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TMI Blog1978 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... " A few facts may be stated : We are concerned with the estate of Nagji Raghavji, who died on 30th November, 1962. Prior to 1951, the deceased was carrying on business in the import and sale of hardware, etc., which was his sole proprietary concern. By a partnership deed dated 3rd January, 1951, his son, Ramanlal, was taken as a partner. The said partnership deed is annexed to the statement of case as annex. " A ", and, by the same, Ramanlal is given his share in the profit and loss of four annas in a rupee, the balance of twelve annas being reserved by Nagji. There is, however, cl 6 in the deed which clearly provides that all the rights, title and interest of M/s. M. Madhukar Co. in the premises, furniture, fixtures and goodwill shall belong to Nagjibhai. Another partnership deed was executed on 12th December, 1955, between Nagjibhai and Ramanlal ; a copy of the same is to be found annexed as annex. " B " to the statement of case. By this deed, Ramanlal's share was increased from four annas to six annas in a rupee, and with this enhancement there was a corresponding diminution in Nagjibhai's share from twelve annas to ten annas in a rupee. Clause 6 of the original deed of part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome part of the tenancy rights and goodwill, according to the Appellate Controller, the deceased was not wholly excluded from the possession and enjoyment of the same till his death, and the provisions of s. 10 were clearly attracted. The matter was taken in further appeal to the Tribunal. It was contended before the Tribunal that there was no necessity of any specific deed for the purpose of transferring goodwill and vesting it in all the partners comprising the new partnership. Reliance was placed on s. 14 of the Partnership Act. The Tribunal upheld this contention. In its view, no document was necessary for the purpose of transferring the item of goodwill and other rights including the tenancy rights. The Tribunal considered the recital which we have earlier extracted, and, in the view that it took, the Tribunal held in favour of the accountable persons that the goodwill became vested in the firm, which would mean that, after the new partnership was formed, Nagjibhai retained 55% interest in the goodwill, tenancy rights, furniture and fixtures and the balance 45% became vested in Ramanlal and Dhirajlal, respectively. Ramanlal would have a 30% interest in the same equivalent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the said unreported judgment (since reported in [1978] 115 ITR 89 (Bom)) and read as follows : " It is obvious that the question whether the provisions of section 10 are attracted or not must principally depend upon the first question whether the relinquishment of 6 annas share in the goodwill and tenancy rights in the first instance and further relinquishment of 6 annas share in the goodwill and tenancy rights on the occasion of reshuffling or profit-sharing proportion amount to gifts or not ; in other words, unless these relinquishments amount to gifts in the sense that these were without adequate consideration, the further question as to whether the donor had or had not entirely excluded himself from possession and enjoyment of goodwill and tenancy rights would not arise. Mr. Joshi also fairly conceded that before his submission could be accepted in its entirety the revenue must establish that there was a gift in favour of the son by the deceased father on each of the two occasions. Now, it is not disputed that the expression ' consideration ' or ' adequate consideration ' has not been defined in the Estate Duty Act and these expressions will have to be understood in thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft of any portion of the goodwill by the deceased to his son.' It was sought to be urged by Mr. Joshi that the physical labour to be contributed by the son might afford adequate consideration for giving him 6 annas share initially, but at least when the profit-sharing proportion was reshuffled on November 10, 1956, for additional share of 6 annas granted to the son there was no adequate consideration and as such at least that relinquishment by the deceased in favour of his son should be regarded as a gift, to which the provisions of section 10 would apply. It is not possible to accept even this contention. As we have stated above, presumably on account of advancing age the father wanted his son to take over the business, retaining small responsibilities with himself. It would be reasonable to assume that an additional share was granted to the son in view of the son accepting additional responsibilities of the business. In any case, in view of the finding which has been recorded by the Tribunal, which is applicable to both the occasions, it would be difficult for the revenue to urge that the transaction amounted to gift without adequate consideration." In connection with this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the Tribunal has rather cursorily observed that the conferment of goodwill on the partnership of three was not for commercial considerations, without giving any reason for this bald conclusion. If the relationship of the partners is properly understood as explained in the aforesaid three decisions, this conclusion cannot be sustained. As far as Ramanlal is concerned, it is further to be observed that under the partnership of 12th November, 1955, he had six annas share in the profits, which was more than 30% share in profits given to him under the partnership of 18th December, 1959. Further, under the partnership of 1955, he was entitled to commission of half per cent. on the total sales, which commission has been given a go-by to in the new partnership when Dhirajlal is introduced as a partner. As far as Ramanlal is concerned, therefore, we find that his share of profits is reduced from about 36% to 30% ; he has lost his commission. It is true that by reason of omission of cl. 6 and by the express recital in the partnership of 1959, which we have noted earlier, Ramanlal gets a 30% share in certain assets including goodwill which hitherto he had not. On the one hand, there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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