1982 (7) TMI 152 - AT - Income Tax

Transfer of profits to minor son not considered gift under Gift Tax Act. Tribunal rules in favor of assessee.

The Tribunal determined that the transfer of profits to the minor son without consideration did not constitute a gift under the Gift Tax Act. By relying ... - Issues:Gift tax assessment on transfer of profits to minor son without consideration.Analysis:The appeal was against the order of the AAC of IT for the assessment year 1975-76 concerning a notice served under section 16(1) of the GT Act, 1958. The assessee, a proprietor of a business, converted it into a partnership, admitting her minor son to the benefits of the partnership. The GTO considered the transfer of profits to the minor son as a gift without consideration, assessing its value at Rs. 48,000 for gift tax. The AAC upheld the GTO's order. The assessee contended no gift was made to the minor son, challenging the order before the Tribunal.The Tribunal noted the conversion of the business into a partnership, with the minor son admitted to the benefits of the partnership without becoming a full-fledged partner. Citing a Gujarat High Court decision, it held that when minors are admitted to partnership benefits with consent and without a direct transaction with the adult partners, it does not constitute a gift under the GT Act. Referring to a previous Tribunal decision on a similar issue, the Tribunal set aside the lower authorities' orders, allowing the appeal filed by the assessee.In conclusion, the Tribunal found that the transfer of profits to the minor son without consideration did not amount to a gift under the GT Act. By following the Gujarat High Court decision and a previous Tribunal ruling, it held that when minors are admitted to partnership benefits with consent and without a direct transaction with adult partners, it does not trigger gift tax implications. Therefore, the Tribunal set aside the lower authorities' orders and allowed the appeal filed by the assessee.