ORDER
M. K. CHATURVEDI, J.M. :
This appeal by the Revenue is directed against the order of CGT(A)-XVIII, Bombay, and pertains to the asst. yr. 1985-86.
2. Solitary ground raised in this appeal projects the following grievance :
“On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the firm is not liable for any gift-tax and that the deemed gift worked out by the GTO is without any basis and improper and thereby erred in deleting the deemed gift of Rs. 15,87,160 considered for gift-law.”
The assessee is a registered firm. The Assessing Officer found that during the relevant year of assessment, it had transferred five flats in its building at Bandra to its five retiring partners. The book value of these flats had been shown at Rs. 23,93,260 and the retiring partners had altogether a credit balance of Rs. 10,01,097. The transfer was effected by debiting the partners accounts. This resulted in total debit balance of Rs. 13,92,163 in the partners accounts. Ultimately, this amount was not recovered from the retiring partners. In addition to that, one of the partners, viz., Shri M. J. Pherwani was also paid a sum of Rs. 2 lakhs. The Assessing Officer, therefore, opined that these transactions were in the nature of gift. He, therefore, subjected the some of gift-tax. It was contended before the CGT(A) that these five flats were purchased in the name of partners, for which the amount was paid from firms account belonging to the retiring partners and not to the firm. Further, nothing was payable by the retiring partners and further Rs. 2 lakhs were payable to Dr. Ramchand J. Pherwani on his retirement. Consequent upon a dispute, the matter was referred to the arbitrator and, according to the award given, the flats were transferred to the partners. CGT(A) further relied on the ratio laid down in the case of Aminchand Pyarelal vs. GTO (1990) 185 ITR 264 (Cal), wherein it was held that a firm is not liable to gift-tax. It was further held by the CGT(A) that there is no material on record to prove that dispute over the flat was a sham one, which led to arbitration award.
3. Shri D. C. Pant, learned Departmental Representative, appeared before us. It was contended that the word person, which has been defined in S. 2(xviii) of the GT Act, 1958, is not an exhaustive one and the categories specified therein do not exhaust the category of other persons, who answered the description of a person. A firm is not a separate legal entity under the general law, but is a compendious name of body of persons who had entered into a partnership. Therefore, a firm would fall within the category of body of individuals or persons, whether incorporated or not, contained in the later part of the definition. Further, it is settled rule of interpretation that the provisions of the statute must be harmoniously interpreted and an interpretation should be avoided which renders the other provisions otiose. To support his contention, learned Departmental Representative relied on the following :
(1) CGT vs. S. B. Sugar Mills (1979) 120 ITR 126 (All);
(2) CIT vs. Bharani Pictures (1981) 129 ITR 244 (Mad) and
(3) A. Vimalan vs. CGT (1974) 94 ITR 21 (Mad).
4. Shri Dilip Dwarkadas, learned counsel for the assessee, appeared before us. It was contended that the flats in question were belonging to the partners and not to the firm. Out attention was invited on the arbitration award dt. 30th January, 1986, the relevant portion of which reads as under :
“Having considered the matter very carefully I make the following Award :
(i) The flat standing in the names of :
1. Mr. Raj Jethanand Pherwani as Karta and Manager of HUF, (2) Mr. Maganlal Jethanand Pherwani as Karta and Manager of HUF (3) Dr. Ramchand Jethanand Pherwani as Karta and Manager of HUF, (4) Mr. Gottam Jethanand Pherwani as Karta and Manager of HUF, (5) Mr. Naraindas Jethanand Pherwani as Karta and Manager of HUF, situated in Kalpana Apartments, Shirler Rajan Road, Bandra (West), Bombay are their exclusive properties and not partnership properties.
(2) Out of the outgoing partners only Dr. Ramchand Jethanand Pherwani will receive from the continuing partners a sum of Rs. 2,00,000 in full satisfaction of his claim.”
Our attention was also invited on the order of the CIT(A) dt. 7th September, 1992 rendered in Appeal No. CIT(A) XVIII/32/92-93 in the income-tax proceedings for the asst. yr. 1985-86, wherein CIT(A) deleted the estimated profits on transfer of flats and stated that there is no material on record to prove that through the mechanism of the sham dispute the partners had appointed an arbitrator, who, in turn, through his award, gave one flat each to the five partners. Regarding the amount of Rs. 2 lakhs paid to Shri M. J. Pherwani, it was held that the same was paid for the past services. Learned counsel further placed his reliance on the decision of the Calcutta High Court rendered in the case of Aminchand Pyarelal vs. GTO (supra), wherein it was held that a firm is not included in the definition of person under S. 2(xviii) of the GT Act, 1958.
5. We have heard the rival submissions in the light of material placed before us and precedents relied upon. We have persued the various documents and materials filed before us at the time of hearing. We have gone through the arbitration award. It is true that in the said award, partners were treated as the real owners of the flats. But how the dispute cropped is not clear to us. Relevant details apropos the same were not filed. How the property was purchased ? How the amount of purchase was reflected in the account ? How it was treated as firms property ? How the dispute was referred to the arbitrator ? How the firm claimed its ownership are – some of the issues which are not clear from the records. Details filed before us are also not adequate to give a clear cut finding on this point. The arbitration award was given on 30th January, 1986 whereas the case relates to the asst. yr. 1985-86. In the absence of details, we find it difficult to give any decision on facts.
6. Sec. 2(xviii) coins the definition of the expression person. In the case of S.B. Sugar Mills (supra), it was held that this definition is not exhaustive one and the categories specified after the word includes in that section do not exhaust the category of other persons, who answer the description of a person. In view of this, in the case of Bharani Pictures (supra), the firm was held to be a legal entity exigible to the gift-tax levy. In the case of Aminchand Pyarelal (supra) it was held that a firm is not included in the definition of “persons” under S. 2(xviii) of the GT Act, 1958. Hence, a firm is not assessable as an entity under the GT Act. We, therefore, find that there is cleavage of judicial opinion on this aspect. The apex Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) has held that if the interpretation of a fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted. In view of this, we are inclined to follow the ratio laid down by the Calcutta High Court in the case of Aminchand Pyarelal (supra). We, accordingly, uphold the impugned order.
In the result, appeal of the Revenue stands dismissed.