Holding

The adjustment of assets on dissolution of a partnership does not constitute a transfer of property and therefore does not amount to a gift under the Gift Tax Act.

Summary

Sri Jagatram Ahuja, a retiring partner of a firm, executed a release deed whereby he transferred his rights in the firm's assets to his brother for Rs. 3,00,000, although the market value of his share was higher. The Gift Tax Officer treated the excess as a gift and levied tax, a decision upheld by the Commissioner (Appeals) and the High Court. The Tribunal held that the adjustment of assets on dissolution was not a transfer of property and therefore not a gift, a view the Supreme Court affirmed. Relying on the definition of "gift" and "transfer of property" in the Gift Tax Act and on the precedent of Getti Chettiar, the Court held that a partnership dissolution involves a mere distribution of assets, not a transfer. Consequently, the High Court's decision was set aside and the appeal was allowed.

Issues considered

Whether the release of a retiring partner's rights in partnership assets for consideration constitutes a "gift" under Section 2(xii) of the Gift Tax Act, 1958.
Whether such release amounts to a "transfer of property" within the meaning of Section 2(xxiv) of the Gift Tax Act.
Whether definitions and interpretations from the Estate Duty Act can be applied to the Gift Tax Act.
Whether the distribution of assets on dissolution of a partnership is a transfer of property for tax purposes.

Legislation cited

Gift Tax Act, 1958s. 16, s. 26(1), s. 2(xii), s. 2(xxiv)
Indian Partnership Act, 1932s. 48

Subjects

gift taxtransfer of propertypartnership dissolutionrelease deedstatutory interpretationSection 2(xii)Section 2(xxiv)Gift Tax ActEstate Duty Actasset distribution

Judgment

SRI JAGATRAM AHUJA A
THE COMMISSIONER OF GIFT TAX, HYDERABAD

OCTOBER 17, 2000

[S.P. BHARUCHA, S.N. PHUKAN AND SHIVARAJ V. PATIL, JJ.] B

-1
Gift Tar, Act, 1958-Section 2 (xii), (xiv)-Release by partner of his
rights in favour of another partner in assets offirm for a fvced consideration
when the market value of assets in proportion to his share is in excess C
thereof-Whether constitutes transfer of property for Gift tax purposes-Held,
it does not constitute a transfer of property and therefore not liable to Gift
tax.

Interpretation of Statutes :
D
Words and phrases defined in one statute as judicially interpreted not
a guide to construction of the same words or expressions in another statute
unless both the statutes are para-materia legislations-Or there is a specific
provision to construe the meaning as defined in the other statute.

Appellant-assessee and his brother were partners in a partnership firm. E
On retirement of the assessee, a Deed of Dissolution was executed. As per
the Deed, the brother got all assets and liabilities of the firm, which included
a
land, buildings, profits and goodwill. The assessee got fixed sum of
Rs. 3,00,000 which was based on partnership agreement. A Release Deed
was executed by the assessee in favour of his brother. F
Gift Tax Officer treated the release by the assessee of the excess in
favour of the another partner as gift, which was also upheld by Commissioner
(Appeals). Tribunal reversed the decision of the authorities in favour of the
g'i4'essee. The High Court decided the question in favour of the Revenue.
G
ht appeal to this Court, it was contended by the assessee that the
decisions relied on by the High Court in support of its conclusion were not
directly on the point and some of them arose under the Estate Duty Act.

Allowing the appeal, this Court
H
1
2 SUPREME COURT REPORTS (2000) SUPP. 4 S.C.R.

