TaxTMI 
TaxTMI 
1968 (9) TMI 45
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....after carrying out necessary, repairs. Besides the four sons who were partners with him in the partnership, the assessee had two other sons by the name of Mohanlal Karnaji and Govindlal Karnaji who were working as employees of the partnership. The assessee and his four sons decided to introduce Mohanlal Karnaji and Govindlal Karnaji as partners in the partnership with effect from Kartak Sud 1, Samvat Year 2016, that is, 1st November, 1959, and there was accordingly a change in the constitution of the partnership as recorded in a new partnership deed, dated 2nd November, 1959. The shares of the assessee and his four sons who were original partners in the firm were required to be adjusted as a result of the introduction of Mohanlal Karnaji and Govindlal Karnaji and the shares of the partners in the re-constituted firm were as under : The assessee ... 6 nP. Kasturji Karnaji ... 19 nP. Adaji Karnaji ... 19 nP. Varjangji Karnaji ... 19 nP. Nanji Karnaji ... 13 nP. Mohanlal Karnaji ... 12 nP. Govindlal Karnaji ... 12 nP. The shares of Kasturji Karnaji, Adaji Karnaji and Varjangji Karnaji remained practically unchanged but the shares of the assessee and Nanji Karnaji were reduced ....
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....ther the case could be brought by the revenue within clauses (b) and (d) of section 2(xxiv) and held that neither of the two clauses had any application to the facts of the present case. The Tribunal observed that, in any event, even if clause (b) or (d) applied and there was therefore a transfer of property, the element of consideration was not absent and it could not therefore be regarded as a gift. The Tribunal in the end considered the applicability of section 4(c) and came to the conclusion that that provision too had no application, for even if it were assumed that the assessee discharged or surrendered or released his 19 nP. share in the goodwill of the firm, such release, discharge or surrender was not shown to be wanting in bona fides and could not therefore be deemed to be a gift within the meaning of section 4(c). This view taken by the Tribunal is challenged before us in the present reference made at the instance of the Commissioner of Gift-tax. Before we examine the arguments advanced on behalf of the parties, it will be convenient at this stage to refer to some of the relevant provisions of the Gift-tax Act. Section 2(xii) defines " gift " to mean transfer by one per....
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....charge or surrender was not bona fide. We will therefore not be concerned with the interpretation of section 4(c). Now, as pointed out above, there were two main grounds on which the Tribunal decided against the revenue. One was that the assessee did not have any specific interest in the goodwill of the firm and there was therefore no existing movable or immovable property which could be transferred by the assessee to Mohanlal Karnaji and Govindlal Karnaji, and the other was that, even if there was a transfer of 19 nP. share in the goodwill of the firm, it was not without consideration in money or money's worth. The revenue challenged the decision of the Tribunal on both the grounds on which it was based. The revenue contended that the interest of the assessee as a partner in the firm was an existing though intangible movable property and it could legitimately form the subject-matter of transfer and it was in fact transferred by the assessee to Mohanlal Karnaji and Govindlal Karnaji to the extent of 19 nP. share when Mohanlal Karnaji and Govindlal Karnaji were admitted as partners in the firm. The revenue also argued that the transfer of this 19 nP. share of the assessee in the fi....
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....according to the revenue, was transferred by the assessee to Mohanlal Karnaji and Govindlal Karnaji. The property which was alleged by the revenue to have been transferred by the assessee to Mohanlal Karnaji and Govindlal Karnaji was 19 nP. share in his interest in the firm and that was certainly property which could form the subject-matter of transfer. But the question is whether it was transferred by the assessee to Mohanlal Karnaji and Govindlal Karnaji when these two gentlemen were introduced as partners with 12 nP. share each in the firm. The argument of the revenue was that there was a transfer of 19 nP. share of the assessee in the firm of Mohanlal Karnaji and Govindlal Karnaji since, as a result of the introduction of Mohanlal Karnaji and Govindlal Karnaji in the firm, the share of the assessee was reduced from 25 nP. to 6 nP. and this reduction in the share of the assessee went to make up the 12 nP. share each of Mohanlal Karnaji and Govindlal Karnaji and there was therefore disposition or alienation of 19 nP. share of the assessee to Mohanlal Karnaji and Govindlal Karnaji. The revenue also urged that in any event, as a result of the admission of Mohanlal Karnaji and Govin....