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Judgment
G. SIVARAJAN J.
The question referred at the instance of the Department in all the four cases is the same and it reads as follows :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no element of gift was involved when the assessee retired from the firm in which he was a partner ?"
The respondents-assessees were partners of a firm, M/s. Hotel Yuvarani, Ernakulam, During the assessment year 1987-88 all the four assessees retired from the said firm. The assessing authority took the view that the assessees have transferred the right to receive future profits in favour of the partners newly admitted on their retirement. The first appellate authority confirmed the assessment. In appeal by the assessees, the Tribunal relying on the decision of this court in Commissioner of Gift-tax Vs. Smt. R. Sarojini (Legal heir of late Rajagopalan), , held that there is no gift in such transactions.
We have heard Sri P. K. R. Menon, learned senior standing counsel for the Revenue, and Sri P. Balachandran, learned counsel for the assessees. Senior counsel submitted that the decision relied on by the Commissioner of Gift-tax Vs. Smt. R. Sarojini (Legal heir of late Rajagopalan), was rendered following the earlier decision of this court in Commissioner of Gift-tax Vs. T.M. Luiz Kannamally, , which has been affirmed by the Supreme Court in The Commissioner of Gift Tax, Trivandrum Vs. T.M. Louiz, . Senior counsel however contended that there is a distinction in this case in that on retirement of the assessees from the partnership firm, M/s, Hotel Yuvarani, new partners have been inducted and therefore the decision of the Supreme Court in The Commissioner of Gift Tax, Trivandrum Vs. T.M. Louiz, has no application to the present case. We have considered a similar contention in I. T. R. No. 61 of 1999 Commissioner of Gift Tax Vs. P.K. Somarajan Pillai, , and held that the said circumstance will not in any way alter the legal principle laid down by the Supreme Court in The Commissioner of Gift Tax, Trivandrum Vs. T.M. Louiz, . We are of the view that the decision mentioned above squarely applies.
In view of our judgment in I. T. R. No. 61 of 1999 Commissioner of Gift Tax Vs. P.K. Somarajan Pillai, , the question specified in para. 1 above has to be answered in the affirmative, i.e., in favour of the assessee and against the Revenue. We answer the question accordingly.
A copy of this judgment under the seal and signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.