Partnership retirement and reconstitution did not create a taxable gift where no transferable partner right was shown.

Retirement from a partnership firm, followed by admission of the partner's wife and daughter-in-law only with the consent of the remaining partners, was not shown to involve any transferable contractual right in the retiring partner. In the absence of proof that he could nominate a successor or assign his partnership interest, no relinquishment or transfer by him could be inferred. On those facts, the retirement did not amount to a taxable gift, and valuation of goodwill was not attracted. The issue was therefore decided in favour of the assessee and against the Revenue.

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Issues: Whether the retirement of a partner and the induction of his wife and daughter-in-law as partners in the firm resulted in a taxable gift attracting gift-tax.

Analysis: The respondent retired from the firm and the wife and daughter-in-law were admitted as partners only thereafter and only with the consent of the other partners. There was no material to show that the assessee had any contractual right to nominate a successor or to assign his partnership interest. In the absence of proof that he had a transferable right which he could relinquish in favour of anyone, no relinquishment or transfer by him could be inferred. On those facts, the question of a taxable gift, including valuation of goodwill, did not arise.

Conclusion: The retirement from the firm did not give rise to any gift by the assessee to his wife and daughter-in-law, and the question was answered against the Revenue and in favour of the assessee.

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