TaxTMI 
TaxTMI 
1988 (8) TMI 149
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cent as per the agreement dated 21-10-1979 w.e.f 31-10-1979. This 14 per cent was given up in favour of the two other existing partners. The partners resorted to reconstitute the shares mutually. No other reason was delineated in the agreement. Apparently, there was no intercalation or extrication of capital of the firm. Neither any new partners were introduced nor anybody retired. 3. It was contended before the Gift-tax Officer (GTO) that no gift-tax is payable in respect of readjustment. The GTO, however, repelled the contention, as according to him, the provisions of section 4 of the Gift-tax Act, gift-tax is attracted as the assessee relinquished a part of his profit-sharing ratio. As the assessee's share of the firm had reduced by 14....
X X X X Extracts X X X X
X X X X Extracts X X X X
....only a reconstitution of the firm and the admission of the minor sons to the benefits of the partnership with the consent of the continuing partners could not amount to gift by the assessee in favour of his minor son. 7. He also relied on the decision in Chhotalal Mohanlal's case. As this case has been fully discussed in the earlier case, relied by him, we do not find necessary to discuss the facts of this case. Other cases relied by him -- D.C. Shah v. CGT [1982] 134 ITR 492 (Kar.) and CGT v. P. Gheevarghese, Travancore Timber & Products [1972] 83 ITR 403 (SC) will be discussed at the opportune time. 8. The learned counsel argued that it was for the Department to find out that the transaction amounted to gift and chargeable to Gift-tax. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther reconstitution of the firm as four new partners and four minors were admitted to the benefits of the partnership. A fresh deed of partnership was again drawn up and the shares were reallocated. The shares of some of the erstwhile partners were reduced in favour of the new partners. New partners in 1964 and the partners and the persons admitted to the benefits of partnership in 1968 contributed capitals in the firm and the new partners agreed to work for the firm. On the question whether the reallocation of shares in 1964 and 1968 amounted to gifts, the Hon'ble High Court held that were contributions of capital by new partners and the partners admitted to the benefits of the partnership. Moreover, the clauses in the deed of partnership ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... power to borrow from banks and other private parties for the purpose of the business and to execute bonds, documents, agreements and other activities as might be necessary. There were other provisions also which showed that it was the assessee who retained substantially the control of the running of the business in his own hands. Clause 17 provided that whenever any of the partners died during the continuance of the partnership then the partnership would not be dissolved between the surviving partners and fairly elaborate provisions were made with regard to what would pass to the representatives of such deceased partner from out of the properties and assets of the partnership as also its profits. The partnership deed also contained what we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any other person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the GTO to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment." 13. He argued that relinquishment in this case was made bona fide, therefore, the exemption is available to the assessee under clause (c) referred to above. However, his submission cannot be accepted. Firstly, because it cannot be accepted that the Supreme Court was obvious of this clause and held the relinquis....