A HELD: 1.1. The present case is clearly and merely a case of adjustment
of distribution of assets of the firm in regard to share of the appellant on its
dissolution and as such no transfer of property was involved in it If there is
a sale or transfer of assets by the assessee t~ a person, the position would be
_different. Since a partner in a firm has no exclusive right on any property of ::. __
the firm, he cannot transfer the property. But upon dissolution of a firm,
B allotment or adjustment of the assets takes place. Hence, there was no element
of transfer in such a case. (14-C; 10-FJ

1.2. Thus the High Court committed an error in answering the question
in favour of the Revenue and agains! the assessee. The judgment of the High
C Court is set aside and the order of the Tribunal is upheld. 114-FJ

Commissioner of Gift Tax v. N.S. Getti Chettiar, (1971) 82 ITR 599 SC;
Malabar Fisheries Co. v. Commissioner of Income Tax, Kera/a, (1979) 120
ITR 49 SC; Commissioner of Income Tax, Madhya Pradesh, Nagpur and
Shandra v. Dewas Cine Corporation, (1968) 68 ITR 240 SC; CITv. Bankey
D Lal Vaidya, (1971) 79 ITR 594 SC; Addi. C!Tv. Mohanbhai Pamabhai, (1987)
165 ITR 166 SC and CED v. Kantilal Trikamlal, (1976) 105 ITR 92 SC, relied
on.

CGTv. Chhotalal Mohan/al, (1987) 166 ITR 124 SC; MK. Kuppuraj v.
E CGT, (1985) 153 ITR484 Mad. and CGTv. Premji TrikamjiJobanputra, (1982)
133 ITR 317 Born., distinguished.

Commissioner ofIncome-tax v. Keshavlal Lallubhai Patel, (1965) 2 SCR
100 = 55 ITR 637 SC and Addanki Narayanappa and Anr. v. Bhaskara ·,
Krishnappti, AIR (1966) SC 1300, referred to.
F
2. 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. 113-A]
G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 313 7 of 1995.

From the Judgment and Order dated 25.4.88 of the Andhra Pradesh High
Court in R.C. No. 254 of 1982.

H A. Subba Rao for the Appellant.
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHJVARAJ V. PATIL, J.] 3

M.L. Verma and S. Rajappa for the Respondent. A
The Judgment of the Court was delivered by

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. B
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 C
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 marklet
value of the assets of the firm in proportion to his share was in excess
there?f, did not amount to a gift within the meaning of the Gift-tax
A~" D
The High Court by the impugned judgment answered the said question
in negative and against the assessee.

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

An agreement was entered into between the appellant and his brother F
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.
f G
(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 Jagarram from
the partnership at the time of retirement. H
4 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A (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. "'-,
B (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
c riecessary documents executed by Sri Jagatram."

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
D
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
E 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.
F 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 .'
G the land and building for Rs. 2,00,000."

It was on 10.3.1972 that the appellant and Bishanlal executed a document
styled as 'Release Deed' pursuant to and consistent with the aforementioned
two documents.

H Originally assessment of gift tax was made on 12.2.1972 on a total gift
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHIVARAJ V. PATIL, J.] 5
of Rs. 70,000. After allowing exemption of Rs. 5,000 it was determined at Rs. A
65,000. Subsequently, the Gift Tax Officer took up the proceedings under
Section 16 of the Act, 1958 by re-opening the assessment already made. He
valued the share of the appellant in the partnership assets at Rs. 12,67,015.
>- ~
An amount of Rs. 3,00,000 paid by Bishanlal to the appellant was deducted
and thus the value of the property alleged to have been gifted by the
appellant to his brother Bishanlal was arrived at Rs. 9,67,015. On appeal by B
the appellant, the Commissioner of Gift-tax (Appeals) confirmed the order of
-. the Gift-tax Officer. However, he reduced the total value of the gift by Rs.
3,77,000. The appellant took up the matter in further appeal before the Tribunal.
The Tribunal accepted the appeal holding that· the distribution of assets
between partners on the dissolution of the firm, even though unequal, does C
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 Act.

At the instance of the Revenue, the Tribunal referred the above stated
question under Section 26(1) of the Act for the opinion of the High Court.
The High Court referring to the various decisions and for the reasons stated D
in the impugned judgment took the view in favour of the Revenue.

In doing so, the High Court relied on CGT v. Chhotalal Mohan/a/,
(1987) 166 ITR 124 SC, MK. Kuppuraj v. CGT(l985) 153 1TR 481 Mad. and
CGT v. Premji Trikamji Jobanputra, ( 1982) 133 ITR 317 Born. distinguishing
the other cases, particularly the case of CGTv. Getti Chettiar, (1971) 82 ITR E
599 SC strongly relied on in support of the case of the appellant.

