A. SATYANARAYANA, A.M.: appeal filed by Revenue and cross objection filed by assessee are against order of Commissioner (A) dt 13th Dec., 1985 for asst. yr. 1980-81, for which previous year ended on 31st Aug., 1979. assessee was partner in firm of M/s M.O. Devasia & Co. with 15 per cent share in profits and losses. He retired from firm w.e.f. 1st April,., 1979 taking as consideration for his share in firm amounts to credit of his capital and current accounts. According to GTO when assessee was partner in firm he had interest in all assets of firm including goodwill attached to business of firm, that actual value of his share was made up of his interest in all assets including goodwill and that interest in goodwill was not taken into account while evaluating amount due to him on relinquishment of his share in firm on retirement. He was of opinion that assessee got as consideration for relinquishment of his share only amount which was less than its market value difference being equivalent to his proportionate interest in goodwill of firm. He held that requirement of share in property without adequate consideration constituted gift. He proceeded to value goodwill of firm at Rs. 14,69,694 taking asset to represent three years purchase of average super profits of firm over last 5 years. assessee s share in goodwill was determined at Rs. 2,20,450 and this was brought to tax. Aggrieved by order of GTO assessee preferred appeal to Commissioner (A). In appeal before Commissioner (A) assessee urged that GTO went wrong in holding that there was gift of property chargeable to gift-tax, that he went wrong in holding that there was goodwill, that goodwill passed on without any consideration. He also contested valuation of goodwill of firm, Commissioner (A) proceeded on basis that assessee contested only existence of goodwill and its valuation, He did not give any finding on assessee s contention that there was no gift of property chargeable to gift-tax. He valued goodwill at 1 1/2 times average super profit at round sum of Rs. 6,00,000 and arrived at assessee s share at Rs. 75,000 and held that said amount of 75,000 has to be assessed in hands of assessee as amount gifted. Against order of Commissioner (A) both Department and assessee have filed appeal and cross objection respectively. In departmental appeal grounds taken are that Commr,(A) failed to consider r. 10(4) of GT Rules r/w notification issued thereon in S.O. No. 301 dt. 20th July, 1977 in quantifying gift involved in this case and that managerial remuneration fixed by Commissioner (A), for evaluating taxable gift is highly excessive and unreasonable besides being opposed to notification mentioned above. In cross objection grounds taken are that Commissioner (A) should have held that there was no gift of property chargeable to gift-tax, that he should have held that there was no goodwill in instant case, that he should have held that there was consideration for goodwill, that he should have given dedication for IT act and also for capital contributed by incoming partners in computation of goodwill, that he was right in not following method of computation given in notification dt 20th July, 1977 and that he was right in allowing deduction for managerial remuneration claimed. We shall first take cross objection filed by assessee and arguments advanced by both sides. At time of hearing, assessee s counsel filed paper book of 11 pages, copy of partnership deed dt 31st Aug., 1973 of firm M/s M.O. Devasia & Co., copy of gift-tax assessment order dt. 11th March,., 1985 for asst. yr. 1980-81 in case of another partner of said firm, Shri M.J. Varkey. His arguments were to following effect: Thought GTO had used word goodwill in assessment order what he had actually done was that he had brought to gift-tax right to share in profits. method adopted for calculation is that prescribed by Board for arriving at right to share in profit. Right to share in profit is not goodwill, method of computation prescribed by Board for calculation of right to share in profits makes it clear that it would apply in case where there is right to share profit without right to share in assets, that is to say, method adopted by GTO would not apply in case where there is right to share asset like goodwill. assessment is wrong because right to share in future profits was not existing asset at time of retirement of partner. There was not gift chargeable to gift-tax. Reliance is paced on decisions in case of CGT vs. Chalasani Subbayya Eluru (deceased by L/R) (1983) 37 CTR (AP) 303:(1983) 144 ITR 295 (AP) and in case of Sharadkumar Shrikrishna vs. CGR (1986) 50 CTR (MP) 132: (1986) 160 ITR 332 (MP). firm did not have any goodwill. It was doing business in ordinary line like hill produces and jewellery. Even assuming that what GTO brought to tax was share in goodwill, cases cited above would show that there is no scope for assessment. Commissioner (A) should have held that there was consideration for share in goodwill parted because of undertaking by incoming partners to bring in capital, to bear share in liabilities and future losses and to work for partnership business. There are sufficient considerations for