TaxTMI 
TaxTMI 
1989 (4) TMI 127
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....re 3. Shri Mohammad Anis 1/3rd share With effect from1st April, 1978, there was a charge in the constitution of the firm and the re-constituted firm was as below: 1. Shri Mohd. Shafique 20% 2. Shri Mohd. Shamim 25% 3. Shri Ziaul Rehman 24% 4. Shri Ikramul Azim 14% 5. Smt. Sultani Begum 17% As a result of re-constitution Shri Mohd. Anis retired form the firm and the shares of Mohd. Shafique and Mohd. Shamim were reduced. Three new partners namely Ziaul Rehman, Ikramul Azim and Smt. Sultani Begum were introduced as new partners in the partnership firm. The GTO initiated gift-tax proceedings against the three partners who constitute the old firm on the ground that by getting their sha....
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.... capital and they were simple beneficiaries for no consideration whatsoever. Reliance was also placed on a judgment of the Hon'ble Calcutta High Court in CGT vs. Nani Gopal Mondal (1984) 41 CTR (Cal) 64 : (1984) Rs. 50 ITR 469 (Cal). In that case "N" was a partner in a firm and was entitled to 1/3rd share in the partnership. He made a gift of his 1/3rd share to his three sons and filed a gift-tax return in respect thereof in which the amount of goodwill was not included. The Hon'ble High Court held that goodwill was one of the assets of the firm and, therefore, had to be taken into consideration for determining the value of the gift. This too, therefore, was a case of a pure and simple gift. 4. Reliance was also placed on CGT vs. Premji ....
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....f certain persons as partners who contributed capital for admission to the partnership any gift was involved the value of the goodwill cannot be taken in isolation. The Hon'ble Supreme Court observed as under: "Now it is quite clear that according to the deed of partnership and even otherwise on admitted facts goodwill was a part of the properties and assets of the business which the assessee was running under the style of Travancore Timber and Products at Kottayam. All these were valued at Rs. 4,00,000. The entire property of the assessee's proprietary business was transferred to the new partnership. According to cl. 7 in the schedule to the partnership deed the parties were to be entitled to the capital and property of the partnership ....
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....been made before us to justify it." This ruling was cited on behalf of the assessee before the GTO and he had referred to the same in his order, yet he has erred in taking the value of the goodwill in isolation without considering what were the other assets and liabilities of the firm and whether the incoming partners in fact got something more valuable than the amount of capital invested by them. 6. In CGT vs. J.N. Marshal (1979) 120 ITR 613 (Bom) it was held that in a case where the incoming partners were obliged to work in the business were to share the losses and contributed capital then admission to the partnership was for consideration and no gift of goodwill was involved. Similarly in Addl. CIT vs. A.A. Annamalai Nadar (1978) 1....