TaxTMI 
TaxTMI 
1996 (1) TMI 145
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....or the accounting year ended on 31-12-1981 the constitution was as under : 1. Laxmanbhai R. Gandhi - HUF 34% 2. Virendra R. Gandhi - HUF 22% 3. Shailesh R. Gandhi 22% 4. Rajesh R. Gandhi 22% Further with effect from 1-1-1982 the firm was reconstituted with Vadilal Ice-cream (P.) Ltd. joining as new partner and the profit sharing ratio was derived as under for the year ended on 31-12-1982 :- 1. Laxman R. Gandhi 25% 2. Virendra R. Gandhi 16% 3. Shailesh R. Gandhi 17% 4. Rajesh R. Gandhi 17% 5. M/s. Vadilal Ice-cream (P.) Ltd. 25% &nbs....
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....ata Ice-cream Ltd. entered the Ice-cream market as a tough competitor and during the very first six months of its existence, this new company was able to achieve a turnover of Rs. 39 lakhs and it established a net work of as many as 225 dealers/distributors. It was pointed out that the induction of M/s. Vadilal Ice-cream (P.) Ltd. in the partnership firm gave a much needed corporate support to the firm to cope with the increasing competition. The Supreme Court decision in the case of Chhotalal Mohanlal was also distinguished and certain other High Courts' decisions were cited in support of the contention that when a major partner is admitted and there is consideration in the form of capital contribution coupled with other business considerations, such a transaction cannot be said to be a gift chargeable to tax. The Assessing Officer was not convinced with these arguments. According to him, the Supreme Court decision was relevant and further the Kerala High Court in CGT v. Ganapathy Moothan [1972] 84 ITR 758 had held that capital contribution was only for the purpose of working the partnership and the same cannot be regarded as consideration. Accordingly, the Assessing Officer deter....
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.... under from the Head Note : " C, G and P were the three partners of a firm with seven annas, four annas and five annas share, respectively. On a reconstitution, P retired, G contributed as before, the share of C was reduced to four annas one R was inducted as a partner with four annas share and two minor sons of C, K and D were admitted to the benefits of the partnership, with a right to a share of 12% and 13% respectively in the profits. The question was whether there was a gift by C to his two minor sons under the Gift-tax Act, 1958. The Tribunal and, on a reference, the High Court held that there was no gift. On appeal to the Supreme Court : Held, reversing the decision of the High Court, that there was a gift within the meaning of section 2(xii) of the Gift-tax Act, 1958, by C in respect of a part of the goodwill. Goodwill is property and when minors are admitted to the benefits of partnership in a firm and the share of an existing partner is reduced thereby, the right to the money value of the goodwill stands transferred and the transaction constitutes a "gift" under the Gift-tax Act, 1958. " 6.1 Similar issue came up for consideration before the Karnataka High Cou....
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.... no person would like to join that business as a partner and contribute capital. It is indeed the goodwill of the firm itself which attracts new capital. Therefore, the capital contributed by the new partners constitutes adequate consideration not only in respect of the right to share future profits but also in respect of the property in the goodwill ". 6.2 It may be mentioned that the Hon'ble Madhya Pradesh High Court in the case of Smt. Kamla Devi Bhanot also has held that when the new partners contribute capital, the surrender of share in their favour cannot be said to be without consideration. Further, the Hon'ble Gujarat High Court in the case of Achalsinhji Keshrisinhji & Co. has held that even a promise to do something is also a consideration. It will be worthwhile to reproduce the following paragraph from the Head Note :--- " Held, (i) that even a promise to do something is also a consideration. Clause 7 of the partnership deed provided that M had given a promise to invest an amount of Rs. 5,000. She had given the promise in view of the fact that the said partnership agreement was executed on December 8, 1971, while it was brought into operation from an earlier date, ....