Goodwill and gift-tax: reduction in a partner's share was not a taxable gift on the facts found.

Where a business dealing in a common commodity was found on the evidence to have no goodwill, reduction of a partner's share on induction of a new partner could not be treated as a transfer by way of gift. The first appellate authority recorded that no goodwill existed and that no part of the assessee's share was transferred as a gift; the Tribunal accepted that factual finding, noting that where the material supports two views the one favourable to the assessee may be adopted. The High Court found no error in that approach and upheld the conclusion that gift-tax was not leviable.

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Issues: Whether the firm had goodwill so that the reduction in the assessee's share on induction of a new partner amounted to a taxable gift.

Analysis: The assessment turned on whether the business, dealing in a common commodity, possessed goodwill capable of transfer. The first appellate authority recorded a factual finding that the firm had no goodwill and that no part of the assessee's share could be treated as transferred by way of gift. The Tribunal declined to disturb that finding and held that where the material supported two possible views, the one favouring the assessee could be accepted. The High Court found no error in that approach and accepted the concurrent conclusion that the business had no goodwill on the facts proved.

Conclusion: The question was answered in the negative and the assessee was held not liable to gift-tax.

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