At the outset, the learned counsel for the appellant submitted that the
appellant is not challenging the valuation of property of alleged gift. Hence,
it is unnecessary for us to go into that question. The learned counsel for the F
appellant seriously contended that the High Court manifestly erred in
answering the question in favour of the Revenue contrary to the ratio and
principles stated in the case of Getti Chettiar (supra). He further submitted
that the decisions relied on by the High Court in support of its conclusion
were not directly on the point and some of them arose under the Estate Duty
A~ G
Per contra, the learned senior counsel for the respondent argued
supporting the view taken by the High Court.

We have carefully considered the submissions made by the leamed1
counsel for the parties. In order to appreciate the respective contentions of H
6 SUPREME COURT REPORTS [2000) SUPP. 4 S.C.R.

A the parties and to resolve the controversy we consider it appropriate to
extract definitions of "Gift" and "Transfer of property" from Section 2 of the
Act: -

"2 (xii)·"gift" means the transfer by one person to. another of any
existing movable or immovable property made voluntarily and without
B consideration in money or money's worth, and includes the transfer
or conversion of any property referred to in section 4, deemed to be
a gift under that section;
.-
Explanation.- A transfer of any building or part thereof referred to
in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-
c tax Act, by the person who is deemed under the said clause to be the
owner thereof made voluntarily and without consideration in money
or money's worth, shall be deemed to be a gift made by such person."

"2 (xxiv) "transfer of property" means any disposition, conveyance,
assignment, settlement, delivery, payment or other alienation of property
D and, without limiting the generality of the foregoing, includes -

(a) the creation of a trust in property;
(b) the grant or creation of any lease, mortgage, charge, easement,
licence, power, partnership or interest in property;
E (c)
.
the exercise of a power of appointment (whether general, special
or subject to any restrictions as to the persons in whose favour
the appointment may be made) of property vested in any person;
not the owner of the property, to determine its disposition in
favour of any person other than the donee of the power; and
F (d) any transaction entered into by any person with intent thereby
to diminish directly or indirectly the value of his own property
and to increase the value of the property of any other person;"

This Court in Commissioner o/Gift-Tax, Madras v. N.S: Getti Chettiar,
G (1971) 82 ITR 599 SC, arising under the Act itself construing and considering
the very same provisions held that in a Hindu Joint Family by allotting greater
share to other members of coparcenary than that to which they were entitled,
the assessee could not be held to have made a gift. Facts of the case were
that the assessee was the Karta of Hindu Undivided Family consisting of
himself, his son and his six grandsons. There was a partition in the family
H property. The total value of the properties divided was Rs. 8,51,440 but the
-
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHIVARAJ V. PATIL. J.] 7
assessee, the Karta took properties worth only Rs. I, 78,343 allotting the A
remaining properties to other coparceners. After considering various decisions
and provisions of law, this Court arrived at the following conclusions:-

(i) That the partition did not effect any transfer as generally
understood in law and did not, therefore, fall within the definition
of gift in Section 2(xii) of the Act. B
-. (ii) That the partition in the family could not be considered to be a
disposition, conveyance, assignment, settlement, delivery,
payment or other alienation of property within the meaning of
those words in Section 2(xxiv) of the Act.
(iii) That the partition was not a transaction entered into by the C
assessee with intent thereby to diminish directly or indirectly the
value of his own property and to increase the value of the
property of any other person and, therefore, Section 2(xxiv)(d)
did not apply.

(iv) That, therefore, there was no gift by the assessee of which he D
was liable to pay gift tax. On the reason that a member of Hindu

-· Undivided Family has no definite share in the family property
before the division and he cannot be said to diminish directly or
indirectly the value of his property or to increase the value of the
property of any other coparcener by agreeing to take a share E
lesser than what he would have got if he would have gone to a
court to enforce his claim.

