[1] rOTA 3/021 IN THE fflGH COURT OF DELHI GTA No3/2002 Date of Healing & Decision : 10 April2003 Tlie Conmiissioner of Income-tax Appellant Through: Ms.Prem Lata Bansal, Sr.Standing Counsel Versus Smt. Asha Gulati Respondent Through rMr.Krishan Mahajan, Advocate CORAM: THE HON'BLE MRJUSTICE D.K. JAIN THE HON'BLE MRJUSTICE MADAN B. LOKUR 1. Whetlierreportei-soflocalpapersmay be allowedtoseethejudgment. 2. To be referred to the Reporter or not? 3. Whetlier thejudgment should be reported in the Digest? D.K. JAIN, J.fOml) Tliis appealby the Revenueunder Section27A of the GiftTax Act, 1958 (in short "the Act') is directed against the order dated 28 November 2001, passed by the Income-tax Appellate Tribunal Delhi Bench-B, New Delhi (for short 'the Tribunal')in GTA No.32/Del/1994, pertaining to assessment year 1989-90. Brieflystated, the backgroundfacts giving rise to the appeal are as follows: Tlie assessee was a paitner in a firai, namely, M/s. Sat Kai'tar International with one Mohan Gulati. She retiied fi-om the firm on 2 Digitally Signed By:AMULYA Signature Not Verified [2] August 1988 and at the time of retu'ementshe took the balance amount outstanding in her capital account, but did not receive any amount towards goodwill and import entitlementof the said fiiin. The import entitlement of the said fu*m was subsequently sold by Mohan Gulati for Rs.6,55,514/-. Tlie AssessingOfficerwas of the view that the assesseehad made a gift in favour of Mohan Gulati in respect of her shai*e in the goodwilland importentitlementof the finn. He, accordingly,valued tlie goodwillof tiliefirm at Rs.1,45,72,354/-on the basisofthe earningsof tlie firmfor the pastthreeyears and determinedthe assessee'ssharetherein at Rs-72,86,177/-,which was treated as tlie value of the gift made by tlie assessee to Mohan Gulati. He also treated 50% of the sale price of tlie import entitlementas assessee'sshare in it and brought the said amount also to gift tax in her hands. Aggrieved, the assesseepi-efen-edappealto theCommissioner i of Income-tax (Appeals). The Commissioner of Income-tax, while allowingthe appeal, observedthat tlie pai'tnershipdeed/retirementdeed did not p-ovide for any amounts payable towai'dsgoodwill of the firm; both the assessee and Mohan Gulati continued to cany on their business of export of garmentsand in fact the name of the firm "Sat Kartar" was being used by the assesseealso and, further, after the retu'ementof tlie rOTA 3/021 V V [3] assessee,tlie ftrtii had losses in assessmentyears 1990-91 and 1991-92. He also obsei-vedthat the AssesssingOfficerhadcalculatedtliegood will in a mechanicalmannerand had failed to prove that any amount had in fact passedfrom thefirm to the assessee. Being aggrieved, the Revenue caiiied the matter in further appeal to the Tribunal. Taking note of the afore-mentionedfactual aspects,highlightedby tlie Commissionerof Income-tax(Appeals),the TribunaldismissedRevenue'sappeal. Hencethe presentappeal. We have heard Ms.Prem Lata Bansal, learned senior standing counsel for the Revenue and Mr.Krishan Mahajan , learned counsel for the respondent-assessee. It is stienuously urged by Ms.Bansal that by voluntaiily foregoingher sharein the goodwilloftlie firm and the importentitlement at tlie time of her retirement,there was a gift by the assesseein favour of Mohan Gulati, which was exigible to gift tax. In support of her propositionthat the goodwillof the fiim is a propertyand extinguishment ofone'sright in tlie said property constitutesagiftundertlie Act,learned counsel has placed reliance on tlie decision of the Supreme Couit in Comniissioner of Gift-tax, Guiai-at Vs. Chhotalal Mohanlal (1987) 166 ITR 124. On the other hand, Mr.Krishan Mahajan, while supporting tlie rOTA 3/021 •> o \ • [4] rOTA 3/021 order passed by tlie Tribunal, has urged that the issue raised by the Revenuehas since been settled by the Apex Coui't in Commissionerof Income-tax Vs. T.M. Louiz (2000) 245 ITR 831 and, therefore, order of theTribunal does not involve any substantial question of law. We find substance in the submission of leai-ned counsel for the assessee. InT.M. Louiz(sup-a)theApexCourthasheldasunder: "When a partner retires from a partnership, the partnershipcontinues. The assets and tiie goodwillof the firm continue to remain the assets and the goodwill of the fh'm. All that the retiring partner gets is the value of his share in the partnership assets less its liabilities. It cannot, in such circumstances, be held, assuming that the retiring partner receivedless than what was his due, that the difference was something that he had ti-ansferred to the continuing pai'tners within the meaning of "transfer of property" for the puiposes of the Gift-tax Act or that there was a gift liable to gift-tax." In view of tlie aforenoted admitted factual position and in the light of the said authoritativepronouncement,no substantialquestionof law survives for our consideration. We, accordingly, decline to entertain the appeal. Dismissed. D.K. JAIN, J. 10 APRIL 2003 MADAN B. LOKUR, .T. V