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TMI Blog1985 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... nd his son, Shri Harinder Katyal. According to this deed, the shares in the profits and losses in the firm were equal between the partners. By another partnership dated April 1, 1962, another son of Shri Bhagwan Dass, namely, Shri Virender Kumar Katyal, minor, was admitted to the benefits of the partnership. According to this deed, Shri Virender Kumar, minor, had been admitted to the benefits of the partnership to the extent of 40% in the profits only. The two partners to the deed, Shri Bhagwan Dass and Shri Harinder Katyal, had to receive 20% and 40% of the profits, respectively, but their share in the loss was 50% each. The Gift-tax Officer held that Shri Bhagwan Dass had parted with his portion of the right to get profit to the extent of 30% in favour of his son, Virender Kumar Katyal, without adequate consideration and hence there was an implied gift in the accounting year relevant to the assessment year. The conclusion was that there was a gift within the meaning of section 2(xii) read with section 2(xxiv)(d) of the Act. The gift was computed as being a transfer of 30% of the goodwill. The value of this goodwill was computed at Rs. 68,995 which was treated as a taxable gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm and hence when the assessee transferred his share or interest in the firm by a deed of gift to his three sons, it was a gift of the goodwill. It may be noted that the assessee had a one-third share in the firm which he transferred by a deed of gift to his three sons. In CGT v. Premji Trikamji Jobanputra [1982] 133 ITR 317, the Bombay High Court held in a case where a minor son was admitted to the benefits of the partnership and the share was reduced, that whether the same amounted to a gift of goodwill or not depended on the facts of each case. The court laid down certain propositions to determine whether there was a gift or not. In a sense, this case supports the case of the Revenue before us. But, it may be noted that further facts had to be ascertained before it could actually be determined whether there was gift or not. In CGT v. A. M. Abdul Rahman Rowther [1973] 89 ITR 219 (Mad), the assessee gifted Rs. 25,000 to a daughter and a son from the share capital account and then made them partners. It was held there was a gift by virtue of the transfer of the capital and the re-adjustment of the shares of the partnership. In CGT v. Ganapathy Moothan [1972] 84 ITR 758 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 of this Act can be reproduced here with advantage. It reads: " 30. Minors admitted to the benefits of Partnership.-(1) A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership. (2) Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have access to and inspect and copy any of the accounts of the firm. (3) Such minor's share is liable for the acts of the firm, but the minor is not personally liable for any such act. (4) Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm, and in such case the amount of his share shall be determined by a valuation made as far as possible in accordance with the rules contained in section 48 : Provided that all the partners acting together or any partner entitled to dissolve the firm upon notice to other partners may elect in such suit to dissolve the firm, and thereupon the court shall proceed with the suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant clause of the partnership deed regarding the minor is as follows: " 4. That Mr. Virender Kumar Katyal (minor) who has been admitted to the benefits of the partnership will receive 40% share out of the profits only. " There is no question of the minor getting any share in the property of the firm. This case is, therefore, quite different from some of the cases cited earlier in which there has been a gift by a father of his share in the partnership to his sons. We do not find any gift involved in the present case. Now, the next question is whether a gift can be implied in the circumstances like the present because of the provisions of the Gift-tax Act. The first relevant provision is section 2(xii) which defines " gift " to mean the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration. As seen above, this partnership by which the minor was admitted to the partnership does not include any transfer of movable or immovable property to that minor. If we now turn to the definition of " transfer of property " in section 2(xxiv), we find that the definition is as follows : " `transfer of property' m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r investigation, but that is not the case before US. In the case before the Madras High Court in Addl. CGT v. A. A. Annamalai Nadar [1978] 113 ITR 574, referred to earlier, the Tribunal has held that there was no gift as the transfer of 75% shares was for adequate consideration, but an alternative point was also mentioned which was as follows (p. 576): " The Tribunal further held that there was goodwill which could exist in this type of business carried on by the assessee for the supply of sanna leaves and pods which had been carried on for a continuous period of 14 years. On the alternative contention, the Tribunal held that the partnership deed did not provide for any share to the minors in the goodwill and that, in view of section 30(2) of the Partnership Act, the goodwill could only be shared by the assessee and his major son and if at all there was gift, gift-tax could be levied only on 50 per cent. of the value of the goodwill of the business. " The court held on this as follows (p. 577): " As far as the minor sons are concerned, there was absolutely no transfer of any assets as such so that there could be no gift of any goodwill in their favour. " We agree with thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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