TMI Blog1985 (9) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... on as to the existence or valuation of goodwill can be deemed to have made a gift of his share of goodwill in favour of the incoming partner or the remaining partners of the firm ? " The facts giving rise to this reference as per the statement of the case received may be stated, in brief, thus: The assessee is an individual. The assessment year involved is 1971-72 for which the previous year ended on October 30, 1970. The assessee was a partner in the firm styled as M/s. Shrikrishna Nandlal Co., Barwaha, which carried on the business of purchasing cotton from farmers and selling it to others after getting it processed, having 25 per cent. share during the assessment year under consideration. He retired from the partnership on November 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncoming partner and since this right is property and is capable of transfer/surrender/relinquishment of interest by the assessee, his right to share profits does attract the provisions of section 4(1)(c) of the Gift-tax Act. The Gift-tax Officer, therefore, proceeded to compute the value of the deemed gift. The value of the deemed gift was determined at Rs. 33,770 and after allowing exemption under section 5(2), the taxable gift was assessed at Rs. 28,770. The assessee went in appeal before the Appellate Assistant Commissioner of Gift-tax, who, relying upon a judgment of this court passed in M.C.C. No. 459 of 1976 decided on May 2, 1981, in the case of Yashkumar Sachdeva, wherein it has been held that there is goodwill passing even on dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by treating it to be a deemed gift. On the other hand, the learned counsel for the Revenue placed reliance on the decision in CGT v. V. A. M. Ayya Nadar [1969] 73 ITR 761 (Mad) and Khushal Khemgar Shah v. Mrs. Khorshed Banu Dadiba Boatwalla, AIR 1970 SC 1147, to show that goodwill was part of the property of a firm. He, therefore, submitted that as goodwill was an asset of the firm, the assessee is deemed to have gifted his share of the goodwill on his retirement in the absence of any other material having been placed on record. Admittedly, there is no written document placed on record when the assessee retired as a partner nor the new deed of partnership also been placed on record. The question, therefore, is whether a gift c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: " (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment. " In the present case, the Gift tax Officer computed the value of the deemed gift on the basis of the share of profits for the period 1966-67 to 1970-71, but he has not taken into calculation whether the value of the assets of the earlier firm, inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to gift-tax. Even if the right of a partner to share the profits of a firm is property, a retiring partner has no right to share the future profits. It is no doubt true that gift-tax is not necessarily restricted to gifts effected by written documents. If it is possible to effect a gift without an instrument in writing, gift-tax is payable on the same. But the subject-matter of a gift may be such that a written instrument is necessary to perfect a gift. Gift-tax is payable in spite of gifts made during the previous year (sic). Completed gifts alone attract liability to tax; Thus, after hearing the learned counsel and after going through the case law cited, we are of the opinion that considering the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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