B.R. Arora, J. - (1.) THE Revenue, by this application under Section 26(3) of the Gift-tax Act, 1958, has prayed that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, may be directed to state the case and refer the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that there could be no element of deemed gift thereby sustaining the order of the Commissioner of Gift-tax (Appeals) and dismissing the departmental appeal ?"
(2.) THE assessee, Marudhar Hotel (Pvt.) Ltd., Jodhpur, a private limited company, by a deed of dissolution dated November 27, 1973, received the property known as "Umaid Bhawan Palace" and the remaining business of Umaid Bhawan Palace, a registered partnership firm. THE assessee thereafter started the business as a hotelier as the sole proprietor on August 1, 1973, and continued up to June 30, 1974. By the partnership deed dated November 12, 1974, the assessee entered into a partnership with Shri Gaj Singh to run the business of hotelier more efficiently with effect from July 1, 1974. THE business was to run under the name and style of Umaid Bhawan Palace, Jodhpur. THE assessee contributed towards its capital the immovable property known as Umaid Bhawan Palace along with its running business with effect from July 1, 1974. THE immovable property which was brought to the stock of the partnership firm along with the other assets, were taken at its book value of Rs. 50,70,000. THE assessee further entered into an agreement with party No. 2, Shri Gaj Singh, on June 10, 1975, and the additional clause was added in the partnership agreement that party No. 2, Shri Gaj Singh, will have no interest in the immovable property, i.e., "Umaid Bhawan Palace" put in the common pool of the partnership and the property will revert back to the assessee at its book value at the time of dissolution of the partnership. This partnership created vide partnership deed dated November 12, 1974, was later on dissolved on March 30, 1977, and the property "Umaid Bhawan Palace, Jodhpur" reverted back to the assessee at its book value. For the assessment year 1976-77, the Gift-tax Officer, on March 19, 1981, issued a notice under Section 16(1) of the Gift-tax Act (for short, "the Act"), to the assessee to file the return of the gift made by it during the period 1976-77. This notice was served upon the assessee on March 24, 1981. The assessee, in pursuance of this notice, filed the return of gift on April 24, 1981, showing "nil" taxable gift. It was also stated in the revised return that the assessee had contributed its sole proprietary business along with the immovable property as its capital contribution to the partnership firm which cannot be said to be a "gift" within the meaning of Section 2(xii) and Section 4 of the Gift-tax Act. It was also stated that the contribution of the property to the partnership firm at its book value cannot be said to be a "transfer" within the meaning of Section 2(xii) of the Gift-tax Act nor was this contribution for an inadequate consideration and as such no taxable gift can be said to have been made by the assessee. The Assessing Officer, vide his order dated March 30, 1985, reassessed the assessee and held that the contribution of Umaid Bhawan Palace, Jodhpur, as the share capital to the firm under the deed of partnership, is transfer of property as defined under Clause (xii) of Section 2 of the Gift-tax Act and determined the amount of Rs. 80,25,000 as the taxable amount of "deemed gift" after deducting Rs. 5,000 as an exemption. He, therefore, determined the gift-tax to the extent of Rs. 52,20,000. Dissatisfied with the order dated March 30, 1985, passed by the Assessing Officer reopening the case and reassessing the assessee, the assessee preferred an-appeal before the Commissioner of Gift-tax (Appeals), Jodhpur, who allowed the appeal filed by the assessee and held that the assessee transferred Umaid Bhawan Palace to the partnership firm as its capital contribution. The transaction was, no doubt, a transfer but the transfer was for a consideration which was incapable of being determined in monetary terms and no profit or gain can be said to have arisen from such transfer and the transfer under consideration is in consonance with the decision of the Supreme Court. The Commissioner further held that the transfer in the present case does not amount to a transaction being a device to convert the personal asset into money substantially for the benefit of the assessee while avoiding tax and the essential ingredients laid down under Section 4(1)(a) of the Gift-tax Act for the purpose of invoking a "deemed gift" are not satisfied and, therefore, the transfer of Umaid Bhawan Palace by the assessee to the partnership firm does not constitute a "deemed gift" under Section 4(1)(a) of the Gift-tax Act. The Revenue, dissatisfied with the order dated January 31, 1986, passed by the Commissioner of Gift-tax (Appeals), Jodhpur, filed an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. The Tribunal, by its order dated November 5, 1986, dismissed the appeal filed by the Revenue and partly allowed the cross-objections filed by the assessee. The Revenue thereafter moved an application under Section 26(1) of the Act to refer the question of law mentioned in the application for the opinion of this court. The Tribunal, vide order dated May 13, 1991, dismissed the application filed by the Revenue and declined to refer the question of law proposed by the Revenue for the opinion of the High Court, as according to the Tribunal, no question of law arises from the order passed by the Tribunal. The Revenue thereafter moved this application under Section 26(3) of the Gift-tax Act.
(3.) IT is contended by learned counsel for the Revenue that (i) the Tribunal, while deciding the issue in the appeal, totally ignored the vital fact that by transfer of "Umaid Bhawan Palace, Jodhpur" as capital contribution at the value of Rs. 50,70,000 against its market value of Rs. 1,31,00,000 the asses see-company has made a "deemed gift" within the meaning of Section 4(1)(a) of the Gift-tax Act, i.e., equivalent to the difference between the market value and the book value of Umaid Bhawan Palace ; (ii) the property brought in the business of the partnership firm by the partners became the property of the firm and in the partnership firm, a partner is entitled to his share of property and ceases to be the exclusive owner of the property ; (iii) "gift" includes the grant of partnership and any such transaction which increases the property of any other person ; (iv) the transfer of Umaid Bhawan Palace was a transfer for all purposes and, thus, the company has made a "deemed gift" in favour of other partners of the firm ; and (v) the insertion of a new clause in the partnership by the addenda dated June 10, 1975, does not alter the legal position in so far as the liability to the gift-tax under Section 4(1)(a) of the Act is concerned and since the question of law does arise out of the order passed by the Tribunal, the Tribunal was, therefore, not justified in declining to refer the question of law for the opinion of this court. Learned counsel for the assessee, on the other hand, has supported the order passed by the Tribunal and submitted that the findings arrived at by the Tribunal are purely findings of fact which is clear from the finding recorded by the Commissioner of Gift-tax (Appeals) in paragraphs numbers 12, 13,14 and 15 of the order and that of the Tribunal in paras 5 and 6 of the order which have not been challenged and as such no question of law does arise in the matter because the Tribunal, as well as the Commissioner, while deciding the question, relied upon the judgment of the Supreme Court in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509. It is further submitted by learned counsel for the assessee that the controversy involved in the present case stands finally decided by the Supreme Court in Sunil Siddharthbhai's case [1985] 156 ITR 509, and as such the reference to the High Court of the question will be only academic and the Tribunal was justified in declining to refer the question to this court. It is also contended by learned counsel for the assessee that even otherwise, the decision of the Tribunal is correct on the question of law and, therefore, the Tribunal was right in declining to refer the case. We have considered the submissions made by learned counsel for the parties. ;