TaxTMI 
TaxTMI 
2002 (10) TMI 18
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. 16 Coch. of 1987 for the assessment year 1976-77. The question referred by the Tribunal pursuant to the direction issued by this court in the judgment dated November 15, 1994, in O.P. Nos. 10415 of 1992 and 10416 of 1992 in both these cases reads as follows: "Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that there is no gift involved in the facts of the present case?" The assessee, a limited company was carrying on business in automobile parts since October 1, 1971. On October 1, 1974, it entered into a partnership with four other persons. Clause (4)(a) of the partnership deed dated October 1, 1974, provides that the business which the assessee-company had been carrying on at (1) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....34,39,305 was taken as the gift made by the assessee in favour of the firm. Before the first appellate authority the assessee raised two contentions: (1) that the transfer of assets, if any, in the transaction is supported by consideration and that (2) even if there is a deemed gift it is entitled to exemption under section 5(1)(xiv) of the Gift-tax Act. The first appellate authority accepted both the contentions and allowed the appeal. The Department took up the matter in appeal before the Income-tax Appellate Tribunal, Cochin Bench. The Tribunal, relying on the decision of the Supreme Court in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509, held that in a case of formation of partnership, the consideration which the incoming partner gai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he finding of the Tribunal that there is no gift involved in the transaction cannot be sustained. Senior counsel further submits that the findings of the Tribunal that the transfer of the business is supported by consideration is also not justified. Counsel for the assessee, on the other hand, relies on the decision of the Full Bench of this court in CGT v. Smt. C.K. Nirmala [1995] 215 ITR 156 as also the decision of the Karnataka High Court in D.C. Shah v. CGT [1982] 134 ITR 492 as affirmed by the Supreme Court in CGT v. D.C. Shah [2001] 249 ITR 518 and submits that the transfer of the business of the assessee-company to the partnership firm is supported by consideration. He also submits that the finding of the first appellate authority....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estion whether any gift is involved in this case, i.e., the worth of the assets which was brought in by the assessee, the worth of the assets and/or consideration brought in by the other partners in the partnership firm. Only after a proper ascertainment of the aforesaid factual situation the question as to whether there is any gift involved in the transaction can be arrived at. It would appear from the order of the Assessing Officer that instead of valuing the worth of the asset brought in by the company to the partnership firm the Assessing Officer picked up the goodwill of the company and determined the value of the asset by adopting the previous three years profit. A Full Bench of this court in CGT v. Smt. C.K. Nirmala [1995] 215 ITR....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... firm and the new partners agreed to work for the firm. The Karnataka High Court held that since there was capital contribution by the incoming partners and by the minors admitted to the benefits of partnership that would constitute sufficient consideration and hence no gift is involved. This decision was taken up before the Supreme Court and the same was affirmed in CGT v. D.C. Shah [2001] 249 ITR 518. The question of law considered by the Supreme Court was as to "whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a taxable gift by the assessee when his share of profit in the firm was reduced from 19 paise to 14 paise and thus the share of his son, Kiran D. Shah was increased from 9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bunal for fresh consideration. Senior standing counsel also relied on a decision of the Supreme Court in Salem Cooperative Central Bank Ltd. v. CIT [1993] 201 ITR 697 to the effect that it is for the Tribunal to consider on all points irrespective of whether the parties have argued or not. Taking into account all the circumstances of the case, we are of the view that the main question as to whether there is any gift at all in the transaction of the assessee entering into the partnership has to be considered afresh by the Tribunal after ascertaining the basic facts with regard to the assets brought in by the assessee-company as well as all other partners and in the light of the principles laid down by the Supreme Court and by this court i....