TMI Blog1977 (7) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 annas share. Later on by a deed dated November 10, 1956, the shares of the two partners were reshuffled. Nemchand's share was reduced from 10 annas to 4 annas and his son's share was raised from 6 annas to 12 annas. Such alteration in the profit-sharing proportion was to take effect from 3rd November, 1956. Nemchand Laherchand died on 16th February, 1963. On March 28, 1964, Kirtilal as an accountable person filed the return under the Estate Duty Act in respect of estate that passed on to the heirs on the death of his father, Nemchand. The Assistant Controller of Estate Duty held that on two occasions, one at the time when Kirtilal was admitted into the partnership and the other on November 10, 1956, when the profit-sharing proportion was altered, the deceased had relinquished his right to 6/16th portion of the goodwill in favour of his son without adequate consideration and such relinquishment resulted in disposition as contemplated by Explanation 2 to clause (15) of section 2 of the Act. He was of the view that the right to share profit in the business had been transferred by the father to his son for adequate consideration but the right to share goodwill and tenancy right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the dutiable estate and not merely 3/4ths as was done by the Assistant Controller. The accountable person filed second appeal to the Tribunal. The Tribunal took the view that ordinarily when the son was taken in as a partner in the erstwhile proprietary business he became entitled to proportionate share in the goodwill and tenancy rights in proportion to the share in profits that was allotted to him and since the son had not been expressly excluded from the use and enjoyment of the benefit of the goodwill and tenancy rights under the terms of the two documents, the son became entitled to share the benefit of the goodwill and the tenancy rights in proportion to the share he had. In other words, on this aspect it reversed the view of the Appellate Controller of Estate Duty. However, since the term " gift " had not been defined in the Estate Duty Act and since the expression " consideration " had also not been defined, both these expressions according to the Tribunal were required to be understood in their normal connotation ; the expression " gift " in the sense in which that was defined by the Transfer of Property Act and the expression " consideration " as was understood in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight was extinguished, and in relation to such a disposition the expression ' property ' shall include the benefit conferred by the extinguishment of the debt or right." Section 10 on which principally reliance was placed by Mr. Joshi runs thus : " 10. Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise..........." He also referred to section 27(1), which deals with dispositions in favour of relatives, and that provision runs thus : " 27. (1) Any disposition made by the deceased in favour of a relative of his shall be treated for the purposes of this Act as a gift unless--- (a) the disposition was made on the part of the deceased for full consideration in money or money's worth paid to him for his own use or benefit ; or (b) the deceased was concerned in a fiduciary capacity imposed on him otherwise than by a disposition made by him and in such a capacity only ; and references to a gift in this Act shall be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the goodwill and tenancy rights in the first instance and further relinquishment of 6 annas' share in the goodwill and tenancy rights on the occasion of reshuffling or profit-sharing proportion amount to gifts or not ; in other words, unless these relinquishments amount to gifts in the sense that these were without adequate consideration, the further question as to whether the donor had or had not entirely excluded himself from possession and enjoyment of goodwill and tenancy rights would not arise. Mr.Joshi also fairly conceded that before his submission could be accepted in its entirety the revenue must establish that there was a gift in favour of the son by the deceased father on each of the two occasions. Now, it is not disputed that the expression " consideration " or " adequate consideration " has not been defined in the Estate Duty Act and those expressions will have to be understood their normal connotation. It is true that the deceased had taken his relative, viz., his son, as a partner in his business when he converted his proprietary business into a partnership business and upon taking him as a partner he was given a share of 6 annas in the partnership including the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led on November 10, 1956, for additional share of 6 annas granted to the son there was no adequate consideration and as such atleast that relinquishment by the deceased in favour of his son should be regarded as a gift to which the provisions of section 10 would apply. It is not possible to accept even this contention. As we have stated above, presumably on account of advancing age the father wanted his son to take over the business, retaining small responsibilities with himself. It would be reasonable to assume that an additional share was granted to the son in view of the son accepting additional responsibilities of the business. In any case, in view of the finding which has been recorded by the Tribunal, which is applicable to both the occasions, it would be difficult for the revenue to urge that the transaction amounted to gift without adequate consideration. In view of the above discussion, it seems to us clear that the further question as to whether the transaction would be affected by section 10 of the Act would not arise and, in our view, the Tribunal was right in coming to the conclusion that the only value that was includible in the principal value of the estate that p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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