1. The first of the appeals is filed by the assessee and the second appeal is filed by the revenue and they relate to the assessment years 1974-75 and 1978-79, respectively. As the decision in the first of the appeals before us is very much essential for the disposal of the second of the appeals before us in order to do complete justice in the matter it is essential to club these two appeals and they be disposed of by a common order.
2. The facts leading to the first of the appeals before us relating to the assessment year 1974-75 briefly stated are as follows. The assessee was the owner of 170.05 acres of coffee plantation and cardamom plantation with a bungalow situated in the said estate. The break up of the total extent of land is as follows : For the assessment year 1972-73 for which the valuation date was 31-3-1972 the WTO assessed the value of the coffee and cardamom estate at Rs. 4,96,650 and the value of the bungalow situated therein at Rs. 30,000. Thus, the total of the agricultural lands as well as the bungalow situated therein was valued at Rs. 5,26,650 for wealth-tax purposes both for the assessment years 1972-73 and 1973-74. For the assessment year 1973-74, the valuation date was 31-1-1973. The wealth-tax assessment orders dated 6-2-1979 for assessment years 1972-73 and 1973-74 were filed before us. The assessee did not dispute in any appeal the valuation of either the agricultural land (coffee and cardamom plantation estate) or the bungalow situated therein for the assessment years 1972-73 and 1973-74 for which he was assessed at Rs. 5,26,650 in each of the two assessment years.
3. On 19-7-1973, the assessee formed a partnership with his wife and six children under which for the first time a firm called Kamala Estate came into being. Among the six children the assessee had three minors and the rest of the three were majors. The assessee brought the whole of his coffee and cardamom plantation estate and also the bungalow situated therein as part of his capital contribution in the firm named Kamala Estate. A deed of partnership dated 17-9-1973 was executed between the partners. The assessee, his wife and his three major children were parties to the said partnership deed. Copy of the partnership deed is furnished to us in a paper compilation. In the said partnership deed the assessee was shown to be of the age of 64 years, his wife 47 years, his son 23 years, his married daughter 22 years and his unmarried major daughter 20 years. The majors admitted three minors viz., Baby A. Shantha Devi, Baby A. Sathi Devi and Baby Savitha Devi, all daughters of the assessee, to the benefits of the partnership. The object of the partnership is to cultivate coffee and other agricultural produce and engage in other lines of business, also which may be decided from time to time." The total capital of the partnership was fixed at Rs. 5 lakhs and individual contributions of the capital of the five major partners are stated to be as under : It is stated in Clause No. 5 that the partners may bring in additional amounts over and above their capitals which shall be kept credited to the current account. So also, it is stated that minors admitted to the benefits of partnership shall contribute their properties shown in Fourth Schedule to the deed to the firm. The capital contribution of the major partners comprised of the immovable properties which they had brought into the firm and which were shown in Schedules I to IV appended to the partnership deed. We have already stated that the assessee had brought his 170.05 acres as his capital contribution which was stated to be of the value of Rs. 2,50,000. So also, his wife Smt.
Kamala Menon had brought 22.20 acres mentioned in Schedule II of the deed of partnership as her share. The assessee's major son had brought his 23.50 acres as the capital contribution as per Schedule III appended to the partnership deed. The married daughter of the assessee Smt. A. Devayani brought her 26 acres as her capital contribution which is mentioned in Schedule IV appended to the partnership deed. The value of the extents mentioned in Schedules II to IV was stated at Rs. 65,000 each. The unmarried major daughter of the assessee Miss Syamala Devi had brought 23.99 acres as her capital contribution and the description of her land is given in Schedule V and its value was shown at Rs. 55,000. The three minor daughters of the assessee had contributed 4 acres each valuing Rs. 55,000 and the extent, thus, contributed by the minors are shown in Schedule VI appended to the partnership deed. In Clause 6 of the partnership deed it is specifically mentioned that from the commencement of the partnership deed it was declared that the properties mentioned in Schedules I to VI under the partnership deed should belong to the firm and the partners should deal with these properties in a similar way as the properties of the firm. So also it was declared that the major partners do not have any separate claim over the partnership properties and the individual partners shall have the same right over them as any other partner. Clause 8 states that the partnership is one at will and any partner may retire by giving 3 months' notice in writing1. It is also stipulated that the death or retirement of any of the partners shall not dissolve the firm but it should continue without interruption and all the assets and liabilities along with the running business shall stand transferred to the remaining partners. The profit sharing ratio was mentioned as under in Clause 9 of the partnership deed : It is stated that the minors who were admitted to the benefits of partnership are not liable for losses incurred, if any, by the firm and the losses should be shared equally at 20 per cent each by all the five major partners. It is further stipulated that the assessee should act as a Managing Partner and he should be responsible for the day to day conduct of the business of the firm.
