TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal rules no gift-tax liability for business conversion into partnership</h1> <h3>Commissioner Of Gift-Tax Versus AC Raghava Menon</h3> The Tribunal ruled in favor of the assessee, determining that there was no liability for gift-tax under the Gift-tax Act for converting a proprietary ... Gift Tax, Deemed Gift, Firm Issues:1. Whether the assessee is liable to be taxed under the Gift-tax Act for converting a proprietary business into a partnershipRs.Analysis:The case involved a question referred under section 26(3) of the Gift-tax Act, 1958 regarding the liability of the assessee to be taxed under the Act. The assessee converted a sole proprietorship business into a partnership, leading to the Gift-tax Officer levying tax on the perceived gift of goodwill and immovable assets. However, the Commissioner of Gift-tax (Appeals) and the Tribunal held that there was no liability for gift-tax based on the decision in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509. The Revenue contended that this decision was not applicable to the case, emphasizing the definition of 'gift' under the Act.The Revenue relied on the decision in CGT v. Chhotalal Mohanlal [1987] 166 ITR 124 to argue for a deemed gift due to the conversion of the business into a partnership. However, previous judgments highlighted that the exigibility of gift-tax depends on the terms of the partnership deed or contract governing the transaction. The consideration for the transfer of personal assets to a partnership was deemed unascertainable until dissolution, as observed in Sunil Siddharthbhai's case [1985] 156 ITR 509. The Tribunal found no evidence to conclude that the assessee transferred the asset for inadequate consideration, thus rejecting the notion of a deemed gift.The judgment emphasized that the credit entry in the capital account did not represent the true value of the consideration, and the Revenue failed to establish all necessary conditions for deeming a gift under section 4(1)(a) of the Act. The Tribunal rightly concluded that no gift was involved in the transaction. Therefore, the answer to the question posed was in favor of the assessee and against the Revenue, indicating that the assessee was not liable to be taxed under the Gift-tax Act for the conversion of the business into a partnership.
TaxTMI 
TaxTMI 
