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TMI Blog2002 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned is 1987-88. The respondent-assessee was a partner in a firm by name M/s. R. Kesava Pillai, Merchants, Quilon. On April 30, 1986, the assessee retired from the said partnership firm and in his place Sri M.C. Thankappan Pillai was admitted as a new partner. The assessee was having 11 per cent. share in the profits of the business of the firm. The Assessing Officer took the view that on the retirement of the assessee from the partnership firm the assessee had made a gift of 11 per cent. interest in the goodwill of the firm in favour of the new partner and accordingly he brought to tax Rs. 39,600 being the surrender value of the goodwill. The first appellate authority relying on the decision of this court in CGT v. T.M. Luiz Kannamally [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case and the distinction sought to be made by the Supreme Court in the second decision turns on its own facts. We have already stated the brief facts. The Tribunal has relied on the decision of this court in T.M. Luiz [1989] 180 ITR 257 which held the view that when a partner retires from a partnership firm, the partnership continues; the assets and the goodwill of the firm continue to remain the assets and the goodwill of the firm and there is no question of any gift of goodwill in such a case. The Supreme Court also in Louiz's case [2000] 245 ITR 831 summarised the facts of the case thus: "To recapitulate, when the assessee retired from the two firms, he received the value of his shares therein and the argument was that what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that share in a particular case may 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 partnership firm as his contribution to its capital. An individual asset is the sole subject of consideration. An exclusive interest in it before it enters the partnership is reduced on such entry into a shared interest" Relying on the said passage the Supreme Court held as follows: "In our view, when there is a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution thereto, of the value of Rs. 9,48,100; the new partnership firm sold the machinery to another concern for the price of Rs. 10,76,220 ; on these facts, the Gift-tax Officer came to the conclusion that the assessee-firm 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 a sum of Rs. 10,76,220 and the assessing authority has taken the yiew that the value of the machinery at Rs. 9,48,100 which was taken to be the capital value thereof. It is in that context that the Supreme Court had made the observation extracted above. It is not clear as to how the observation made by the Supreme Court and extracted h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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