4. The GTO felt that inasmuch as the properties which were valued for the purposes of wealth-tax at Rs. 5,26,650 were transferred to the firm only for a consideration of Rs. 2.5 lakhs, it resulted in a deemed gift within the meaning of Section 4 of the Gift-tax Act, 1958 ('the Act'), and, therefore, he had issued a notice under Section 16(1) of the Act to the assessee on 23-10-1980. In response to the said notice the assessee filed a nil return on 13-1-1981. It was sought to be contended before the GTO that the assessee did not make any gift as he had not transferred any immovable properties through a registered document. So also, it was contended that the alleged transfer was only to the firm in which the assessee was also a partner and there cannot be a gift by the assessee to himself and there cannot be a valid gift in such a situation. These contentions were negatived by the GTO. He held that for transferring immovable properties to a firm no registered document is necessary. In this case, the assessee had transferred his properties towards his capital and from the date of transfer his properties became the assets of the firm. The difference between the figure of capital contribution entered in the books of account of the firm in the capital account of the assessee and the real market value of the total extent of the assets brought into as capital by the assessee as on the date of transfer, viz., 17-9-1973 constitutes gift made by the assessee in favour of the other partners of the firm. Thus, holding the GTO began computing the value of the gift under his orders dated 29-9-1983. The fair market value of the estate as on the date of transfer was held to be Rs. 8,26,300. After deducting Rs. 2,50,000 towards the share capital of the assessee the remaining amount of Rs. 5,76,300 was taken to be the value of gross gift made by the assessee to the other partners of the firm. As already stated there are 8 partners and the assessee's wife is one among them. The GTO felt that one-seventh share not exceeding Rs. 50,000 should be construed to be a gift made by the assessee to his wife and so exempt under Section 5(1)(viii) of the Act.
So also he granted basic exemption of Rs. 5,000 and computed the taxable gift at Rs. 4,28,570 as per his order dated 29-3-1983. It was later rectified as per the order of the GTO dated 12-6-1984 under which the value of the gift was determined at Rs. 5,13,670. This figure was substituted in place of Rs. 4,28,570 as was originally determined by the GTO.5. As against the order of the GTO an appeal was taken before the Commissioner (Appeals), Calicut. Two contentions were raised before him. Firstly, it was contended that there was no gift at all of any property by the assessee to the firm or to anyone else. In the process of pooling properties of himself, his wife and children and forming a partnership does not involve any gift and secondly it was contended that the value of the properties fixed was very high. It was contended that whatever be the capital that was contributed by the assessee to the partnership the assessee continued to own the estate and there was no question of any part of the estate being gifted by him to the firm or to his wife or to children who constituted the other partners of the firm. It was next contended even though there was any transfer of any estate of the appellant is involved in the formation of the partnership there was adequate consideration for the transfer and there was no gift involved. Thirdly, it was also contended that the valuation of the gift is not proper and it was fixed at a very high figure. All these three contentions were negatived by the learned Commissioner (Appeals). While negativing the first contention, the learned Commissioner (Appeals) held that the independent personality of the firm is limited only for the purposes of levy of income-tax and other taxes. He further held that the individual property of a partner can at any time be declared to be the property of the firm without resorting to the usual legal formalities of drawing up a document and registering the same. The fact that the estate was figured as an asset in the accounts of the firm and the fact that it was declared to be the property of the firm are sufficient to come to a finding that the estate of the assessee had been transferred in favour of the partnership. The transfer should be deemed to have been made to the firm consisting of the assessee, his wife and his children. Dealing with the second contention, the learned Commissioner (Appeals) held that the market value of the estate of the assessee was indisputably in excess of the capital credited in his account in the firm and consequently a gift liable to gift-tax resulted on account of the transfer of the estate of the assessee to the firm.
Dealing with the contention that the gift was not properly valued, the learned Commissioner (Appeals) held that the estate of the assessee was already valued by the WTO while making wealth-tax assessments and since the GTO adopted the same value as adopted for the purpose of relevant wealth-tax assessment the argument that the property had been valued at a very high figure for the purposes of gift-tax cannot be upheld. Thus, the learned CGT (Appeals) repelled all the three contentions raised by the assessee and dismissed the appeal.
