Supreme Court of India
M/s. Sree Narayana Chandrika Trust v. Commissioner of Gift Tax, Kerala
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What the Court ordered
We are of the view that even assuming that there was a transfer of I2% of the share profit/loss in favour of the incoming partner M.U. Indira by the appellant assessee, it was not a situation of transfer for inadequate consideration so as to amount to a taxable gift within the meaning of section 4( I )(a) of the Gift Tax Act, I.
Judgment, page 9
From the headnote
Gift Tax Act, 1958-Section 4(/)(a)-Gift Tax-Relinquishment of profit/ loss share by a partner in favour of newly inducted partner upon reconstitution of the firm-Share of newly inducted partner not proved to be for inadequate consideration-Held: Such relinquishment does not amount to taxable gift. Appellant was a partner along with 8 other partners in a firm having 45% profit/loss share in the firm. The partnership was reconstituted inducting a new partner in the firm who made her contribution towards the capital and she was given 12% share. As a result of reconstitution, shares of all the
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