IMPORTANT POINT
Distribution of assets between partners on the dissolution of the firm, even though unequal, does not amount to "transfer of property" within the meaning of Section 2(xxiv) and therefore, did not amount to "gift" as defined in Section 2(xii) of the Gift-Tax Act.

Headnote:(i) Gift Tax Act, 1958-Section 2 (xii) read with Section 2(xxiv)-Gift-Transfer of Property-Distribution of assets between partners on dissolution of firm-Does not amount to tranfer of property even if distribution unequal-Consequently no gift involved within meaning of Section 2(xii) in such a case. (Paras 7, 14, 20 & 28)
       (ii) Interpretation of Statutes- Words and expression defined in one Statute-Whether, could be guide to construction of same words and expression in another statute.
       The words and expressions defined in one statute as judicially interpreted do not afford a guide to construction of the same words or expressions in another statute unless both the statutes are para-materia legislations or it is specifically so provided in one statute to give the same meaning to the words as defined in other statute. (Para 21)

JUDGMENT

Shivaraj V. Patil, J.-This appeal is by the assessee against the judgment and order dated 25.4.1988 passed by the Division Bench of the High Court of Andhra Pradesh. It relates to the assessment year 1972-73.

2. The Income-tax Appellate Tribunal, Hyderabad, (for short the Tribunal ) had referred the following question under 26(1) of the Gift-tax Act, 1958 (for short the Act ) for the opinion of the High Court :

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the release by the assessee who was one of the partners in the firm of 3-Aces, of his rights in the assets of the firm for a consideration of Rs. 3,00,000/- when the market value of the assets of the firm in proportion to his share was in excess thereof, did not amount to a gift within the meaning of the Gift-tax Act."

The High Court by the impugned judgment answered the said question in negative and against the assessee.

3. Briefly stated, the facts leading to the filing of this appeal are as follows.

The appellant and his brother Bishanlal Ahuja were the partners of a partnership firm constituted on 9.1.1965 under the name and style of "3-Aces". The firm was engaged in the business of a restaurant in a building known as "Mohsin-ul-Mulk Kothi" situated at Abid Road, Hyderabad.

4. An agreement was entered into between the appellant and his brother Bishanlal on 15.4.1971. The terms of the said agreement are set out below :

"(i) Sri Jagatram (assessee) is to retire before December 31, 1971.

(ii) Steps are to be taken to finalise accounts relating to the partnership and determination of the amount due to Sri Jagatram on retirement.

(iii) Sri Bishanlal agreed to pay a sum of Rs.1,50,000 to Sri Jagatram towards the value of 50 share of the goodwill of the firm.

(iv) The above sum of Rs. 1,50,000 payable by Sri Bishanlal to Sri Jagatram shall be in addition to the sum due to Sri Jagatram from the partnership at the time of retirement.

(v) If the total sum including 50 share value of the goodwill, i.e., Rs.1,50,000/-, payable to Sri Jagatram falls below Rs. 3,00,000, the amount in excess of the balance actually due to Sri Jagatram at the time of retirement shall be treated as the sale value of 50 share of the goodwill belonging to Sri Jagatram.

(vi) Sri Jagatram shall execute proper conveyance in favour of Sri Bishanlal conveying 50 share in the land and building in which the business of 3-Aces is carried on.

(vii) It is open to Sri Bishanlal to classify the sum payable to Sri Jagatram as between movable and immovable properties and get necessary documents executed by Sri Jagatram."

5. Pursuant to the said agreement, a Deed of Dissolution of the partnership was executed on 22.11.1971 w.e.f. that date. The relevant terms contained in the Deed of Dissolution are given below :

"(i) All the assets and liabilities of the partnership including the land and building are taken by Sri Bishanlal from November 22, 1971.

(ii) Sri Jagatram renounced his interest, share and interest in the said assets and liabilities from November 22, 1971.

(iii) In full settlement and satisfaction of the share, right and interest of Sri Jagatram in the partnership including land and buildings, profits and goodwill and the amounts standing to the credit of Sri Jagatram in the partnership accounts as on November 21, 1971, Sri Jagatram has agreed to receive Rs.3,00,000.

(iv) Out of the said Rs. 3,00,000, Rs. 1,00,000 has already been paid. The balance of Rs. 2,00,000 is payable by Sri Bishanlal against the sale consideration of the undivided 50 share in the land and building known as "Mohsin-ul-Mulk Kothi".

(v) Sri Jagatram should immediately execute a sale deed and register the same in favour of Sri Bishanlal conveying his 50 share in the land and building f

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2000 Supreme(SC) 1652

IMPORTANT POINTDistribution of assets between partners on the dissolution of the firm, even though unequal, does not amount to "transfer of property" within the meaning of Section 2(xxiv) and therefore, did not amount to "gift" as defined in Section 2(xii) of the Gift-Tax Act.

Cases Referred (8)

IMPORTANT POINT
Distribution of assets between partners on the dissolution of the firm, even though unequal, does not amount to "transfer of property" within the meaning of Section 2(xxiv) and therefore, did not amount to "gift" as defined in Section 2(xii) of the Gift-Tax Act.