6. As against the impugned order dated 25-2-1984 the assessee came up in second appeal before this Tribunal and, thus, the matter stands for our consideration. We have heard Shri C.B.M. Warrier, the learned counsel for the assessee and Shri K.P. Sudhaharan Pillai, learned departmental representative. Firstly, it is contended before us on behalf of the assessee that assuming without admitting there was a gift involved in the creation of partnership, the gross value of the gift should be computed as follows :for the assessment years Rs.1972-73 and 1973-74 5,26,650Less : Capital contribution of the 2,50,000assessee as entered --------into the books of account 2,76,650 -------- Rs. 2,76,650 is the excess real value of the estate of the assessee than entered in the capital account of the assessee. From out of it Rs. 5,000 towards exemption under Section 5(2) and Rs. 50,000 towards gift in favour of wife exempt under Section 5(1)(viii) should be deducted.
Ultimately the gift, if any, should be determined only at Rs. 2,44,677 instead of Rs. 5,13,670, according to the calculation furnished as annexure to this order which is furnished to us at the time of hearing.
7. It is further contended on behalf of the assessee that just like the assessee his wife as well as his children also brought their estates as can be seen from the Schedules I to VI appended to the partnership deed. The values of those estates are more than the capital contributions credited in favour of his wife as well as each of his children. So just like in the case of the assessee, an amount of Rs. 60,450 should be held to be representing a deemed gift in favour of the assessee by virtue of transfers of estates made by the wife and the children of the assessee in favour of the firm and, therefore, the learned counsel argued that this amount of Rs. 60,450 should be deducted from the value of the gift computed in the hands of the assessee. It was next contended on behalf of the assessee that as the estate of the assessee was not transferred in favour of the firm by any registered conveyance, no transfer of property by way of gift has taken place either to the firm or in favour of the partners. It is also contended that the firm was subsequently dissolved and the same properties continued to be the absolute properties of the partners and, hence, there was no gift of properties. It was also contended that if partners have mutually relinquished their rights over their respective properties in favour of the firm was considered to be a transfer then the transfer of property by one partner is in consideration of the transfer of property by others and, hence, there is relinquishment of rights over the properties to the benefit of each other and there is consideration for the contribution of the properties. It is also contended that there is no under-valuation of the properties contributed at the time of formation of the partnership. It is also contended that even if there is considered to be any gift as the gift is executed in the course of carrying on of the business such gift is exempt from tax under Section 5(1)(xiv). It is sought to be further contended that the gift, if any, in this case, is for carrying on of business.
8. On the other hand, the learned departmental representative contended that each of the contentions raised on behalf of the assessee is untenable. The argument claiming exemption under Section 5(1)(xw) saying that the gift is made in the course of carrying on of business was never raised before the Commissioner of Income-tax (Appeals) and it was raised for the first time only before this Tribunal. The learned departmental representative contended that even with regard to the capital contribution of Rs. 2,50,000 we have to hold that there is transfer and such transfer results in capital gains in view of the Gujarat High Court decision in CIT v. Kartikey V. Sarabhai  131 IITR 42 and the Kerala High Court (Pull Bench) decision in the case of A. Abdul Rahim, Travancore Confectionery Works v. CIT  110 ITR 595. It is further contended that in view of the authoritative pronouncement of the Supreme Court in CGT v. P. Gheevarghese, Travancore Timbers and Products  83 ITR 403 the fact that the donor made a gift while he was running a business was not sufficient to bring the gift within the exemption under Clause (xiv) of Section 5(1), but it had further to be established that there was some integral connection or relation between the making of the gift and the carrying on of the business and the object in making the gift or the design or intention behind it had to be related to the business. The learned departmental representative contended that in this case the relationship between the gift and carrying on of business is not established and so the exemption under Section 5(1)(xiv) cannot be claimed. The learned departmental representative further contended that the argument because no regular registered deed is executed no gift is complete should be repelled in view of the decisions in K.D. Pandey v.CWT  108 ITR 214 (All.) and CIT v. Amber Corpn.  127 ITR 29 at page 32 (Raj.).
9. Thus, we have heard the arguments on both sides fully. In our opinion, none of the contentions raised on behalf of the assessee on merits are tenable. Let us take the argument one by one and deal with them. The first contention of the assessee was that in any event of the matter the gift was not properly valued. We feel that there is some force in this contention. The wealth-tax assessments dated 6-2-1979 for the assessment years 1972-73 and 1973-74 were furnished in a paper compilation. As can be seen from those orders the total wealth of the assessee was determined at Rs. 8,26,289 for 1972-73 and at Rs. 8,52,438 for the assessment year 1973-74. However, for the purposes of gift-tax the value of the coffee and cardamom plantation comprised in the estate whose total extent is 170.05 acres and the bungalow situated therein was wrongly taken roundly at Rs. 8,26,300. This valuation represents the whole value of the assets of the assessee both movable and immovable for each of those two assessment years. The value of coffee estate as well as bungalow formed part of the whole estate held by the assessee. The determined value of these two items of the assessee came to only Rs. 5,26,650 comprising of Rs. 4,96,650 towards value of coffee and cardamom plantation and Rs. 30,000 towards value of the bungalow.