alleged transfer of share in goodwill. Reliance is placed on decision of Bombay High Court in CGT (Central) vs. J.N. Marshall (1979) 120 ITR 613 (Bom). Commissioner (A) should have given deduction for capital undertaken to be brought by incoming partners. Commissioner (A) was right in not following CBDT circular for valuing goodwill. circular would apply only in case where there was right to share in profits only. He was right in allowing managerial remuneration. business had turnover of around 4 crores year and had three places of business. Commissioner(A) should have allowed deduction for income-tax also. departmental representative relied on orders of lower authorities. We have considered rival submissions. assessee retired from partnership on 1st April,., 1979. rights and liabilities of assessee and other partners upto 31st March, 1979 were governed by terms and conditions contained in partnership deed dt. 31st Aug., 1973. Clause No. 12 said partnership deed reads as under: "The partners may by mutual agreement admit new partner or partners into t h e partnership or allow any partner to retire from partnership whenever deemed necessary on such terms and conditions as may be agreed to by partners, without dissolution of partnership." According to GTO, when assessee was partner of firm he had interest in all assets of firm including goodwill attached to business of firm, that accordingly actual value of his share was made up of his share in all assets including goodwill and that interest in goodwill was not taken into account while evaluating amount due to him on relinquishment of share in firm on retirement. What GTO meant by this is that each partner had share in each specific asset of partnership and that assessee s share in partnership is equivalent to his share in aggregate value of all assets of partnership. view of CTO runs contrary to decision of Supreme Court in case of Addanki Narayanappa vs. Bhaskara Krishnappa AIR 1966 (SC) 1300 which is as under: " provisions of s. 14,15,29,32,37,38 and 48 make it clear that whatever may be character of property which is brought in by partners when partnership is formed or which may be acquired in course of business if partnership it becomes property of firm and what partner is entitled to is his share of profits, if any, accruing to partnership from realisation of this property, and upon dissolution of partnership to share in money representing value of property. No doubt, since firm has no legal existence, partnership property will vest in all partners and in that sense every partner has interest in property of partnership. During subsistence of partnership, however, no partner can deal with any portion of property as his own. Nor can he assign his interest in specific item of partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon dissolution of firm to share in assets of firm which remain after satisfying liabilities set out in cl. (a) and sub-cl.(i), (ii) and (iii) of cl. (b) of s. 48." In present case when assessee retired from partnership on 1st April,., 1979 firm of M/s M.O. Devasia & Co. was not dissolved as per above cl 12 of partnership deed. assessee retired during subsistence of partnership. According to aforesaid decision of supreme Court, right of partner during subsistence of partnership is only to obtain such profits, if any, that fall to his share from time to time. During subsistence of partnership no partner can predicate his share in any subsistence of partnership no partner can predicate his share in any specific asset of partnership, or assign or transfer his interest in any specific asset of partnership to anyone. Only upon dissolution of firm his right to share in assets of firm comes in. From above it will be seen that it cannot be said that assessee had got share in goodwill, considered by GTO as asset of firm. alleged relinquishment of non-existing share of partner in specific asset, namely goodwill in present case, of firm cannot be termed as relinquishment without consideration and brought to tax as gift made. Even assuming what GTO had brought to tax is assessee s relinquishment of his share in goodwill of firm without consideration, as per decision of Andhra Pradesh High Court in case of CGT vs. Chalasani Subbayya (1983) 37 CTR (AP) 303: (1983) 144 ITR 295 (AP) and decision of Madhya Pradesh High Court in Saradkumar Shrikrishna vs. CGT (1986) 50 CTR (MP) 132: (1986) 160 ITR 332 (MP), it is not open to Department to pick out one of assets of firm, namely, goodwill, and say that retiring partner has relinquished his share in goodwill and levy gift-tax thereon. So, we hold that there was no gift involved in this case when assessee retired from partnership firm by taking complete amounts standing to his credit both in his capital and current accounts in firm. assessment of gift-tax as recomputed by Commissioner (A) is, therefore, cancelled. In view of our above finding, it is not necessary to go into alternative contentions of assessee in cross objection and grounds of appeal in Revenue s appeal relating to valuation of goodwill. In result, cross objection is allowed and departmental appeal is dismissed. *** GIFT-TAX OFFICER v. K.V. JOSEPH