Retiring partner's share in goodwill was not a taxable gift where the firm continued and no specific asset transfer occurred.

A retiring partner is not treated as transferring a specific asset of the firm, because during the continuance of a partnership a partner has no assignable right in any particular firm property, including goodwill, but only a right to profits and, on dissolution, to a share in surplus assets after liabilities. On the facts, the firm had not been dissolved when the assessee retired, so the retirement payment against capital and current account could not be isolated as a relinquishment of goodwill without consideration. No gift arose on retirement, and the gift-tax assessment was not sustainable.

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Issues: Whether a retiring partner, on receiving the amounts standing to his capital and current account, was liable to gift-tax on the alleged relinquishment of his share in the firm's goodwill.

Analysis: During the subsistence of a partnership, a partner is not entitled to any specific asset of the firm but only to his share of profits, if any, and, on dissolution, to a share in the surplus assets after liabilities are met. On the facts, the firm was not dissolved when the assessee retired, and therefore no partner could be said to have an assignable or transferable share in any specific asset such as goodwill. The attempt to isolate goodwill and treat the retirement as a relinquishment of a specific asset without consideration was inconsistent with the legal nature of partnership property and the rights of a partner during the continuance of the firm.

Conclusion: No gift was involved on the assessee's retirement from the partnership, and the gift-tax assessment was not sustainable.

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