TMI Blog1977 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees in these references, retried from the partnership with effect from April 17, 1964. At the time of retirement, as stated by the Appellate Assistant Commissioner in his order, they took whatever they were entitled to from the partnership firm, namely, the amounts of capital invested along with profits and shares to their credit. The firm was reconstituted with the continuing two partners and certain others by a deed dated July 1, 1964, and that partnership became effective from April 17, 1964, namely, the date on which the four assessees herein retired. The Gift-tax Officer came to the conclusion that as a result of the retirement from the partnership firm, the assessees herein had relinquished their respective interests as sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently, there was no question of liability to gift-tax, with the result the Appellate Assistant Commissioner set aside the assessments made by the Gift-tax Officer. Against the order of the Appellate Assistant Commissioner, the department preferred appeals to the Income-tax Appellate Tribunal. Before the Tribunal, the contentions of the department were that on account of the retirement of the assessees from the partnership, the continuing partners had full rights over the entire profits of the firm and to that extent the assessees surrendered the right of their shares in the profits without consideration which involved gift of property and that the gift-tax assessments made by the Gift-tax Officer were, therefore, proper. As against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Gift-tax Act, 1958, on the ground that he did not relinquish his right to share in the profits of the partnership on his retirement in favour of the continuing and newly admitted partners?" We may point out that the question is identical in all the four references. We are clearly of the opinion that the conclusion of the Tribunal is correct. From the question reproduced above, it is clear that, according to the department the subject-matter of the gift was a right to share in the profits of the partnership. It is not in dispute that when the assessees retired from the partnership, they received their share in the assets of the partnership including their share of profits up-to-date. Consequently, the only contention of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance in the contention of the revenue, and the moment a partner retires from the partnership, he will have no right to receive any future profits in the said firm and hence there is no question of his giving up any such right. The learned counsel strongly relied on a decision of this court in Commissioner of Gift-tax v. V. A. M. Ayya Nadar [1969] 73 ITR 761 (Mad). In that case, what happened was that the assessee therein was a partner of a firm under the name and style of V. A. M. Rathinam Brothers, which carried on business at Virudhunagar. It had nine partners with four minors admitted to the benefits of the partnership. The assessee had a third share in the profits of the firm as well as its liabilities. By a deed dated March 31, 1958 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original holder and certain others who are all partners, it involves a transfer of the right which has the effect of diminishing the assessee's interest and correspondingly increasing the value or quantum of the shares earlier held by the other two partners. On that view we think that the distribution by way of realignment of the one-third share of the assessee did involve transfer of property amounting to a gift chargeable to tax." We are clearly of the opinion that that case has no bearing whatever on the present case. In that case, a partner, who was entitled to 1/3rd share by realignment was allotted only 1/9th share and the balance of 2/9th share went to other partners. At the same time, that partner's share of the capital was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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