9911796707
TMI Blog1993 (6) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... others in a partnership business run under the name and style of M/s. Elve Corporation. The aforesaid partnership was evidenced by a partnership deed dated 1st July 1967, which was amended on 16th November 1975 and on 24th October 1975. On 1-7-1978, the limited company by name Gajra Gears Pvt. Ltd., entered into this partnership. The assessee and the other partners, other than the company, were directors of Gajra Gears Pvt. Ltd. The existing partners relinquished 10% of profit sharing ratio in favour of the limited company. The conditions were the losses and appreciation in the value of all the assets of the firm except goodwill should be shared in the same proportion in which the profits and losses of the firm were shared. However, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Gajra Gears (P.) Ltd., shall have no claim of right to, interest and entitlements over the goodwill of the firm, at any time. " It was these amendments, which prompted the Assessing Officer to hold that the assessee had made a gift of his rights in assets in favour of the new partner, Gajra Gears Pvt. Ltd. The Assessing Officer first computed the gifts deemed to have been made by the firm in favour of the new partner, Gajra Gears Pvt. Ltd., and then quantified the assessee's share in such deemed gift. The assessee contended that the admission of Gajra Gears Pvt. Ltd., as partner was for full and valid consideration inasmuch as the new partner had contributed capital of Rs. 15 lakhs and it also exposed itself to all the liabilities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than goodwill inasmuch as such assets having not been disposed of, there is no gift of any existing property since the new partner is exposed to the risk of fluctuation in value of assets, the quantification of gift was not fair or proper on the methods of valuation of the assets also. The assessee's learned counsel reiterated the contentions, which the assessee has taken before the tax authorities. 2.2 The departmental representative, on the other hand, strongly supported the order of the Gift-tax Officer and contended that, in the facts and circumstances of the case, there has been a gift in the form of right to share in the appreciation of assets in favour of Gajra Gears Pvt. Ltd. To the extent there is a lack of consideration, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement of the type, which the partners in the instant case have made between themselves. The gift charged to tax by computing the notional and hypothetical appreciation in the value of the assets of the firm, in our opinion, does not enure to the present benefit of the donee. For these reasons, we are unable to sustain the order levying the gift-tax. 2.4 In the result, appeal is allowed. WTA 2183 to 2185/BOM/89 and WTA 1730 to 1735/BOM/90 3. In all these appeals, the different assessees have taken the following common grounds for all the assessment years : " (2) On facts and circumstances of the case and in law the learned Commissioner of Wealth-tax (Appeals) erred in upholding that the appellant partner had a right appreciation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessees are liable under the Wealth-tax Act in respect of the value of the assets as on the valuation date. The assessments framed for the other years are also on the same reasoning. 3.1 We have heard the parties to the dispute. In the gift-tax proceedings, we have taken a view that the amendment in the partnership deed was for adequate business consideration and does not involve any gift. As far as the levy of wealth-tax liability is concerned, we are unable to sustain the orders of the tax authorities. Under section 3 of the Act, the assessee is liable to the tax in respect of the net wealth on the valuation date. The term 'net wealth' is defined in section 2(m) of the Wealth-tax Act, according to which it means the amount by which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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