1993 (6) TMI 50

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of the business and hence the assessee was entitled to exemption under section 5(1)(xiv) of the Gift-tax Act, 1958? " The respondents in these references are the assessees. We are concerned with the assessment year 1975-76. The assessees were partners in the firm Messrs. Jairam and Sons, each having one-third share. The partnership business was started in 1958. One son of each of the partners was introduced in the partnership on October 27, 1973, and each of them was given half share of his father. The sons contributed Rs. 15,000 each. The original partners were assessed to gift-tax on the ground that they have forgone 16-2/3 per cent. of the profit-sharing right to the incoming partners without adequate consideration. The value of such....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t-tax Officer to have been made bona fide for the purpose of such business". On these two aspects, the Appellate Tribunal found in favour of the assessee. As observed by a Division Bench of this court in V. O. Markose v. CIT [1975] 98 ITR 504, the question whether the requirements of section 5(1)(xiv) have been satisfied is not a pure question of fact. It depends in the first instance on evidentiary facts. But the conclusion to be reached from such evidentiary facts depends on the correct legal principles that should be applied and upon the proper legal approach and this is a question of law. The Supreme Court in CGT v. P. Gheevarghese, Travancore Timbers and Products [1972] 83 ITR 403, observed that the expression "in the course of carr....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

...., that is, the new partners". The respective age of the three partners was shown as 56, 50 and 45 in the partnership deed. They could have continued the business, according to counsel, and the assistance of their sons was not necessary taking into account the age of the partners at the time of the partnership deed. The sons who were introduced as partners were aged 19, 20 and 32. One of them had already been working with the firm for the last 12 years. This observation of the Tribunal, according to counsel, is contrary to the observation at a later stage that the new partners were already working in the firm. There is no difficulty in reconciling the two observations. The new partners would have been working in the firm and one of them woul....