TMI Blog1993 (10) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... as a partner in the firm, Messrs. Kamal Industries, prior to the assessment year 1976-77. The assessee retired during the assessment year 1976-77 and his son, Shri Suraj Nankani, was taken up as a partner in his place. The Gift-tax Officer considered that it is a deemed gift by the father to his son and the same is taxable in the hands of the assessee. In the appeal before the Appellate Assistant Commissioner of Income-tax, it was held that it was surrender of the interest of the assessee in the firm and, therefore, the said surrender of interest in the share of the firm was a deemed gift. In second appeal before the Income-tax Appellate Tribunal, the appeal was allowed on the ground that there was no future right in a retiring partner to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken as a partner but what were the terms in the deed, it has not been discussed by the taxing authorities including the Tribunal. In accordance with the provisions of section 4(1)(c) of the Act, the surrender of any interest in the property is deemed to be a gift. A partner may not have a right on retirement to share in future profits but at the time of retirement, he has a right in the goodwill of the firm. Whether there is any goodwill or not and whether the surrender of the interest in the goodwill was bona fide or not has to be determined on the basis of the facts available on record. The logic, on the basis of which the Income-tax Appellate Tribunal has proceeded is the future right of a person retiring from a firm in respect of fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was not justified in giving a decision in respect of non-existent rights of future profits and not considering the aspect of existing rights. The case of Addl. CGT v. P. Krishnamoorthy [1977] 110 ITR 212 (Mad) refers only with regard to the right to receive future profits in the firm. The existing rights and the interest in a firm, if surrendered will be deemed to be a gift. Since the facts have not been found by the Income-tax Appellate Tribunal, we, therefore, refer the matter back to the Income-tax Appellate Tribunal to decide the question in accordance with law after giving opportunity to both the parties. The Tribunal shall also take into consideration the definition as given under section 4(1)(c) of the Gift-tax Act and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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