The word 'transaction' in clause (d) of Section 2(xxiv) takes its colour
from the main clause; it must be a transfer of property in some way. The words
disposition, conveyance, assignment, settlement, delivery and payment are all p
used to indicate some kind of transfer of property. An interpretation clause
which extends the meaning of a word does not take away its ordinary and
popular meaning.
•
' i It is settled position in law that a partition of Hindu Undivided Family
cannot be considered as a transfer in the strict sense. In Commissioner of G
Income-tax v. Keshavlal Lallubhai Patel, [1965] 2 SCR 100 = 55 ITR 637 this
Court stated thus: -

"But, is a partition of joint Hindu family property a transfer in the
strict sense? We are of the opinion that it is not. This was so held
in Gutta Radhakrishnayya v. Gulla Sarasamma, [!LR 1951 Mad. 607]. H
8 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A Subba Rao J. (then a judge of the Madras High Court), after examining
several authorities, came to the conclusion that 'partition is really a
process in and by which a joint enjoyment is transformed into an
enj~yment in severalty. Each one of the shares had an antecedent title
and, therefore, no conveyance is involved in the process, as a
conferment of a new title is not necessary.' The Madras High Court
B again examined the question in M.K. Stremann v. Commissioner of
Income-tax, [41 ITR 297 (Mad.)], with reference to section 16(3)(a)(iv).
It observed that 'obviously no question of transfer of assets can arise
when all that happens is separation in status, though the result of
such severance in status is that the property hitherto held by the
c coparcenary is held thereafter by the separated members as tenants-
in-common. Subsequent partition between the divided members of the
family does not amount either to a transfer of assets from that body_
of the tenants-in-common to each of such tenants-in-common'."

This Court in Getti Chettiar case aforementioned has stated thus: -
D
"A reading of this section clearly goes to show that the words
"disposition", "conveyance'', "assignment'', "settlement", "delivery"
and "payment" are used as some of the modes of transfer of property.
The dictionary gives various meanings for those words but those
meanings do not help us. We have to und.erstand the meaning of
E
those words in the context in which they are used. Words in a section
of a statute are not to be interpreted by having those words in one
hand and the dictionary in the other. In spelling out the meaning of
the words in a section, one must take into consideration the setting
in which those terms are used and the purpose that they are intended
F to serve. If so understood, it is clear that the word "disposition" in
the context means giving away or giving·up by a person of something
which was his own, "conveyance" means transfer of ownership,
"assignment" means the transfer of the claim, right or property to
another, "settlement" means settling the property, right or claim
conveyance or disposition of property for the benefit of another,
G
"delivery" contemplated therein is the delivery of one's property to
another for no consideration and "payment" implies gift of money by
someone to another. We do not think that a partition in a Hindu
Undivided Family can be considered either as "disposition" or
"conveyance" or "assignment" or "settlement" or "delivery" or
H "payment" or "alienation" within the meaning of those words in
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHIVARAJ V. PATIL, J.] 9

This leaves us with cl. (d) of S. 2 (xxiv) which speaks of a
transaction entered into by any person with intent thereby to diminish
directly or indirectly the value of his own property and to im;rease the
value of the property of another person. A member of Hindu Undivided
Family who, as mentioned earlier, has no definite share in the family B
property before division, cannot be said to diminish directly or
indirectly the value of his property or to increase the value of the
property of any other coparcener by agreeing to take a share lesser
than what he would have got if he had gone to court to enforce his
claim. Till partition, his share in the family property is indeterminate. C
He becomes entitled to a share in the family property only after the
partition. Therefore there is no question of his either diminishing
directly or indirectly the value of his own property_ or of increasing
the value of the property of anyone else. The "transaction" referred
to in cl. (d) of s. 2 (xxiv) takes its colour from the main clause viz., it
must be a transfer of property in some way. This conclusion of ours D
gets support from sub-clause (a) to (c) of clause (xxiv) of s. 2, each
of which deals with one or the other mode of transfer. If Parliament
-.. intended to bring within the scope of that provision partitions of the
type with which we are concerned, nothing was easier than to say so.
In interpreting tax laws, courts merely look at the words of the section. E
If a case clearly comes within the section, the subject is taxed and not
otherwise."