From out of the said total value Rs. 2,50,000 which was credited to the assessee's account towards his capital contribution to the firm has to be excluded. Further exemptions to which the assessee was entitled to was the basic exemption of Rs. 5,000 under Section 5(2) and the exemption under Section 5(1)(viii), i.e., value of gift said to have been made to the wife of the assessee. After having adjusted the exemptions claimed we hold that in any view of the matter the value of the gift should be determined only at Rs. 2,44,677, the break-up of which is given in the annexure to this order :by Shri V. Madhava Menon 4,96,650Value of bungalow 30,000 --------Less : 5 per cent assessee's share of profit 13,832 --------Less : 5 per cent assessee's wife's share of 13,141 profit exempt under Section 5(1)(viii) --------2,49,677 Basic exemption under Section 5(2) 5,000Total value of the taxable gift -------- 2,44,677 and to this extent only the appeal for the assessment year 1974-75 should succeed.
10. Now, let us come to the contentions put forward before us by the assessee on merits. The first of such contentions is that no transfer is involved much less any gift is involved when a partner brings in some immovable property belonging to him individually as his share capital into the firm formed by him with others. It is argued that a firm is not a legal entity. It cannot hold property nor can it have any interest in the property for it has no legal existence. Therefore, on the formation of the partnership and the creation of a firm by a person by bringing in his assets and liabilities for the business of the firm he does not transfer any right in the property which was his to the firm nor is there any relinquish-ment of any of his rights in the assets or even any extinguishment of such rights. In support of this proposition the learned counsel for the assessee relied upon the Kerala High Court decision in CIT v. CM. Kunhammed  94 ITR 179 where it was held that no transfer is involved in the action of an individual partner in bringing in his separate property and treating it as one of the assets of the firm, 11. However, we noticed that there arose a conflict among several decisions of the Kerala High Court on this very point. It is no doubt true that in CM. Kunhammed's case (supra), the Kerala High Court held that there was no transfer in bringing in the property of an individual towards his share capital and treating it as an asset of the firm. The later decisions of the same High Court dissented from the above and held that there was a transfer involved in a similar transaction. To resolve the conflict a Full Bench is formed by the Kerala High Court in the case of A. Abdul Rahim, Travancore Confectionery Works (supra). It is no doubt true that the Kerala High Court in that case was called upon to decide whether development rebate earlier granted to the individual business of Shri A. Abdul Rahim is liable to be withdrawn on the ground that there was a transfer of business assets from a proprietary concern to a partnership concern constituted by Shri Abdul Rahim and his sons. However, the point at issue was whether there was any extinguishment of right of the assessee in the property which was exclusively his and which was brought in for the purposes of the business of the firm. The Full Bench of the Kerala High Court held that there was a transfer involved within the meaning of Section 2(47) of the Income-tax Act, 1961. In the head-note of the Full Bench decision, it is noted as follows : When the business in the manufacture and sale of confectionery owned by the assessee was converted into a partnership business of the assessee and his son and the firm took over the assets and liabilities of the said business, there was an extinguishment of the right of the assessee in the property which was exclusively his and which was brought in for the purpose of the business of the firm.
This was sufficient to attract Section 2(47) of the Income-tax Act, 1961. As there was a transfer of a capital asset within the meaning of Section 2(47) of the Income-tax Act, attracting Section 34(3)(6) and Section 155(5) of the Act, the Appellate Tribunal was right in holding that the withdrawal under Section 155(5) of the development rebate which had already been granted by the Income-tax Officer for the assessment years 1962-63 to 1965-66 and 1967-68 was justified.
(p. 595) The Full Bench decision of the Kerala High Court was followed by the Gujarat High Court in the case of Kartikey V. Sarabhai (supra). There also it was held that by bringing in separate property of a partner towards his share capital in a partnership firm in which he was a partner a transfer is involved within the meaning of Section 2(47) of the Income-tax Act. Their Lordships of the Gujarat High Court exhaustively considered what type of rights a partner enjoys over the property which he had introduced into the firm and whether there was any extinguishment of his rights in the said property in favour of others. The following is what is held by them: It is, therefore, not possible to contend that the assessee continues to be an owner in respect of the property introduced by him in the firm of which he is a partner. Not even in respect of a part of the said property. He no longer has any title to the said property or any part of it. He no longer has any power to dispose of the whole or any part of it or any interest therein as his property.
