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2010 (7) TMI 770 - HC - Income TaxDeemed gift as per the provisions of the Gift-tax Act - Whether capital contribution of Rs. 11,59,375 by the assessee in favour of the partnership firm on 1st April, 1993, and subsequent retirement on August 31, 1993, after four months by receiving a sum of Rs. 22,84,375 the difference of Rs. 11,25,000 cannot be treated as deemed gift as per the provisions of the Gift-tax Act? - Whether the entire transaction was bona fide not for inadequate consideration and consequently does not attract gift-tax liability? - Held that:- As assessee brought their landed properties into the partnership firm. The transaction is not a sham transaction, It is not a case of complete transfer of right of property in favour of the partnership firm. Partnership has admittedly not paid any consideration for such transfer when the properties were brought into the firm. When the partnership firm has not paid any consideration, when the amount mentioned in the books of account is only a notional value and when the partners even after transfer continue to have interest in the property and only on dissolution or retirement, the actual share of a partner could be ascertained and the value of the property is unascertainable on the day they were brought into the partnership firm, the question of holding it as a deemed gift under section 4(1)(a) is impermissible. That is precisely what the Tribunal has held on considering the various judgments on the point. In that view of the matter, no merit in the contention of the Revenue - substantial question of law is answered against the Revenue and in favour of the assessee.
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