Partnership with consideration in money or money's worth does not amount to a taxable gift under the Gift-tax Act.

Formation of a partnership between a father and son, where the son contributed fresh capital and assumed reciprocal partnership obligations, was held not to involve a taxable gift under the Gift-tax Act, 1958. Any transfer of the father's interest in the goodwill of the proprietary business was treated as incidental to the partnership arrangement, not as a separate gratuitous transfer. The arrangement involved consideration in money or money's worth, and the statutory definition of "gift" was not satisfied merely because a transfer within the broader transfer definition could be assumed. The transaction was therefore not taxable as a gift.

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Issues: Whether the formation of a partnership between a father and son, with the son contributing capital and taking over the business, involved a taxable gift under the Gift-tax Act, 1958.

Analysis: The transfer, if any, of the father's interest in the goodwill of the proprietary business occurred only as an incident of the formation of the partnership and not as a separate gratuitous transfer. The son brought in fresh capital, retained his earlier advance in the business, and undertook reciprocal obligations as a partner. On these facts, the arrangement involved consideration in money or money's worth. The Revenue did not proceed on the footing of a deemed gift under section 4(1), and the statutory definition of gift under section 2(xii) was not satisfied merely because a transfer within section 2(xxiv) could be assumed.

Conclusion: The transaction did not amount to a taxable gift, and the Tribunal was correct in holding that the sum was not taxable under the Gift-tax Act, 1958.

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