Partner's transferable share includes goodwill in firm assets, making it part of the gifted property for tax purposes.

A partner's transferable interest in a firm extends to the firm's assets as a whole, and goodwill is treated as part of that asset base under the Partnership Act. On that footing, when a partner transfers his partnership interest, the transferee receives that interest in the assets including goodwill unless the partnership contract excludes it. Applying this principle, the assessee's one-third share in the goodwill was included in the value of the gifted property and was liable to gift-tax, so the reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether the assessee's one-third share in the goodwill of the partnership firm formed part of the property gifted by him and was liable to gift-tax when he transferred his partnership interest to his sons.

Analysis: The relevant inquiry was the nature of a partner's interest in partnership property and whether goodwill is included in that interest. The Court treated goodwill as an asset of the firm under the Partnership Act and relied on the principle that a partner's share extends to the firm's assets as a whole, though he has no specific right in any particular item during subsistence of the partnership. It held that when a partner transfers his interest in the firm, the transferee receives that interest in the assets including goodwill, unless excluded by contract. The authorities relied upon by the assessee were distinguished on their facts, while the view that goodwill forms part of the partner's transferable share was accepted.

Conclusion: The assessee's share in the goodwill was includible in the value of the gifted property and was liable to gift-tax, and the answer to the reference was against the assessee and in favour of the Revenue.

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