JUDGEMENT
J. Kathuria, Accountant Member -
(1.)THIS appeal by the Revenue arises out of the order dated 4-4-1988 of the learned Commissioner of Gift-tax (Appeals), Karnal, for the assessment year 1980-81.
(2.)The only ground raised in the appeal, reads as under:-
On the facts and in the circumstances of the case the learned Commissioner of Gift-tax (Appeals) has erred in law and facts in quashing the order of the Gift-tax Officer assessing the goodwill amount of Rs. 4,54,000 ignoring the deeming provisions of the Gift-tax Act which are applicable in this case.
Brief facts of the case may first be noticed. A firm known and styled as M/s. Mahajan Overseas came into existence on 17-1-1974. Its business consisted of purchase and export of various handlooms goods e.g. pillow shams, napkins, cotton and woollen durries, table mats etc. On 1-1-1977 the firm was reconstituted and four new partners including Smt. Raj Devi the assessee joined it and a minor (Miss Nishi Mahajan) was admitted to the benefits of the partnership. Immediately prior to the reconstitution, the firm consisted of 9 partners. Smt. Raj Devi had 12 per cent share. A new partnership deed was executed on 14-4-1977 when Nishi Mahajan attained majority. There was otherwise no change in the constitution of the firm. On 1-1-1978 the firm was reconstituted again. Out of the 14 partners 8 partners retired and the following partners continued the business of the firm :-
JUDGEMENT_2347_TLIT0_19890.htm
On 18-9-1979 Smt. Raj Devi voluntarily retired from the firm. A deed of dissolution of the firm dated 18-9-1979 was executed. The remaining 5 partners took over all the assets and liabilities of the business of the firm as a going concern with effect from 19-9-1979. As a result of the retirement of Smt. Raj Devi, the shares of three of the remaining partners were modified and there was no change in the share of the other two partners. Thus, with effect from 19-9-1979 Smt. Kamal Saroj had 25 per cent share, Smt. Nirmal Kanta 15 per cent share and Shri Rakesh Mahajan 25 per cent share. In other words, their shares were increased by 5% each. There was no change in the shares of Shri Rajesh Mahajan and Km. Nishi Mahajan which remained at 20% and 15% respectively.
(3.)IN the. partnership deed of 1-1-1976 there was no specific clause regarding goodwill of the firm. Clause 15 of the deed, however, stipulated as under:-
That for all other purposes the relations of the parties shall be governed by the provisions of the INdian Partnership Act.
IN the partnership deed of 1-1-1977, clause 9 was to the following effect:-
That the firm shall not be dissolved by the retirement, expulsion, bankruptcy or disability of any of the partner, and on happening of any such event, the remaining partners shall be entitled to continue the business of the firm as usual subject to the determination of the share of the retiring, expelled, insolvent, disabled or deceased partner as provided hereinafter in this deed, but in so determining his share, the goodwill of the firm shall not be taken into consideration.
(Emphasis supplied)
Clause 13 of the said partnership deed reads as under:-
That the goodwill of the partnership firm M/s. Mahajan Overseas shall be the property of the firm.
Though a new partnership deed was drawn up on 14-4-1977, there was no change so far as the clauses with regard to goodwill were concerned. Clauses No. 10 and 13 were the exact reproduction of clauses No. 9 and 13 respectively of the earlier partnership deed dated 1-1-1977.Though a copy of the partnership deed executed on 1-1-1978 was not filed before us, copy of the Tribunal's order dated 30-4-1985 in the assessee's Estate Duty case (E.D.A. ll/Chandi./1983) showed that clause 15 of the partnership deed dated 1-1-1978 provided as under:-
The goodwill of the firm shall belong to all the parties in proportion to their shares fixed in this deed.
Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.