9911796707
TMI Blog1983 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12,000 being interest on capital employed, he arrived at a net figure of Rs. 5,26,000. He then ascertained 8% thereon and determined the two years' purchase at Rs. 84,160. Thus the value of relinquishment of the right by the assessee was deemed to be a gift of the value of Rs. 84,160. Aggrieved by the order of the GTO, the assessee appealed to the AAC. Before the AAC, the assessee contended that the admission of the minors to the benefits of the partnership could not have constituted a gift or deemed gift, since there was nothing in the partnership deed dated April 14, 1970, which had the effect of conferring on the minors any interest in the assets of the firm; that all that the minors secured were the rights to share the future profits ; that the relinquishment of a portion of the assessee's right to future profits cannot be taken as a gift at all and that the GTO has erred in holding that the gift was the transfer of the right to share future profits and as such the transaction will fall within the definition of " gift ". The AAC, however, agreed with the assessee I s contention and held that the transfer of right to share future profits would not come within the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2) Even assuming that there has been a gift by the assessee in favour of the minors, that gift cannot be taken to have been made during the assessment year. (3) Even assuming that there has been a gift by the assessee in favour of the minors, it is a gift of the future profits of the business and, therefore, the estimated value of the gift as worked out by the GTO cannot be taken to be correct. We are, however, of the view that it is not open to the assessee to raise contentions (2) and (3) set out above as the question referred to us is not comprehensive enough to include them. The question referred only deals with the assessee's liability to gift tax, and the question is whether the assessee was liable to any gift-tax at all having regard to the nature of the transaction. If the assessee is liable to pay gift-tax, whether the gift-tax is payable in the assessment year or in any other assessment year is not comprehended by the question referred. Similarly, the quantum of the gift or the extent of the assessee's gift-tax liability is not comprehended in the question referred to. We do not, therefore, feel compelled to express our opinion in this case on those contentions advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel for the assessee then contends that the transfer of a right to future profits cannot be taken to be a gift at all because no property in praesenti is transferred and that it is not possible to estimate the future profits for the purpose of valuation of the gift, if any. The learned counsel refers to the decision of this court in Addl. CGT v. Krishnamoorthy [1977] 110 ITR 212, in support of his submission that the right to a future profit cannot be a property at all which could be the subject-matter of a gift. The question that arose in the said case was whether there is any relinquishment of a right to share in the profits of the partnership on partner's retirement in favour of the continuing and newly admitted partners. The facts in that case were that some of the partners retired from the partnership after collecting from the firm whatever they were entitled to get and the firm continued with the remaining partners. Thereafter, the firm admitted new partners. The GTO took the view that since the retiring partner, even after retirement, had a share in the profits of the partnership, that right should be taken to have been relinquished in favour of the newly admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as brought about by the redistribution of shares by which the assessee, out of 3/9ths share, retained 1/9th share and the balance of 2/9ths share was taken by the other two partners. This court held that the re-distribution by way of re-alignment of the share involves a transfer of property amounting to a gift chargeable to gift-tax and that the right of a partner to share in the profits of a firm is as much property as a right of a partner to share in the assets of the firm, and, therefore, a redistribution of the share of the profits as between one partner and certain others involves a transfer of the right which has the effect of diminishing a partner's interest and correspondingly increasing the value or quantum of the shares held by the other partners. In this case, the minors had no interest in the partnership before the reconstitution of the firm on April 14, 1970. It is only by the new terms of the partnership, the assessee relinquished a portion of the right to share his profits so that the minors can have the benefit of the share relinquished. This will directly attract the principle laid down in the decision in CGT v. Ayya Nadar [1969] 73 ITR 761 (Mad). As already st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
