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TMI Blog1991 (9) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... eena Trust are for the benefit of the wife and the minor daughter of Shri Baber Pasha. In the partnership, the five trusts contributed Rs. 5,000 each, as capital. S/Shri Aurangzeb Pasha and Baber Pasha had certain Coffee estates. S/Shri Aurangzeb Pasha and Baber Pasha, by way of their contribution towards capital of the firm, brought in the Coffee estates. The capital contributed by S/Shri Aurangzeb Pasha and Baber Pasha was much more than the amount of capital contributed by the trustees. The interests of the various partners in the partnership were as under : (i) Shri Aurangzeb Pasha 12.50 per cent (ii) Al-Habeeb Trust 25.00 per cent (iii) Al-Fatah Trust 6.25 per cent (iv) Khwaja Trust 6.25 per cent (v) Shri Baber Pasha 18.75 per cent (vi) Mubarak Trust 25.00 per cent (vii) Madeena Trust 6.25 per cent 3. The WTO was of the view that S/Shri Aurangzeb Pasha and Baber Pasha, the assessees, had transferred Coffee estates to the firm for inadequate consideration for the benefit of their wives and children and, as such, the provisions of section 4(1)(a)(iii) of the Wealth-tax Act, 1957 were applicable. The WTO has stated as under : " . . . . It is apparent to notice h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth of the assessee, but went much beyond that. Anyhow this need not detain us at the moment and in case need be we will come to this point later. 4. Being aggrieved by the action of the WTO, in invoking the provisions of section 4(1)(a)(iii), the assessees went up in appeal before the CIT(Appeals). The CIT(Appeals) upheld the view of the WTO that the provisions of section 4(1)(a)(iii) were applicable. The CIT(Appeals) was of the view that, taking into consideration the fact that the shares allocated to the assessees in the partnership were not commensurate with the capital contribution made by them, it was to be said that the transfer of the Coffee estates by the assessees was without adequate consideration and as such the provisions of section 4(1)(a)(iii) were attracted. The CIT(Appeals) held as under : " Sri Aurangzeb Pasha and Sri Baber Pasha would each have got 50 per cent share in the interests of the partnership. They have introduced five trusts as partners and they have allocated the interest in such a manner that each family gets 50 per cent. The capital contribution by each of the trusts is only Rs. 5,000 as against the contribution of Sankan Estate as capital by Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the case. 5. We have considered the matter carefully. Section 4(1)(a)(iii) of the Wealth-tax Act, 1957 is in the following terms : " 4. Net wealth to include certain assets-- (1) In computing the net wealth of an individual, there shall be included, as belonging to that individual-- (a) the value of assets which on the valuation date are held-- (i) ..................................................................................................................................... (ii) ................................................................................................................................... (iii) by a person or association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both, or (iv) ..................................................................................................................................... " It is so obvious that sub-clause (iii) does not apply in this case. This sub-clause becomes applicable whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in clause (a) and sub-clauses (i), (ii) and (iii) of clause (b) of section 48. " The holding of property for the benefit of another person has a certain legal connotation and it will be erroneous to say that the partnership firm holds the property for the benefit of its partners in that sense of the term. In view of, firstly that the firm is not a " person " and secondly, even if it is to be regarded as a " person " it cannot be considered to hold the properties for the benefit of the assessees or their wives or minor children, the provisions of sub-clause (iii) of section 4(1)(a) cannot come into operation. 6. Then, for invoking sub-clause (iii), the transfer should be otherwise than for adequate consideration. The assessees had brought their coffee estates to the firm, by way of their capital contribution. Certain sums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the capital contributed by him. That can only be a ground for saying that there has not been adequate consideration for the capital brought in by him. We are not considering the applicability of the provisions of section 4(1)(a)(iii) with regard to capital investment made by a partner in a firm. The amount of capital investment, being the property of the partner, as it is, is includible in his total wealth and resort to the deeming provisions is not required. We are considering the applicability of the deeming provisions of section 4(1)(a)(iii) to the property which having been transferred, no more belongs to the assessee and would not be includible in his total wealth, but for the applicability of section 4(1)(a)(iii). Not being allotted share in profit commensurate with capital contribution of Rs. 5 lakhs can only be a ground for saying that there has not been adequate consideration for capital contribution, but that will be no ground for saying that the sum of Rs. 5 lakhs which the transferor has received, for the transfer of his property to the firm, is not adequate consideration for the property transferred. Whether the amount received by him is adequate consideration or not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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