Neither the whole nor any part of it is includible in his net wealth in the context of his liability under the Wealth-tax Act. It is, therefore, abundantly clear that his erstwhile title in respect of the said property would stand extinguished from the point of time when it is introduced as a capital asset in the firm of which he is a partner.... (p. 50) Further elaborating the same point the Gujarat High Court explained the legal position in view of the Supreme Court decision in Addanki Narayanappa v. Bhaskara Krishnappa AIR The resultant position in the eye of law is that the exclusive property of the person, who brought it in, would cease to be his exclusive property and would become the asset of the partnership in which all the partners would have interest in proportion to their share. The person who introduced the property in question would not be able to claim or exercise any exclusive right over any property which he has brought in, or over any other partnership property. He would not able to exercise his right even to the extent of his share in the business of the partnership. This is all that a person who introduces his property in a firm of which he is a partner acquires as per the law declared by the Supreme Court in Addanki Narayanappa's case AIR 1976 SC 1300, in unequivocal terms.... (p.
52) As can be seen from pages 55-56 of the decision in Kartikey V.Sara-bhai's case (supra) the Gujarat High Court approvingly quoted from the decision in A. Abdul Rahim, Travancore Confectionery Works' case (supra) as well as from the decision of the Karnataka High Court in Addl. CIT v. M.AJ. Vasanaik  116 ITR 110. There also the Hon'ble Karnataka High Court considered the right of a partner over an asset of the firm which he himself introduced into the firm and stated as follows : ... If the partners agreed to treat the property of any of them as partnership property, such property will become partnership property and Section 14 of the Partnership Act becomes applicable. The said Act is not similar to the unilateral act on the part of a coparcener who throws his separate property into the family hotchpot. The legal results which flow from the individual's property being converted into partnership property are that the partner to whom the property belonged before becoming partnership property loses his exclusive titles to it and the right he thereupon acquires is only the right of a partner in the partnership assets, in accordance with the partnership agreement and the provisions of the Partnership Act.
There is virtually a transfer of his right in the property to the partners of a firm including himself.... (p. 122) 12. In this case, what we have to decide is the character of the excess value of the coffee and cardamom plantation estate which the assessee introduced towards his share capital into the firm. That means, we are not determining the character of Rs. 2,50,000 introduced by the assessee into the firm as his capital contribution. The value of the whole of the property was Rs. 5,26,650 out of which the contribution towards the capital contribution was Rs. 2,50,000. Now in this appeal we are concerned with the question whether the difference between the above two sums constitutes gift or extinguishment of any right by the assessee in favour of the other partners of the firm. Either the Full Bench of the Kerala High. Court decision or in Kartikey V. Sarabhai's case (supra) the only question was what was the character of the property introduced by a partner into a firm towards his capital. That means the question that arose when applied to the facts of our case is whether Rs. 2,50,000 introduced by the assessee into the firm is a kind of transfer or whether there was extinguishment of the rights of the assessee in a property worth Rs. 2,50,000 in favour of the other partners. But the question before us is not the same as the one considered by either the Kerala High Court, Gujarat High Court or the Karnataka High Court adverted to above. In the Act, Section 2(xxiv), the words 'transfer of property' are defined as meaning, inter alia, the creation of partnership also. In this case for the first time, the partnership was formed under the deed dated 17-9-1973, previous to that the assessee, his wife as well as his children were cultivating their own respective extents of coffee and cardamom estates. The total capital of the partnership was Rs. 5 lakhs. Out of which the assessee's share was Rs. 2,50,000 which represents half the total capital.
However, in the profit sharing ratio the assessee was only entitled to 5 per cent share whereas in the losses he had to bear one-fifth of the total losses or 20 per cent of the total losses. Further, the assessee though entitled only to 5 per cent of the profits is under an obligation to manage the day-to-day conduct of the business of the firm. Under Section 14 of the Indian Partnership Act, 1932 the property of the firm represents all the property as well as the rights and interests in the property originally brought into the stock of the firm (i) or subsequently acquired by purchase or otherwise, by or on behalf of the firm (ii) or for the purposes and in the course of the business of firm and (Hi) the goodwill of the business. In the partnership deed, before us there is no clause which runs contrary to the effect of Section 14. Section 48(b)(iii) of the Indian Partnership Act states in what way the assets of the firm should be distributed after dissolution of the firm and during the settlement of accounts of the firm. It states, the assets of the firm including any sums contributed by the partners to make up deficiencies of capital shall be applied firstly in paying the debts of the firm to third parties and secondly in paying to each partner rateably what is due to him from the firm for advances as distinguished from capital and thirdly in paying to each partner rateably what is due to him on account of capital and the residue, if any, shall be divided among the partners in the same proportion in which the profits are to be divided among them. In our understanding when a property is introduced by an individual partner into the firm which is of more value than at which the owner partner introduces it into the firm, Section 14 nonetheless considers the whole property as belonging to the firm. In Kartikey V. Sarabhai's case (supra) itself it was decided that it is competent to a person in law to sell his property to a partnership firm consisting of himself and another. For such a transfer is very much contemplated by Section 5 of the Transfer of Property Act, under which the transfer of property means 'an act by which a living person conveys property in present or in future to himself or one or more other living persons'. Therefore, to our minds it appears that though the property was of the value of Rs. 5.26 lakhs when once introduced into the partnership firm towards a purported capital contribution only Rs. 2.50 lakhs nonetheless the whole property would become the property of the firm under Section 14 and having due regard to the Full Bench decision of the Kerala High Court as well as the Gujarat High Court in Kartikey V. Sarabhai's case (supra) and also the decision of the Karnataka High Court in M.A.J. Vasanaik's case (supra) there is no reservation in our minds to come to the conclusion that to the extent of the excess value of the coffee and cardamom estate, viz., Rs. 2,44,677 there was a transfer to the partnership firm consisting of the assessee and others. In any event, the excess value of the property represents the property with regard to which there was extinguishment of the right of the assessee and conferring such right in favour of the other partners who are none other than the wife and children of the assessee. Therefore, from a review of all the facts of this case and having regard to the cumulative effect of those facts we have to hold that there was a taxable gift of Rs. 2.44 lakhs by the assessee and this gift was brought about by creation of a partnership firm under the deed dated 17-9-1973.
