Goodwill in a partnership transport business can support gift-tax where a partner surrenders share on reconstitution.

Reduction of an assessee's partnership share on reconstitution was held to attract gift-tax where the firm was found to possess goodwill. Goodwill was treated as the commercial advantage arising from reputation, customer connection, and the continued ability to secure business, and the Tribunal's finding that the transport firm had such goodwill was treated as a finding of fact. In advisory jurisdiction, that factual finding was not disturbed because no perversity or lack of evidence was shown. The surrender of 30% share was therefore taxable as a gift, and the reference was answered in favour of the Revenue.

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Issues: Whether the reduction of the assessee's share in a partnership firm on reconstitution gave rise to a taxable gift on the footing that the firm possessed goodwill.

Analysis: The question referred was treated as encompassing the Tribunal's finding on the existence of goodwill. Goodwill was explained as the benefit arising from connection, reputation, customer attraction, and the overall advantages of carrying on the business. On the facts found, the firm had carried on the same transport business for the same company year after year, and the Tribunal concluded that such continued business relationship and reputation constituted goodwill. That finding was regarded as a finding of fact, open to interference only if unsupported by material or shown to be perverse, and no such infirmity was established.

Conclusion: The surrender of 30 per cent share was liable to gift-tax. The issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered in the affirmative, upholding gift-tax exigibility on the transaction on the basis that the firm had goodwill.

Ratio Decidendi: A business may possess goodwill even in a contract-based transport activity if its continued connection and reputation generate commercial advantage, and a factual finding to that effect is not to be disturbed in advisory jurisdiction absent perversity or lack of evidence.

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