AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (8) TMI 91
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....itioner. From 1969, he has been running a nursing home at Attingal under the name "V.V. Clinic". On April 1, 1984, he formed a partnership with his wife, Dr. Molly M. Das and their son M. Vinod, and daughter, M. Veena to take over the hospital as partnership business. Till then Dr. Molly M. Das was working in the hospital as a salaried employee. The son, Vinod, was a final year MBBS student and the daughter, Veena, was studying for BDS (dentistry). Though the partnership deed was drawn on December 12, 1984, it is stated in the deed that the partnership shall be deemed to have come into effect from April 1, 1984. It is provided in the partnership deed that the capital of the first partner, viz., Dr. Mohandas, shall be the balance in his acco....
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....60 per cent, thereof, i.e., Rs. 25,09,800. Towards the share in the goodwill transferred by the assessee there was an addition of Rs. 3,06,826 thereby assessing the total value of the gift at Rs. 32,11,626. The assessee took up the matter in appeal and the Commissioner of Income-tax (Appeals) accepted the assessee's plea that there was no element of gift involved in converting the proprietary concern into a partnership as the arrangement was to provide continuity of the service that was being rendered to the patients. But the Commissioner of Income-tax (Appeals) found it was not possible to delete the sum of Rs. 4,88,000 which the assessee had declared as taxable gift in the return filed by him. Accordingly, the appellate authority upheld ....
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....ch the gift is proved to the satisfaction of the Gift-tax Officer to have been made bona fide for the purpose of such business, profession or vocation". Section 5(1)(xiv) had come up for interpretation before this court as well as before the Supreme Court. In CGT v. Dr. George Kuruvilla [1970] 77 ITR 746, the Supreme Court held as follows: "The donor is exempt under section 5(1)(xiv) from liability to pay tax only if the gift is in the course of carrying on a business, profession or vocation and is made bona fide for the purpose of such business, profession or vocation. The clause does not enact that a gift made by a person carrying on any business is exempt from tax, nor does it provide that a gift is exempt from tax merely because the pro....
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....t the assessee was not entitled to exemption under section 5(1)(xiv). On these facts, the Division Bench held as follows: "The assessee, after relinquishment of his 15 per cent, share of profits in favour of his sons, who were all majors, continued to be a dominant partner with control over all major partners. The conduct of the business did not change in any way by the adjustment of the profit and the shares. Therefore, the relinquishment of 15 per cent, share by the assessee amount to a deemed gift which was exigible to gift-tax." In CGT v. M. Sankaran Nair [1972] 85 ITR 396 (Ker), the facts of the case are as follows: On the date of the partnership, Sankaran Nair was 53 years old. The preamble in annexure A shows that the partnership wa....
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....l with the document interpreted by their Lordships of the Supreme Court in CGT v. P. Gheevarghese, Travancore Timbers and Products [1972] 83 ITR 403 (SC). This court held that the assessee was not entitled to exemption." In the present case, the partnership deed is produced as annexure D. In the partnership deed it is stated that it consists of the assessee, his wife and son, Vinod, aged 21 and daughter Veena, aged 19. The preamble to the partnership states as follows: "Whereas, the first party to this deed, viz., Dr. V. Mohandas has been carrying on medical profession in the running of a clinic in the name of V.V. Clinic, Attingal, Trivandrum District, for the past 15 years. Whereas the second party who is an equally qualified doctor has ....
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....ee months' notice from either side. Clause 14 says that the death or retirement of any partner/partners shall not dissolve the firm. The profession/business shall be continued with the remaining or such additional partners as may be agreed upon. Clause 16 says that the partnership shall be one determinate at will. Clause 17 gives power to the assessee as managing partner of the firm. On analysing the above deed of partnership, it is not possible to come to the conclusion that the gift is one which comes under section 5(1)(xiv) of the Gift-tax Act. As already stated in order to attract the benefit of section 5(1)(xiv), two conditions have to be satisfied. The first is that the gift has to be in the course of carrying on a business, professi....