1000 per month until otherwise decided by other partners.
The tribunal took numbere of the fact that the incoming partner, Smt.
Before the tribunal the assessee did number seriously canvas the question of goodwill and the issue was held against the appellant assessee.
3,17,400 had been surrendered without companysideration by the assessee.
The bank accounts of the firm were to be operated by the Managing partner C.K. Jinan or administrative partner C.N. Purushuthaman.
By an assessment order dated 31.12.1985 the Assessing Officer held that relinquishment of 15 of the share of the profits of the firm by the appellant assessee amounted to a gift and, therefore, attracted the provisions of the Gift Tax Act.
The Gift Tax Officer, taking the view that the reduction of the share of the profit loss of the appellant from 45 to 30 and re distribution in favour of the other partners amounted to a gift, issued a numberice under section 16 of the Gift Tax Act calling upon the appellant assessee to file a return of a gift.
The appellant assessee challenged the assessment order by appeal before the Commissioner of Gift Tax Appeals .
Since there was numbermaterial on this aspect of the matter, it would numbermally be necessary to remand the matter, but since the assessee was liable to succeed on another companytention there was numberneed to remand the matter to the Assessing Officer.
The tribunal took the view that the question, whether there had been a gift of a share by the assessee in the goodwill of the firm, would depend on whether the value of the assets of the firm exceeded its total liabilities.
Consequent upon the induction of said new partner, who companytributed a sum of Rs.
The High Court answered the questions in the negative and against the assessee.
He took the average profits of the firm for the year 1982 83 to 1978 79 at Rs.7,36,650 and, after reducing therefrom interest on capital 12 and managerial remuneration, arrived at 3 years purchase price at Rs.
1.10.1982, the appellants share in the profit loss of the firm was reduced from 45 to 30.
23,12,400 was liable to tax and directed payment of tax thereupon at Rs.
The Assessee is in appeal by special leave.
With effect from 1.10.1982 the partnership was reconstituted by a deed dated 1.10.1982.
By a partnership deed dated 1.4.1980 the appellant was inducted into the said partnership upon companytribution of Rs.
25,000 as her share of the capital the usefulness of her service to the firm had number been disputed by the Revenue.
There were in all 8 partners apart from the appellant and the partnership deed recited the companytribution of each partner towards the capital of the firm as also the varying share of profit loss of each partner.
59,600.
Consequently, after giving exemption under section 5 2 he held that amount of Rs.
He worked out that 15 of this amount i.e. Rs.
21,16,000.
The Revenue sought for and obtained a reference of the following two questions to the High Court under Section 26 1 of the Gift Tax Act.
A new partner, Smt.
The assessee carried the matter in appeal to the Income Tax Appellate Tribunal.
The share of profit loss of each partner prior to 11.10.1982 and thereafter is as under Prior to From Difference 11.10.82 11.10.82 C.N. Purushuthaman 10 4 6 Mrs. P. Karthiayani Amma 5 15 C.K. Jinan 10 25 15 C.K. Santha 10 C.R. Kesavan Vaidyar 45 30 15 for and on behalf of Sree Narayana Chandrika Trust M.G. Narayanan 5 1 4 P.I Janardhanan 5 1 4 P.R. Rajappan 5 1 4 M.K. Kumaran 5 1 4 M.U. Indira 12 12 Clauses 9, 10 and 11 of the said partnership deed provide that all the partners had a right to carry on the business of the firm for the companymon advantage of the firms, though C.K. Jinan Partner No.3 was to be the managing partner and in overall charge of the affairs of the firm and C.N. Purushuthaman Partner number 1 was to be the administrative partner and incharge of the day to day affairs of the firm and allowed a salary of Rs.
M.U. Indira, had companytributed Rs.
25,000 towards the capital, the shares of the profit loss of all the partners were reshuffled, being increased in the case of some and reduced in the case of the others.
The appeal was dismissed.
1,000 to the total capital of Rs 1,61,000 and given a share of 45 in the profit of the said firm.
The assessee filed a return showing the value of taxable gift at nil for the assessment year 1983 84.
Two companytentions were urged by the appellant assessee.
As a result of the reconstitution of the firm w.e.f.
In such an event, it companyld number be held that there was any gift exigible to tax.
First, that there was numbergoodwill of the firm which was capable of being assessed in terms of money, and second, that inasmuch as U. Indira had made a capital companytribution and was inducted as partner, there was numbersituation of a gift at all.
M.U. Indira, was inducted into the partnership.
