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TMI Blog1991 (1) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. The assessee is a registered firm consisting of 11 partners and constituted under a partnership deed dated 30-7-1981. It was carrying on business in agro-chemicals and pesticides. A company called Indag Products Private Ltd. was incorporated on 24-5-1982 and according to the Memorandum of Association, the main object was to take over the business of the assessee-firm. On 15-6-1982 the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt fact is that all the partners of the assessee-firm were shareholders of the company and the only other shareholders were the promoters of the company, S. James Fredrick and S. Samuel Jaysingh who were each allotted 100 equity shares of Rs. 10 each. On these facts, the Gift-tax Officer was of the view that though all the partners were shareholders of the company, since the firm and the company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the closing stock resulted in a deemed gift. 4. In the further appeal before us it was contended on behalf of the assessee that a firm cannot be an assessee under the provisions of the Gift-tax Act and that the transfer of the business was not for inadequate consideration so as to envisage any deemed gift under section 4(1)(a) of the Act. On the other hand, it was contended on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he number of shares issued to the shareholders. If we were to disturb the valuation of the assets in the Balance Sheet by enhancing the value of the closing stock the statement of assets and liabilities can be balanced only by revising upwards to an equal extent the value of the shares issued by the company. 6. In the present case, the real question is whether the consideration is inadequate beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred without consideration. This view is incorrect because the Allahabad High Court has held in the case of CGT v. Motor Sales [1990] 186 ITR 419 that where the entire assets of the firm were taken over by the company as a going concern, the shares allotted would encompass all the assets of the company including the profits which are embedded in the assets transferred. The inevitable conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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