No taxable gift arises from surrender of goodwill where a minor had no proved contractual right in the partnership asset.

A minor admitted to the benefits of a partnership could not be treated as having surrendered a proved share in goodwill where the partnership deed or admission arrangement did not confer any such entitlement. Goodwill is partnership property subject to contract, but on the facts no contractual or enforceable right in goodwill was shown to exist in the minor's favour. In the absence of a demonstrated proprietary interest, the continuing partners' taking over of the alleged share could not be characterised as transfer of a valuable asset. The transaction was therefore not a taxable gift under the Gift-tax Act, and the issue was answered for the assessee against the Revenue.

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Issues: Whether the surrender of a minor admitted to the benefits of a partnership, resulting in the continuing partners taking over her share, constituted a taxable gift in respect of goodwill under the Gift-tax Act.

Analysis: The dispute turned on whether the minor had any contractual or enforceable right to a share in the goodwill of the firm. Goodwill is an asset of the firm and, subject to contract, forms part of the partnership property. On the facts, there was no finding that the partnership deed or admission arrangement conferred any share in goodwill on the minor, nor that any contribution or investment on her behalf created such a right. In the absence of a proved entitlement to goodwill, the assumption of a transfer of a valuable interest could not be sustained.

Conclusion: The transaction did not amount to a gift taxable under the Gift-tax Act, and the question was answered in favour of the assessee and against the Revenue.

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