This Court again in Addanki Narayanappa and Another v. Bhaskara
Krishnappa, AIR (1966) SC 1300, considering the provisions of Sections 14,
15, 29, 32, 37, 38 and 48 of Partnership Act, 1932 has explained as to the nature F
of property during subsistence of partnership and after its dissolution. It is
held that "from a perusal of these provisions it would be abundantly clear that
whatever may be the character of the property which is brought in by the
partners, when the partnership is formed or which may be acquired in the
course of the business of the partnership it becomes the property of the firm G
and what a partner is entitled to is his share of profits, if any, accruing to the
. partnership from the realization of this property, and upon dissolution of the
partnership to a share in the money representing the value of the property.
No doubt, since a firm has no legal existence, the partnership property will
vest in a\\ the partners and in that sense every partner has an interest in the
property of the partnership. During the subsistence of the partnership, however, H
IO SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A no partner can deal with any portion of the property as his own. Nor can he
assign his interest in a specific item of the partnership property to anyone.
His right is to obtain such profits, if any, as fall to his share from time to time,
and upon the dissolution of the firm to a share in the assets of the firm which
remain after satisfying the liabilities set out in Cl. (a) and sub-Cls. (i), (ii) and
B (iii) of Cl. (b) ofS.48."

In Malabar Fisheries Co. v. Commissioner of Income-tax, Kera/a, (1979)
120 ITR 49 SC this Court considered few provisions of Income-tax Act, 1961.
Referring to the case of Addanki Narayanappa and other cases expressed
the view that a partnership firm under the Indian Partnership Act is not a
C distinct legal entity apart from the partners constituting it and that in law the
firm as such has no separate rights of its own. When one talks of the property
or assets of the firm all that is meant is property or assets in which all partners
have a joint or common interest. Hence the contention that upon dissolution
of the firm rights in the partnership assets are extinguished, ·cannot be accepted ..
It is further, held that the partners own jointly or in common the assets of the
D partnership and, therefore, the consequence of the distribution, division or
allotment of assets to the partners which flows upon dissolution after discharge
of Iiabilities is nothing but a mutual adjustment of rights between the partners
and there is no question of any extinguishment of the firm's rights in the
partnership assets amounting to a .transfer of assets within the meaning of
E Section 2(4 7) of the Income-tax Act, 1961. Although the case arose under the
provisions of Income-tax Act, but as to the nature and character of transaction
of mutual adjustment of rights between the partners upon dissolution of a
firm, it was clearly held that such a transaction did not amount to transfer.
If there is a sale or transfer of assets by the assessee to a person, the position

-
would be different. Since a partner in a firm has no exclusive right on any
F property of the firm he cannot transfer the property. But upon the dissolution
of a firm allotment or adjustment of the assets takes place. Hence there was
no element of transfer in such a case.

Yet, in another case Commissioner of Income-Tax, Madhya Pradesh,
G Nagpur and Bhandara v. Dewas Cine Corporation, (1968) 68 ITR 240 SC,
dealing with the provisions of Section 10(2)(vii) of Income-tax Act again
referring to Addanki Narayanappa's case this Court took the view that a
partner might in an action for dissolution insist to sell the assets of partnership
to realize his share. But where in satisfaction of the claim of a partner to his
share in the value of the residue determined on the footing of an actual or
H notional sale, the properties so allotted cannot be taken to have been sold
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHIVARAJ V. PATIL, J.] 11

