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<h1>High Court rules transfer of goodwill share to sons not a gift but for consideration</h1> The High Court of Madhya Pradesh ruled in favor of the assessee in a case involving the transfer of 40% share of goodwill and development rebate reserve ... Gift Issues involved: Interpretation of the term 'gift' under the Gift-tax Act, 1958 in relation to the transfer of 40% share of goodwill and development rebate reserve by the assessee to his sons.Summary:The High Court of Madhya Pradesh considered a case where the assessee transferred 40% of his share in a partnership firm to his sons and claimed it was not a gift but for consideration. The Tribunal found in favor of the assessee, prompting a reference to the High Court. The Department argued that the transfer lacked consideration as expertise was not contributed by all sons and the capital investment was made after a significant delay. However, the Tribunal highlighted that the sons' expertise and capital contributions constituted consideration for the transfer.The Court noted that while the minor sons may not have contributed expertise, the major sons did, and all sons made capital investments. The Tribunal found that the transfer was not without consideration, as evidenced by the capital contributions made by all sons. The Court emphasized that the consideration need not pass at the time of the partnership deed but should be intended to pass, which was the case here, even though the actual transfer occurred later.Regarding the Department's argument on the section of the Act, the Court clarified that even though the question referred to a specific section, the circumstances of consideration had to be considered. The Court ultimately held that the transfer of 40% share was for consideration, not a gift, under the Gift-tax Act. Therefore, the decision was in favor of the assessee, with no costs awarded.In conclusion, the High Court ruled that the transfer of 40% share of goodwill and development rebate reserve by the assessee to his sons was for consideration and did not constitute a gift under the Gift-tax Act.
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