13. It was the contention of the assessee before us that as he did not execute a duly stamped and registered document conveying the coffee and cardamom estate of an extent of 170.05 acres in favour of the firm or in favour of other partners of the firm it cannot be said that he transferred the said extent either in favour of the firm or in favour of other partners. In support of this contention, the learned counsel for the assessee cited before us the decision of the Gujarat High Court in Darbar Shivrajkumar v. CGT  131 ITR 647 in which it is held that the combined effect of Sections 122 and 123 of the Transfer of Property Act, 1882 is that a transaction of a gift of immovable property would be complete only by executing a registered document subject to other conditions being fulfilled. It is also held therein that the transaction would not be complete and a gift in the eye of law cannot be made by the donor to the donee prior to the registration of the document by which the gift was made. Therefore, the liability to pay tax on gift must be determined not with reference to the date of gift deed but with reference to the date on which it was registered under Section 47 of the Indian Registration Act, 1908. This argument of the assessee is fallacious. The learned departmental representative in order to counteract the argument of the learned counsel of the assessee cited before us the decision of the Allahabad High Court in K.D.Pandey's case (supra) where as per the head-note of the decision the following is held : A partner can bring his immovable property to the stock or capital of the firm as his contribution thereto without a registered instrument. As soon as a partner intends that his separate properties should become partnership properties and they are treated as such, then by virtue of the provisions of the Contract Act and the partnership, the properties become the properties of the firm.
(p. 214) The learned departmental representative also cited before us the decision of the Rajasthan High Court in Amber Corpn.'s case (supra) where it was held in the head-note of the decision as follows : On a reading of Section 14 of the Indian Partnership Act, 1932, it would be clear that all property and rights and interests which the partners may have brought into the common stock as their contribution to the common business are parts of the partnership property. Even if the property contributed by a partner be immovable property, no document, registered or otherwise, is required for transferring the property to the partnership. (p. 29) 14. We have gone through the Gujarat High Court decision cited in support of the assessee's contention. It deals with the event with reference to which the gift-tax is to be computed. In that case admittedly there was a duly stamped and registered document. The date of execution of the gift deed is quite different from the date of registration of the gift deed. When the taxable event occurred in the transaction was the only question considered by the Gujarat High Court in that case. The said decision is not an authority for the proposition for which the asseseee's counsel wants to use it. The said decision never laid down a universal proposition that a gift cannot come into existence without a registered document, All deemed gifts contemplated under the Act need not be evidenced by registered documents. The decision cited by the learned departmental representative pointedly referred to the fact that a partner can bring in his individual property into the assets of the firm without any registered document.
In view of all the above, we repel the contention advanced on behalf of the assessee that without registered document no transfer or gift can be said to have taken place.
15. The next contention of the assessee was that the firm was subsequently dissolved and the same properties continued to be the absolute properties of the partners and so there was no question of any gift of those properties. We have already considered the provisions of Section 48(6)(iii) as to how the assets of the firm be applied at the time of dissolution and settlement of accounts. Firstly, the assets should be applied in paying the debts of the firm to third parties.
Secondly, the assets should be applied in paying to each partner rateably what is due to him from the firm for advances made by him as distinguished from capital and thirdly the assets should be applied in paying to each partner rateably what is due to him on account of capital and the residue shall be divided in the same ratio as profits of the firm are agreed to be divided.
