Withdrawal from partnership profits did not attract gift-tax where no taxable transfer unsupported by consideration was established.

A partner's right to share in future profits is a property interest, but once the partner withdraws from the partnership there is no subsisting right to those future profits. On the facts, the minor had a credit balance in his capital account, had withdrawn substantial sums, and had received interest on the balance; the relinquishment of the benefit in future profits was therefore not shown to be a taxable transfer unsupported by consideration. The High Court accordingly treated the arrangement as outside gift-tax, because the record did not establish a gift chargeable to tax.

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Issues: Whether the assessee was liable to pay gift-tax on withdrawing from the benefits of partnership and foregoing his share in the future profits of the firm.

Analysis: The right of a partner to share in the profits of a firm is a property, but on withdrawing from the partnership a partner has no subsisting right to future profits. On the facts, the minor had a credit balance in his capital account, had withdrawn substantial amounts, and had also received interest on the balance. The transfer of the benefit in future profits was therefore not supported by any consideration, and the view taken by the Tribunal was consistent with the authorities relied upon.

Conclusion: The assessee was not liable to gift-tax.

Ratio Decidendi: Where a partner withdraws from the benefits of partnership and ceases to have a right to future profits, the cessation of that right does not attract gift-tax if the factual position shows that no taxable transfer unsupported by consideration is established on the record.

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