SMT. MANORAMADEVI UMRAOMALJI vs COMMISSIONER OF GIFT TAX.

G. G. Sohani, J. - By this reference under s. 26(1) of the GT Act, 1958, (hereinafter referred to as the Act), the ITAT, Indore Bench has referred the following question of law to this Court for its opinion :

"Whether, on the facts and in the circumstances of the case, a partner on settling his accounts with the firm, is entitled to a share in the goodwill of the firm, if any ?"

The material facts giving rise to this reference, briefly, are as follows :

The assessee is an individual and the assessment year in question is 1975-76. The assessee was a partner in the firm M/s Chandmal Kasturchand but in the accounting year relevant to the assessment year in question, there was a change in the constitution of the firm on account of retirement of the assessee from the firm. The GTO found that on settlement of accounts at the time of retirement of the assessee from the firm, as the assessee had not received any amount towards her share in the goodwill of the firm, from the remaining partners or from the incoming partner, the assessee would be deemed to have made a gift in favour of the partners to the extent of her share in the firm. The GTO accordingly held that the assessee had made a gift of the amount of Rs. 58,950 as that was the amount computed by him as the assessees share in the goodwill. Aggrieved by this decision, the assessee preferred an appeal before the AAC. That appeal was allowed. On further appeal by the Revenue the Tribunal set aside the order passed by the AAC and remanded the matter to him for disposing of the appeal afresh. Aggrieved by this order, the assessee sought reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this Court for its opinion.

The question referred to this Court does not bring out the real controversy between the parties. We, therefore, reframe the question as follows :

"Whether, on the facts and in the circumstances of the case, the assessee, who settled her account on retirement from partnership without any valuation of goodwill, can be deemed to have made a gift of her share of goodwill in favour of the remaining partners or the incoming partner of the firm ?"

A similar question was referred to another Division Bench of this Court in Sharad Kumar Shrikrishna Vs. Commissioner of Gift-tax, , and the Division Bench in that case, took the view that a partner, who settled his accounts on retirement from partnership without any stipulation as to the existence or valuation of goodwill could not be deemed to have made a gift of his share of goodwill in favour of the incoming partner or the remaining partners of the firm. The ld. counsel for the Revenue was unable to point out any cogent reason for taking a view different from the taken in Sharad Kumar Shrikrishna Vs. Commissioner of Gift-tax, . Following that decision, therefore, our answer to the question reframed by us is that on the facts and in the circumstances of the case, the assessee could not be deemed to have made a gift of her share in the goodwill in favour of the incoming partner or the remaining partners of the firm.

Reference answered accordingly. In the circumstances of the case, parties shall bear their own costs this reference.