Goodwill rights of minors in partnership depend on the deed, and exclusion on reconstitution is not a taxable gift without entitlement.

A minor admitted only to the benefits of partnership does not automatically acquire a share in the firm's goodwill on reconstitution; that entitlement depends on the partnership deed and the terms of admission. Goodwill is a firm asset, but the assessing authority must establish a contractual or legal basis before treating exclusion of minors as a taxable transfer. On the facts stated, the authority relied on assumptions without examining the relevant agreement, so the proposed gift-tax treatment was not sustainable.

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Issues: Whether minors admitted to the benefits of partnership had, on reconstitution of the firm, a share in the goodwill so as to attract gift-tax on their exclusion.

Analysis: A minor is not competent to contract and cannot become a partner, but may be admitted only to the benefits of partnership. The rights of such a minor are governed by the partnership agreement and the statutory incidents of admission to benefits under the Partnership Act. Goodwill is an asset of the firm, but whether a minor admitted to benefits has any share in it depends on the terms on which the minor was admitted. The assessing authority proceeded on assumptions without examining the relevant partnership deed or the agreement admitting the minors to benefits, and without showing any basis for treating goodwill as part of the minors' entitlement.

Conclusion: The minors had no presumed or automatic share in the goodwill, and the gift-tax assessment was not sustainable. The question was answered in the affirmative in favour of the assessee and against the Revenue.

Ratio Decidendi: The entitlement of a minor admitted to the benefits of partnership is strictly determined by the partnership arrangement, and in the absence of a contractual or legal right to goodwill, exclusion on reconstitution does not give rise to taxable gift.

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