TaxTMI 
TaxTMI 
1990 (2) TMI 124
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....n-law, which amounted to a deemed gift, which was liable to gift-tax under the Gift-tax Act. He determined the value of this alleged gift by adopting the super-profit method for determining the goodwill of the business, and arrived at the value of this gift at Rs. 77,304, which he brought to charge in the hands of the assessee. 3. The assessee appealed objecting to this assessment and contended that the late Rajamony Nadar was 58 years old at the time of entering into the partnership with his sons and daughters-in-law, that he was suffering from heart ailment and could not look after his business personally and that therefore he took his two sons and daughters-in-law as partners, who had agreed to contribute capital to the partnership business as and when required. It was further submitted that on account of the illhealth of Rajamony Nadar there was a decline in the profits of the business, as could be seen from the figures of profits set out in the assessment order by the Gift-tax Officer himself while computing the value of the gift in the super profit method. It was argued that his two sons were Engineering Graduates, that one of them was working in Minnsota University, U.S.A....
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....sons and two daughters-in-law into partnership. It is further stated in the written submissions that the business of the firm after the formation of the partnership had developed and increased manifold, as could be seen from the sales turnover of Rs. 5.26 lakhs in 1977-78 to Rs. 30.20 lakhs in 1987-88. It is further stated that Rajamony Nadar expired on 2-12-1981. There is no dispute about these facts stated by the assessee in his written submissions. 6. On the above facts it is the assessee's contention that the four partners were taken in by Rajamony Nadar for the purpose of expansion of his business and for obtaining fresh financial resources, which would constitute adequate consideration in money or money's worth and therefore there could be no gift, much less a deemed gift, as alleged by the Gift-tax Officer. In support of these submissions, the assessee has relied on the decision of the Madras High Court in G. Shanmugam's case and CGT v. T.S. Shanmugham [1977] 110 ITR 237. 7. In T.S. Shanmugham's case the assessee had taken his two sons who were assisting him in his business as his partners in the said business and after carrying on the business in partnership for two y....
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....e to the conclusion that the transfer was in the course of the carrying on of the business and hence the gift was exempt from taxation. Their Lordships followed their earlier decision in T.S. Shanmugham's case as well as the decision of the Kerala High Court in the case of V.O. Markose v. CIT [1975] 98 ITR 504. 9. In Addl. CGT v. A.A. Annamalai Nadar [1978] 113 ITR 574 (Mad.) the assessee, who was carrying on commission a business in 'sanna' leaves and pods, converted the said business into a partnership by taking his major son, who was already working with him as an employee, and admitted his two minor sons to the benefits of partnership, each of them being entitled to a 25% share in the profits. The Gift-tax Officer held that the business of the assessee enjoyed a goodwill and, by taking his three sons into the partnership, the assessee transferred 75% of the goodwill of the business and estimating the same at Rs. 24,501 subjected it to gift-tax. This was confirmed by the AAC, but the Appellate Tribunal held that the transfer of the goodwill by the assessee was for consideration and hence on the basis of the decision of the Gujarat High Court in CGT v. Karnaji Lumbaji [1969] 7....
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....case of A.A. Annamalai Nadar. 11. The learned departmental representative, Shri Jha, vehemently contended that the gift-tax assessment was properly made, in view of the decision of the Madras High Court in CGT v. S. Rukmani Ammal [1973] 87 ITR 549. This decision is clearly distinguishable on facts, as in that case there was no evidence that the major sons or any of them had any specialised knowledge or experience so as to be able to assist the assessee in the development and management of the business. Their Lordships further held that there was nothing in the said case to indicate the earning of the profits with the efficiency of the management by the sons. Their Lordships further held that in fact the inclusion of the minor sons also in the partnership clearly showed that the object of entering into the partnership was to benefit the sons and not for advancement or improvement of the business. On the contrary, the facts of the present case are entirely different, as we have discussed above. Therefore, this decision is not applicable to the facts of the present case. 12. Similarly, the decision of the Kerala High Court in C.K. Krishnankutty Nair v. CGT [1977] 110 ITR 541 is ....
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....financial resources and the existence of consideration in money or money's worth having been established, there is no gift to be deemed." Thus, it would be clear that it was the case of the assessee before the departmental authorities that there was no gift involved, much less a deemed gift, which would be liable to tax in his hands. Therefore, it is well within the jurisdiction of the Tribunal to examine this contention of the assessee and come to an independent conclusion, apart from what the Dy. Commissioner (Appeals) has stated in his appellate order. Further, the Appellate Tribunal is not confined to the grounds of appeal raised before it while deciding an appeal. This would be clear from Rule 11 of the Income-tax Appellate Tribunal Rules, 1963, which reads as follows :-- "Grounds which may be taken in appeal : 11.The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule : Provided that the Tribunal shall not rest its....