to him. A
On principles and in view of the clear ratio, the decision of Getti
Chettiar (supra) of this Court supported the case of the appellant which
decision was rightly applied by the Tribunal to the facts of the case. The High
Court in relation to the said decision has stated thus :-
B
"Be that as it may, it is not for us to express any opinion on the said
criticism. By virtue of Article 141 of the Constitution, the said decision
and even the observations aforesaid are binding upon us. In our
opinion, however, the ratio of the said decision has no application to
the distribution of assets as between partners whose shares inter se
are specific and determined at any given point of time. Moreover, this c·
decision has to be read and understood in the light of the subsequent
decision of the Supreme Court in CED v. Kantilal Trikamla/, (1976)
105 ITR 92, which is, no doubt, a case arising under the Estate Duty
Act. Section 2 ( 15) of the Estate Duty Act defines "property" in the
following terms."
D
The High Court having rightly stated that the said decision and even
the observations made were binding on it wrongly did not apply the ratio of
the said decision to the facts of the case in hand. Further the High Court
committed an error in stating that the said decision had no application to the
distribution of the assets as between the partners whose shares inter-se are E
specific and determined at any given point of time and that the said decision
had to be read and understood in the light of the subsequent decision of this
Court in Kantilal Trikamlal's case. As in the case of Hindu Joint Family, the
coparceners do not have exclusive rights on any specific property of the
family, the property allotted to their shares become specified only on partition;
the same is the position in the case of partner of a firm. No partner of a firm F
can claim exclusive or specific right in any specific asset of the property of
a firm. Coparceners also have definite share in the Hindu Undivided Family.
So also the partners have definite share in the partnership. In our considered
view, the principles stated in Getti Chettiar 's case equally apply to case of
allotment or adjustment of properties among the partners upon dissolution of G
a firm. We fail to understand how Kantilal Trikamla/'s case made any
difference. The said case did not show any disagreement with the principles
stated in Getti Chetiar 's case and no distinction was made to take a different
view. On the other hand, principles stated in Getti Chettiar's case were
affirmed. In relation to Getti Chettiar's case, in Kantilal Trikamlal, it is stated
thus:- H
12 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A "That a case under the Gift-tax Act, I 958, and the construction of
section 2(xxiv) fell for decision. Certainly, many of the observations
there, read de hors the particular statute, might reinforce the assessee's
stand. This court interpreted the expression "transfer of property" in
section 2(xxiv) and held that the expression "disposition" used in that
provision should be read in the context and setting of the given
B statute. The very fact that "disposition" is treated as a mode of
transfer takes the legal concept along a different street, if one may use
such a phrase, from the one along which that word in the Estate Duty
Act is travelling. Mr. Justice Hegde rightly observed, if we may say
so with respect, that:
c "Words in the section of a statute are not to be interpreted by
having those words in one hand and the dictionary in the other.
In spelling out the meaning of the words in a section, one must
take into consideration the setting in which those terms are used
and the purpose that they are intended to serve." (pp.605-606).
D
The word" transaction" in section 2(xxiv) of the Gift-tax Act takes its
colour from the main clause, that is, it must be a "transfer" of property
in some way. Since a partition is not a "transfer" in the ordinary sense
of law, the court reached the conclusion that a mere partition with
unequal allotments not being a transfer, cannot be covered by section
E
2(xxiv). A close reading of that provision and the judgment will dissolve
the mist of misunderstanding arid discloses the danger of reading
observations from that case for application in the instant case. The
language of section 2( I 5), Explanation 2, is different and wider and the
reasoning of Getti Chettiar cannot therefore, control its amplitude. It >
F is perfectly true that in ordinary Hindu law a partition involves no
conveyance and no question of transfer arises when all that happens
is a severance in status and the common holding of property by the
coparcener is converted into separate title of each coparcener as
tenant-in-common. Nor does subsequent partition by metes and bounds
amount to a transfer. The controlling distinction consists in the
G difference in definition between the Gift-tax Act (section 2(xxiv) and
the Estate Duty Act (section 2(15)."

We find that Kantilal Trikam/al's case supports the view taken in Getti
Chettiar 's case. Added to this, Section 2( 15) of the Estate Duty Act, defining
H "property" came up for consideration in Kantilal Trikam/al's case. We may·
SRI JAGATRAM AHUJA v.COMMR. OF GIFT TAX [SHIVARAJ V. PATIL, J.] 13

state here itself that the words and expressions defined in one statute as A
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. The aim and object of the
two legislations, namely, the Gift-tax Act and the Estate Duty Act are not B
similar.

