Goodwill transfer on admitting minors to partnership benefits can constitute a taxable gift under the Gift-tax Act.

Admitting minors to the benefits of partnership for a fixed share can amount to a gift under the Gift-tax Act where the arrangement diminishes the partner's existing interest in the firm's goodwill without consideration. Goodwill is an existing asset and property of the firm, and the transfer of its money value is not limited to future profits when the partner's share is reduced. The relinquished value of that goodwill is treated as a voluntary transfer of property without consideration, making it taxable as a gift.

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Issues: Whether the benefits of partnership given to the minors constituted a gift within the meaning of the Gift-tax Act.

Analysis: Gift under the Act means a voluntary transfer of existing movable or immovable property without consideration in money or money's worth, and goodwill of a firm is an asset and property of the firm. On the admission of the minors to the benefits of partnership for a fixed share, the assessee's interest in the goodwill stood diminished to that extent, and the money value of that interest was transferred without consideration. The transfer was, therefore, not confined to future profits but extended to an existing valuable asset of the firm.

Conclusion: The arrangement amounted to a gift under the Gift-tax Act and was rightly taxable.

Ratio Decidendi: Where a partner's share in the goodwill of a firm is diminished by admitting minors to the benefits of partnership without consideration, the relinquished value of the goodwill constitutes a taxable gift.

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