16. There is a catena of decisions to show that on dissolution when an asset of the firm is transferred to an erstwhile partner it does not require any registered document. We have already extracted from Kartikey V. Sarabhai's case (supra) as to the extract right of a partner after he introduces his individual property into the assets of the firm. It is clearly held in that case that the person who introduced the property would not be able to claim or entitled to claim any exclusive right over any property which he had brought in or over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. It is also said in that very same case that a partner having one-half share in the partnership is not the one-half owner of the specific properties belonging to the firm. What he has is one-half share in the residue of partnership assets remaining after payment of debts and liabilities of the firm. It is further held that erstwhile title in respect of the said property held by the assessee would stand extinguished from the point of time when it was introduced as capital asset in the firm of which he is a partner. Now, we are on the point as to what happens at the stage of introducing individual properties into the assets of the firm. We are not concerned here as to what happens to that property after the dissolution of the firm. The Gujarat High Court while elaborating its logic that there was extinguishment of right involved held as follows at page 72 in the reported decision : ... There is a direct nexus between the extinguishment of the right and the credit of 'the money equivalent' of the market value of the property in question as on the date of its introduction in the capital account of the partner. There is, therefore, consideration for the transfer. What belonged to the person who introduced the asset, no more belongs to him. What now belongs to him is the money equivalent of the amount which has been credited in the capital account of the partnership firm. There is an inseverable link between the two.... (p. 72) Therefore, in our opinion, simply because the assessee got back his very properties after dissolution of the firm does not have any consequence as far as the matter in controversy before us is concerned.
17. It was also contended before us that the partners have mutually relinquished their rights over the respective properties in favour of the firm then the transfer of property by one partner is in consideration of the transfer of property by others and, hence, there is relinquishment of rights over the properties to the benefit of each other and there is consideration for the contribution of the properties. In view of the decision in Kartikey V. Sarabhai's case (supra), it has to be held that there is consideration for the relinquishment of the rights of the partners in the property which he had brought into the assets of the firm to the extent of the amount credited to his capital account. That means in the case before us it should be held that there is consideration for transfer of Rs. 2,50,000. But when there is unimpeachable evidence to show that the property that is brought into the assets of the firm by the assessee was worth more than Rs. 5.26 lakhs it is difficult to understand how there can be consideration for the difference between Rs. 5.26 lakhs and Rs. 2.50 lakhs. Simply because the properties contributed by other partners to the assets of the firm also are of much more value than the amounts of capitals credited to their respective names it cannot be said that there is consideration for the gift made by the assessee.
Utmost it can be said that those partners who had contributed their extents to the assets of the firm also made gifts. Under the circumstances we are unable to uphold the contention that the children of the assessee also made an excess contribution of Rs. 60,450 and that should either be deducted from the value of the gift computed in the hands of the assessee or that can be regarded as consideration for the gift made by the assessee.
18. Lastly, it is contended even if there is considered to be any gift in this transaction as the gift is executed in the course of carrying on of the business such gift is exempt from tax under Section 5(1)(xiv). In support of the said contention, the assesses relied upon the decision of the Kerala High Court in the case of V.O. Markose v.CIT  98 ITR 504, the decision of the Madras High Court in CGT v.T.S.Shanmugham  110 ITR 237 and the decision of the Madras High Court in CGT v. G. Shanmugam  118 ITR 890. The learned departmental representative in order to counter the arguments of the assessee relied upon the decision of the Hon'ble Supreme Court in P.Gheevarghese, Travancore Timbers and Products' case (supra) and tried to distinguish the decision cited on behalf of the assessee.
19. After considering the respective arguments advanced on either side we are unable to accept the contention put forward on behalf of the assessee. Firstly no ground claiming exemption under Section 5(1)(xiv) was raised before either the GTO or the Commissioner (Appeals) and the claim for exemption was never considered by any of the lower authorities. Even before this Tribunal no ground was raised and for the first time the claim for exemption was put forward at the time of arguments. Firstly we hold that this aspect is not a pure question of law which can be raised at any time. We hold that this is a mixed question of fact and law. Unless it is raised before the lower authorities and considered by them it cannot be said that it arises from out of the orders of the lower authorities. We cannot permit to raise any point (which is a mixed question of fact and law) to be raised before us for the first time. Even with regard to the merits this contention should fail. Firstly, we must observe that the partnership was formed on 17-9-1973. Previous to that no business was carried on either by the assessee or by his children. Under the circumstances, there is no question of either his major son, major daughters, minor daughters or the wife of the assessee gaining any experience in the management of coffee and cardamom estate and, thus, gaining competence to assist the assessee in the management of the business of the firm. As per the stipulations of the partnership deed it was the assessee who is expected to manage the day-to-day affairs of the firm.
