TaxTMI 
TaxTMI 
1984 (5) TMI 127
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....r and Shri Jayakannan, minor son of Smt. G. Saraswathi Ammal, was also admitted to the benefits of the partnership. The new partnership came into existence under the partnership deed dated 4-4-1976 in order to 'instil young blood in the business'. According to this partnership deed, the new partners were also to contribute capital to the firm. The shares of the partners in the profits and losses of the firm were as follows : ------------------------------------------------------------------------ Sl. No. Name of the partner Ratio Ratio from 3-3-1976  ....
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....milarly, according to him, Shri G. Parthasarathy did not have any experience and skill in the line of business carried on by the firm and so his admission to the partnership was of no consequence. The GTO was, therefore, of the view that Smt. G. Saraswathi Ammal and Shri A.M.S. Guruswamy Nadar have relinquished 20 per cent of their share in the goodwill of the firm in favour of their sons without any consideration and so the transactions tantamounted to taxable gifts. The GTO worked out the value of the taxable gift at Rs. 1,39,707 in each of these cases and brought the same to tax under the Gift-tax Act, 1958 ('the Act'). 5. The AAC did not agree with the GTO. In the case of Smt. G. Saraswathi Ammal, he observed as under : "3. The de....
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....ction of capital even though slightly late cannot be ignored while considering the adequacy of consideration. In the case of Shri Jayakannan, the capital was brought in much before the close of the accounting year even though it was later than the date of admission. Considering the ruling of the Madras High Court in the case of Annamalai Nadar and the decision of the ITAT, Madras Bench cited above, the minor has been admitted to the benefits of partnership with due consideration." Similarly, in the case of Shri A.M.S. Guruswamy Nadar the AAC accepted the contention of the assessee and observed as under : "3. An identical issue has been decided by the ITAT, Madras Bench in Gift-tax Officer, Virudhunagar v. A.M.S. Ganesan, Sivakasi i....
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....ing year. But the ITAT, Madras Bench, in the decision cited above has endorsed the above act as sufficient consideration." 6. Aggrieved by the orders of the AAC, the department has filed the present appeals. 7. Before us, the learned representative of the department reiterated the arguments of the GTO. He submitted that Shri C. Jayakannan was a minor and so he could not render any services to the firm. He further submitted that Shri G. Parthasarathy had also no experience in the line of business carried on by the firm and so his admission to the partnership was meaningless. He, therefore, urged that Smt. G. Saraswathi Ammal and Shri A.M.S. Guruswamy Nadar had relinquished their shares in the goodwill of the firm in favour of their son....
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....igh Court in the case of CGT v. Ali Hussain M. Jeevaji [1980] 123 ITR 420. In addition, he brought to our notice a decision of the Tribunal in a similar case of GTO v. A.M.S. Ganesan [GT Appeal No. 37 (Mad.) of 1982, dated 15-3-1983], wherein similar claim of the assessee in that case was accepted. The learned representative of the assessee, accordingly, pleaded that the orders of the AAC were unassailable. 9. After going through the record and hearing the learned representatives of the parties, we are of the opinion that the impugned orders of the AAC are sound and call for no interference. It is not disputed that Shri C. Jayakannan and Shri G. Parthasarathy contributed capital for becoming partners of the firm. It is not the case of th....