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TMI Blog1974 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership with effect from August 17, 1966, and that such transfer did not constitute a gift. He further contended that, even if it amounted to a gift, that gift was exempted by virtue of section 5(1)(xiv) of the Gift-tax Act, 1958. Both these contentions were negatived by the Income-tax Officer, in appeal by the Appellate Assistant Commissioner, and in further appeal by the assessee, by the Tribunal. Sri V. O. Markose was one of the two partners of the firm of M/s. Joseph and Markose for a fairly long period and V. O. Markose was entitled to a half share in the profits of the firm. The partners of the firm were members of the legal profession practising law. At the time of the transfer, Sri V. O. Markose was 75 years old and his partner, Sri Thomas Vellapally, has had a serious heart attack and was not in full vigour or health. Sri V. O. Markose wrote two letters explaining the circumstances under which and the reasons that prompted the induction of the new partner. The new partner was a man with varied experience and quite elderly. He has been assisting the firm by doing part of the work of the firm for four years and he was being given remuneration by the firm for such work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(v) of the Income-tax Act, 1961, for short "the Act". That section is in these terms : 16. The income chargeable under the head "Salaries" shall be computed after making the following deductions, namely:-..... (v) any amount actually expended by the assessee, not being an amount expended on the purchase of books or other publications, or on entertainment or on the maintenance of a conveyance, which, by the conditions of his service, he is required to spend out of his remuneration wholly, necessarily and exclusively in the performance of his duties." The assessee in that case, an Income-tax Officer, claimed that the rent he paid for a building that he took on hire in Ernakulam to which place the officer was transferred was a payment made by him which satisfied the requirements of the section and so claimed the rent as an allowable deduction from his salary in computing his total income for the purpose of assessment under the Income-tax Act, 1961. This court ruled that the payment of rent may perhaps be for the performance of his duties but was not wholly, necessarily and exclusively required to be spent in the performance of the duties. The claim of the assessee was, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the firm with the object of conferring benefit on them for the natural reason that the father wanted to look to the advancement of his daughters. It was further provided in the deed that even the minor children would, in due course, be admitted to partnership. Clause 18 of the schedule already referred to laid down that the assessee could nominate either one or all of his minor children to be partner or partners on their attaining majority and such nomination or appointment could be made even by a will or codicil. The assessee retained complete control over the running of the partnership business and it can hardly be said that he needed any help from his daughters particularly when there is no evidence that he was in a weak state of health, his age being below 50 years. Moreover, there is nothing to show that the daughters had any specialised knowledge or business experience so as to be able to assist in the development or management of the business. We are wholly unable in these circumstances to accept that the present case is different from Dr. George Kuruvilla's case. In our judgment there was no cogent material to come to the conclusion that the gift of Re. 25,000 to each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The conclusion to be reached from such evidentiary facts must depend upon the correct legal principles that should be applied and upon the proper legal approach. The second question referred to us in this case can be compared with the question which had often arisen whether a particular transaction was an adventure in the nature of trade. Dealing with such a question the Supreme Court elaborately dealt. with this aspect whether the conclusion reached by the Tribunal that in a particular case there was an adventure in the nature of trade was a conclusion on a pure question of fact unassailable before the High Court on a reference except when the conclusion on the question of fact itself had been referred to the High Court. In paragraph 11 of the judgment in G. Venkataswami Naidu Co. v. Commissioner of Income-tax this aspect has been fully dealt with. It is not only useful but necessary to extract the passage in view of the contentions that have been referred to by counsel for the department that the conclusion reached by the Tribunal is a conclusion on a pure question of fact which we should accept in trying to answer the question before us: "What then is the nature of the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction is treated as a conclusion on a question of fact, it cannot be ignored that, in arriving at its final conclusion on facts proved, the Tribunal has undoubtedly to address itself to the legal requirements associated with the concept of trade or business. Without taking into account such relevant legal principles it would not be possible to decide whether the transaction in question is or is not in the nature of trade. If that be so, the final conclusion of the Tribunal can be challenged on the ground that the relevant legal principles have been misapplied by the Tribunal in reaching its decision on the point; and such a challenge would be open under section 66(1) because it is a challenge on a ground of law. The same result is achieved from another point of view and that is to treat the final conclusion as one on a mixed question of law and fact. On this view the conclusion is not treated as one on a pure question of fact, and its validity is allowed to be impeached on the ground that it has been based on a misapplication of the true legal principles. It would thus be seen that whether we call the conclusion in question as one of fact or as one on a question of mixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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