 Maheshkumar Ravjibhai Rs. 1,25,000 It was also claimed that as per the .....

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..... s decisions on the controversy and has held that when the incoming partner brings any contribution towards the capital of the firm, the said fact together with the obligations undertaken by the incoming partners of sincerely and faithfully carrying on the business for the common advantage of the firm was adequate consideration for reallocating the share of the profits. The apex court has also held that even if there is a managing partner or administrative partner, it is a matter of convenience. The apex court has held in the aforesaid decision that the obligation to sincerely and faithfully carrying on business for the common advantage of the firm is an obligation arising out of the partnership and also ordinarily under the partnership deed .....

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