2000 (9) TMI 69

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....ive and against the assessee (see [1997] 224 ITR 431, 435) : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the distribution of plant and machinery belonging to the assessee-firm by it to its partners constituted a transfer of the assets and, hence, it was a case of deemed gift by way of sale of the assets at a consideration less than the mar....

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....rice of Rs. 10,76,220. On these facts, the Gift-tax Officer came to the conclusion that the assessee had made a gift of the machinery to its five partners and the consideration therefor was much less than the market value as evidenced by the sale of the machinery to the third party for the sum of Rs. 10,76,220. On the basis that the assessee had made a gift of Rs. 9,50,185, the assessee was charge....

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....ngly, it upheld the Tribunal's conclusion. Learned counsel for the assessee submitted to us that when there is already a subsisting shared interest in an asset, as in the case when a firm is continuing, the distribution of such asset to a partner would amount to replacing the shared interest with an exclusive interest in the asset and so there was no transfer. There was a transfer when individu....

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....ay be realised by the receipt of only one of all the assets. What happens here is that a shared interest in all the assets of the firm is replaced by an exclusive interest in an asset of equal value. That is why it has been held that there is no transfer. It is the realisation of a pre-existing right. The position is different, it seems to us, when a partner brings his personal asset into the part....