Consideration in partnership reconstitution prevented the admission of new partners from being treated as a taxable gift.

A partner's interest in a firm is transferable property, but a gift under the Gift-tax Act arises only where the transfer is voluntary and without consideration in money or money's worth. On the facts discussed, admitting two employees as partners was not gratuitous because they contributed experience, assumed liability for losses, were to work in the business, and their admission avoided the need to pay them as employees. The revenue failed to prove absence of consideration. The transaction therefore did not amount to a taxable gift, and it was unnecessary to decide whether it constituted a transfer within the wider charging definitions.

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Issues: Whether the introduction of two new partners in an existing firm, resulting in a reduction of the assessee's share, amounted to a transfer of property without consideration so as to constitute a gift liable to gift-tax.

Analysis: A partner's interest in a firm is transferable property, though not a specific interest in any particular asset of the firm. Even so, a gift under the Gift-tax Act arises only if the transfer is voluntary and without consideration in money or money's worth. The admission of the two employees as partners was not a gratuitous arrangement: they brought experience, were to attend to the business, would share liabilities and future losses, and their admission saved the firm from paying them remuneration as employees. The revenue failed to establish absence of consideration. The Court found it unnecessary to decide whether the transaction amounted to a transfer within the wider definitions in the charging provisions.

Conclusion: The alleged transfer was not without consideration and did not constitute a taxable gift; the answer to the reference was therefore in the negative.

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