In CIT v. Bankey Lal Vaidya, (I 97 I) 79 ITR 594 SC, it is clearly stated
that where in the course of dissolution,. the assets of the firm are divided
between the partners according to the respective shares, by allotting the
individual assets or paying the money value equivalent thereof, no transfer C
is involved and that it is merely a case of distribution of assets.

The same view is taken in Addi. C/Tv. Mohanbhai Pamabhai, [1987)
I65 ITR 166 (SC) that where a partner retires from a firm and receives his share
of amount calculated on the valuation of the net partnership as.sets including D
goodwill of the firm, no transfer is involved.

We now refer to the cases relied on by the High Court to support its
view. In CGT v. Chhotalal Mohan/a/, (1974) 97 ITR 393 (Guj), this Court
reversed the deCision of Gujarat High Court and in the light of the facts and
circumstances of the case, held that there was a gift for the purpose of the E
Gift-tax Act. In that case, a firm. by name M/s. Chhotalal Mohanlal came into
existence with three partners namely, Chhotalal Mohanlal, G. Chhotalal and P.
Vedilal with 7 annas, 4 annas and 5 annas shares re:opectively. During the
assessment year 1963-64, under the new deed, P. Vedilal retired. The share of
G. Chhotalal remained unchanged. One R. Chhotalal became a partner with 4
annas share. The share of assessee Chhotalal Mohanlal was reduced to 4 F
annas. For the remaining 4 annas share, 2 minor sons of Chhotalal Mohanlal
were admitted to the benefits of the firm with 12% and 13% interest respectively.
There was also no change in the share capital standing in the name of the
assessee. As can be seen from the facts stated above, P. Vedilal retired and
1 the firm was reconstituted; two minor sons ofChhotalal Mohanlal, one of the G
partners were admitted to the benefits of the partnership and simultaneously
share of said Chhotalal Mohanlal was reduced from 7 annas to 4 annas giving
3 annas share to the minor sons. In this situation when at the time of the
reconstitution of the firm, a 3 annas share out of Chhotalal Mohanlal's 7
annas share in the partnership firm was given to his minor sons it was taken
H
14 SUPREME COURT REPORTS [2000) SUPP. 4 S.C.R.

A as transfer of property by way of gift and as such it was taxable. Hence the
case of Chottalal Mohanlal did not advance the case of the Revenue on the
facts of the case before us.

The case of M.K. Kuppuraj was also a case where the assessee's share
was reduced and his minor children were admitted to the benefits of the
B partnership with 8% share in the profits and this case was referred to and
approved by this Court in Chottalal Mohanlal's case. The case of Premji
Tri/camji is again a case where in the constitution of a firm, minors were
admitted to the benefits of the partnership firm. In all these cases, minors were
admitted to the benefits of the partnership and if such partner or minor did
C not bring in capital of his own into the partnership firm corresponding to his
share, it was held that the transaction amounted to a gift. But the present case
stands entirely on a different footing. It is clearly and merely a case of
adjustment or distribution of assets of the firm in regard to share of the
appellant on its dissolution and as such no transfer of property was involved
in it.
D
Thus, in our view, the High court was not right in applying the decisions
in (1) Chhotalal Mohanlal (2) M.K. Kuppuraj, (3) Premji Trikamji to the facts
of the case in hand.

The cases of this Court in (1) Getti Chettiar, ( 2) Malabar Fisheries Co.,
E (3) Dewas Cine Corporation, (4) Bankey Lal Vaidya and (5) Mohanbhai
Pamabtiai aforementioned fully support the appellant on facts and in the
circumstances of the case.

Having regard to all aspects and for the reasons stated above, we
conclude that the High Court committed an error in answering the question
F in negative i.e. in favour of the Revenue and against the assessee-appellant.
Hence this appeal is entitled to succeed. The judgment and order of the High
Court reported in [ 1988] 172 ITR 632 (AP) are set aside, upholding the order
of the Tribunal. The question aforementioned is answered in the affirmative
i.e. against the Revenue and in favour of the assessee-appellant. The appeal
G is ordered accordingly. No costs.

B.S. Appeal allowed.