TMI Blog1983 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... he G.T. Act was involved in the transaction ? (3) Whether separate additions in respect of revaluing of assets and goodwill could be made under the G.T. Act in case of retirement of a partner from the firm ? " Assessee, Maneklal Motilal Agrawal, used to carry on business of plying buses. On August 21, 1968, he converted the proprietary business into a partnership firm in which he had 50% share. The other partner was Jawaharlal Agrawal with 25% share. Two minors, namely, Subhash Agrawal and Arvind Agrawal, had shares of 12.5% each in the profits of the partnership business. On January 15, 1971, the said firm was reconstituted as a result of which the assessee, Maneklal, retired from the firm and his wife, Smt. Sajanbai, became a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for fresh computation. In second appeal, the Income-tax Appellate Tribunal agreed with the reasoning of the Commissioner (Appeals) and affirmed his order. At the instance of the assessee, therefore, the aforestated questions have been referred for our opinion. When the reference came up earlier before us for hearing, we called for a supplementary statement of case because we noted that more facts were necessary for answering the reference. The supplementary statement has since been received but this statement also does not contain the necessary facts for answering the reference. It appears that those facts which we considered essential for answering the reference were not available to the Tribunal and the same could not be obtained with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing to show that there was any abandonment of interest by the assessee. The existing assets and liabilities were taken over by the new partners for consideration and, therefore, there was no gift within the meaning of the G.T. Act. Learned standing counsel for the Revenue in reply submitted that distribution of profits and assets at the time of assessee's retirement was made on the book value thereof and not on the market value and, therefore, the difference between the book value and the market value should be treated as deemed gift. It was not disputed that while computing gift-tax, the GTO did not take into consideration either the account books of the firm or its balancesheet. Thus, there was no material to show whether the firm's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted to the benefits of the firm has brought any capital. The court observed that unless such questions are determined, it would not be possible to lay down as a general rule that there has been a gift in respect of the goodwill whenever a firm is reconstituted as a result of which minors are admitted to the benefits of the partnership and the share in goodwill of one of the partners is reduced and the same is pro rata given to the minors who are so admitted to the benefits of the partnership. In Premji's case, there was no retirement of any partner but there was a change in the constitution of the firm as result of which there was reduction in the share of one of the partners whose share was given to the minor. Since those facts were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1982] 134 ITR 492, the Karnataka High Court held that when there was contribution of capital by the new partners and the new partners had to participate in the business of the firm, it constituted adequate consideration and there was no taxable gift as a result of reallocation of shares by which shares of the erstwhile partners were reduced and new partners were allocated shares. Learned counsel for the Revenue relied on the decision of the Madras High Court in CGT v. M. K. Krishna Chettiar [1973] 87 ITR 1, in order to support his contention that retirement of the assessee from the business without obtaining any consideration for the value of the goodwill of the business amounted to gift of the goodwill to his sons and this was taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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