2004 (1) TMI 36

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....) Whether the Appellate Tribunal has correctly appreciated the decision of the hon'ble Supreme Court in the case of CGT v. Chhotalal Mohanlal [1987] 166 ITR 124?" The facts giving rise to these references are as under: All the five assessees were partners in the firm, M/s. Accurate Engineering Co., having 20 per cent, share each. During the previous year relevant to the assessment year 1981-82, there was a change in the constitution of the firm in as much Mr. G. V. Modha, trustee of the Accurate Trust, was admitted as a partner with a 50 per cent, share and therefore reducing the share of all the five assessees by 10 per cent. each. Subsequently, there was another change in the constitution of the said firm whereby the assessees partn....

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.... assessment orders passed by the Gift-tax Officer in all these cases and allowed the appeals of all these assessees. Hence, the Gift-tax Officer carried the matter in appeal before the Income-tax Appellate Tribunal. Before the Tribunal, the Revenue contended that the goodwill of the business has been held to be an asset by the hon'ble Supreme Court in CGT v. Chhotalal Mohanlal [1987] 166 ITR 124 and that, therefore, the capital contributed by M/s. Accurate Trust in the capital account cannot be treated as consideration for transfer of goodwill by these five partners in favour of M/s. Accurate Trust. The Revenue accordingly contended that the transfer of goodwill by the five outgoing partners in favour of M/s. Accurate Trust was without a....

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....m and taking accounts at that time does not involve any transfer of property as such. Retirement of a partner and continued existence of the firm carrying on the same business by the remaining partners postulates that the firm carries on the business with the goodwill. It is ultimately a question of contract between the parties as to the settlement of accounts whether the goodwill is to be taken into account or not. For the purpose of inviting operation of gift tax, the first condition is that there must be a transfer from one person to another. As no transfer takes place between the partners or from the firm to the partners or vice versa as a result of dissolution or on retirement of the partner, the taxability of the event is rightly not ....