NDLI: Commissioner of Gift Tax Gujarat Vs. Chhotalal Mohanlal

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	1958 Gift Tax 'Act
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Gift-tax Act, 1958 (18 of 1958)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Gift Tax Act, 1958-Section 2(xii) & 4-Goodwill of partnership-Whether can be transferred-Whether such transfer a 'gift'. Under a deed of partnership dated 12.11.1958, a firm by the name M/s. Chhotalal Vedilal came Into existence with Chhotalal Mohanlal (the assessee), Gunvantilal Chhotalal and Pravinchandra Vedilal, as partners, each having 7 annas, 4 annas and 5 annas share respectively in the firm. This position continued until on 9.11.1961 when a change took place in the constitution of the firm. Under the new deed, Pravinchandra Vedilal retired. One Ramniklal Chhotalal became a partner with 4 annas share. The share of the assessee, Chhotalal Mohanlal was reduced. For the remaining 4 annas, two minor sons of the assessee were admitted to the benefits only of the firm. In the assessment year 1963-64, the Gift Tax Officer concluded that the assessee bad deprived himself of 19% share In the profits and had gifted away 19% share in the' goodwill of the firm in favour of his two minor sons. He valued the goodwill and treated 19% thereof as taxable gift.In the appeal before the Appellate Assistant Commissioner the assessee took the stand that the gift was not of a share of the goodwill but in respect of the right to receive future profits. He valued that right and since the amount was higher than what the Income Tax Officer has estimated, be enhanced the quantum. In further appeal by the assessee the Tribunal held that in the circumstances of the case there could be no gift of goodwill and found, that the right to receive future profits could not be subject matter of a gift as the transfer did not relate to existing property and the situation did not give rise to any gift which could be made liable to tax under the Act. In the Reference the High Court upheld the view of the Tribunal. In the appeal to this Court on behalf of the Revenue, it was contended that the order of the Gift Tax Officer was right and the Appellate Assistant Commissioner, the Tribunal and the High Court had gone wrong in holding that the arrangement under the deed of 9.11.1961 did not give rise to a taxable event under the Act.
Judge	Honble Mr. Justice Ranganath Misra
Neutral Citation	1987 INSC 113
Petitioner	Commissioner Of Gift Tax Gujarat
Respondent	Chhotalal Mohanlal
SCR	[1987] 2 S.C.R. 1042
Judgement Date	1987-04-16
Case Number	2027

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