Retiring partner with settled accounts has no subsisting right in future profits, so no taxable gift arises.

Where a partner retires from a firm after his accounts have been settled and the dues paid, he has no subsisting enforceable right in the future profits of the reconstituted firm. On those facts, the retirement does not amount to relinquishment of property capable of being treated as a transfer or deemed gift, so no taxable gift arises. The Madras HC upheld the Tribunal's view that, once no further claim remains against the firm, the assessee cannot be said to have given up any existing right liable to gift-tax.

---

---

Issues: Whether, on retirement from a firm after the dues were ascertained and paid, the assessee could be said to have relinquished any right to future profits so as to attract gift-tax.

Analysis: The assessee retired from the partnership, the amounts due to him had been settled and paid, and he had no further claim against the firm. In that situation, he had no subsisting right in the future profits of the reconstituted firm. Since the assessee was not shown to have given up any enforceable right that could be treated as property transferred or as a deemed gift, no taxable gift arose on the facts found.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The Tribunal's view that no taxable gift arose on the assessee's retirement was upheld, and no referable question of law was made out.

Ratio Decidendi: Where a retiring partner's accounts are settled and no further enforceable claim remains against the firm, there is no subsisting right in future profits capable of being treated as a taxable or deemed gift.

---