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TMI Blog1993 (6) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5(1)(xiv) of the Gift-tax Act, 1958? " The respondents in these references are the assessees. We are concerned with the assessment year 1975-76. The assessees were partners in the firm Messrs. Jairam and Sons, each having one-third share. The partnership business was started in 1958. One son of each of the partners was introduced in the partnership on October 27, 1973, and each of them was given half share of his father. The sons contributed Rs. 15,000 each. The original partners were assessed to gift-tax on the ground that they have forgone 16-2/3 per cent. of the profit-sharing right to the incoming partners without adequate consideration. The value of such a right was worked out by taking the average of five years' income, deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese two aspects, the Appellate Tribunal found in favour of the assessee. As observed by a Division Bench of this court in V. O. Markose v. CIT [1975] 98 ITR 504, the question whether the requirements of section 5(1)(xiv) have been satisfied is not a pure question of fact. It depends in the first instance on evidentiary facts. But the conclusion to be reached from such evidentiary facts depends on the correct legal principles that should be applied and upon the proper legal approach and this is a question of law. The Supreme Court in CGT v. P. Gheevarghese, Travancore Timbers and Products [1972] 83 ITR 403, observed that the expression "in the course of carrying on the business, etc.", means that the gift should have some relationship wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56, 50 and 45 in the partnership deed. They could have continued the business, according to counsel, and the assistance of their sons was not necessary taking into account the age of the partners at the time of the partnership deed. The sons who were introduced as partners were aged 19, 20 and 32. One of them had already been working with the firm for the last 12 years. This observation of the Tribunal, according to counsel, is contrary to the observation at a later stage that the new partners were already working in the firm. There is no difficulty in reconciling the two observations. The new partners would have been working in the firm and one of them would have been there for a period of 12 years. It is brought to our notice by learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the firm and not by the individual. The gift was not of a property of the firm. It was in these circumstances that this court observed that it cannot be said that there is an integral connection between the new arrangement that was made and the business that was carried on. This decision is, therefore, of no assistance to the Revenue. For the reasons stated in the foregoing paragraphs, we are of the opinion that the Income-tax Appellate Tribunal was justified in granting exemption under section 5(1)(xiv) of the Gift-tax Act. The question referred to this court is, therefore, answered in the affirmative, that is, in favour of the assessee and against the Revenue. A copy of this judgment under the seal of the court and the signature o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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