That itself would disclose that the other partners, of the firm have no experience in this line of business. The cases cited on behalf of the assessee are all cases where there was already a business carried on and the persons who are subsequently enlisted as partners of the firm were helping the assessee. However, no such circumstances are available in this case and so the three decisions cited on behalf of the assessee do not help his contention.
20. In P. Gheevarghese, Travancore Timbers and Products' case (supra) the assessee is the sole proprietor under the name and style of Travancore Timbers and Products. He converted his proprietary business into a partnership firm under a deed dated 1-8-1963. The capital of the partnership was Us. 4 lakhs of which the assessee contributed Rs. 3.50 lakhs and each of his two daughters contributed Rs. 25,000. The contribution of capital by the daughters was affected by the transfer of Rs. 25,000 from the assessee's account to the account of each of the daughters. All the assets of the erstwhile proprietary business of the assessee were transferred to the partnership business. It was agreed that profits and losses were to be divided in equal shares though the assessee is entitled to 7/8th share and his daughters 1/16th share each in the assets of the firm. It was the contention of the assessee in that case that the main intention" was to ensure continuity of the business and to prevent its extinction on his death and such purpose amounted to business expediency and, therefore, all the conditions of Section 5(1)(xiv) are satisfied. Repelling the contentions of the assessee about the exemption under Section 5(1)(xiv), the Supreme Court held as per the head-note of the decision as follows : (ii) that the donor made a gift while he was running the business was not sufficient to bring the gift within the exemption under Clause (xiv) of Section 5(1) of the Act. It had further to be established that there was some integral connection or relation between the making of the gift and the carrying on of the business and the object in making the gift or the design or intention behind it had to be related to the business. There was no cogent material in this case to come to the conclusion that the gift of Rs. 25,000 each to the daughters was in the course of carrying on the business of the assessee and was for the purpose of the business. The real intention of the assessee was to take his daughters into the firm with the object of conferring benefit on them for their advancement.
The requirements of Section 5(1)(xiv) of the Act were not satisfied, so far as the gift of Rs. 50,000 was concerned. (p. 404) In this case also it is contended that the assessee is a man of 63 years old and for the purposes of continuity of business the assistance of his son, daughters, etc., is required. The fact of the case on hand are similar to the facts already considered by the Hon'ble Supreme Court in P. Gheevarghese, Travancore Timbers & Products' case (supra).
Following the Supreme Court decision we have to hold that the requirements of Section 5(1)(xiv) are not fulfilled and the sons, daughters as well as wife of the assessee are introduced as partners of the firm only in order to confer benefits on them for their advancement and, therefore, the assessee is not entitled to Section 5(1)(xiv) exemption. So on merits also this contention fails.
21. In the result, the appeal of the assessee is partly allowed as we have determined the value of the taxable gift at Rs. 2,44,677.
22. Now let us come to the gift-tax assessment for the assessment year 1978-79. During the year 1977-78 the assessee executed 5 gift deeds in favour of his five daughters through which he had conveyed the respective extents valuing the respective amounts shown against each of them below : Thus, it can be seen that the assessee had gifted 89.54 acres of coffee plantation out of his total extent of 170.05 acres in favour of his daughters. The taxable gift was computed at Rs. 10,951.20 by the GTO as per his orders dated 29-3-1983.
23. Against the GTO's order the matter is carried on to the Commissioner (Appeals), Calicut. He held that the transfer of the estate as a whole had been subjected to gift-tax for the assessment year 1974-75 and so the subsequent gifts made by the assessee cannot have any effect and cannot be considered as gifts made by him. A property can only be transferred once and as an absolute transfer of gift had already taken place in 1974-75 and, therefore, the subsequent gifts can have no legal effect or consequence and in that view no transfer took place in favour of the assessee's five daughters under the impugned gift deeds. He further opined the transfer, if any, is to be considered to have been effected only by the firm to which the properties legitimately belonged and not to the appellant. In view of that the Commissioner (Appeals) cancelled the assessment. Now the said cancellation is sought to be challenged before us by the department.
According to the department five gifts made by the assessee during the assessment year 1978-79 are liable to gift-tax.
24. Having heard both parties on this point we are of the opinion that in view of our finding that there was already a gift with regard to 170.05 acres and as the assessee already having lost title over the gifted properties it cannot be said that he would be competent to gift 89.54 acres which form part of the total extent of 170.05 acres which we have already considered in the assessment year 1974-75. Therefore, we see no ground to interfere with the orders of the Commissioner (Appeals) for the assessment year 1978-79.
25. In the result, the appeal for 1974-75 is partly allowed and the appeal for 1978-79 is dismissed.