Partner retirement under a family realignment is not a taxable gift when supported by consideration and rights are merely readjusted.

A partner's retirement from a firm is not a taxable gift under the Gift-tax Act, 1958 where the transaction is part of a family arrangement or broader realignment of partnership interests and is supported by consideration. A gift requires a transfer of existing property without consideration; consideration under the Act is not limited to cash and includes money or money's worth. On the proved facts, the retiring partner's relinquishment of rights was a readjustment of partnership assets, not a gratuitous transfer. Gift-tax was therefore not exigible, and the issue was answered against the Revenue and in favour of the assessee.

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Issues: Whether retirement of a partner from a firm, in the circumstances of a family arrangement and realignment of partnership interests, gives rise to a taxable gift under the Gift-tax Act, 1958.

Analysis: A transaction is a gift only if it involves a transfer of existing movable or immovable property and is made without consideration. The statutory definition of transfer of property is wide, but the essential requirements of transfer and absence of consideration must both be satisfied. Consideration under the Gift-tax Act carries the meaning given in section 2(d) of the Indian Contract Act, 1872, and is not confined to monetary payment. On the proved facts, the retiring partner's relinquishment of rights was part of a broader family arrangement and realignment in which the loss in one firm was compensated by gains in other concerns. The retirement therefore represented a readjustment of rights in partnership assets, not a gratuitous transfer.

Conclusion: The retirement did not amount to a gift and no gift-tax was exigible; the question was answered against the Revenue and in favour of the assessee.

Final Conclusion: A partner's retirement, when supported by consideration through reciprocal adjustment in a family or business realignment, is not a taxable gift under the Gift-tax Act, 1958.

Ratio Decidendi: Retirement of a partner from a firm does not constitute a gift where the transaction results only in a readjustment of partnership rights and is supported by consideration in money or money's worth.

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