Retiring partner's shortfall in partnership assets was not a taxable gift under the Gift-tax Act.

A retiring partner who receives only the value of her share in partnership assets, after liabilities, is not treated as making a gift merely because no separate amount is paid for goodwill or import entitlement. The partnership continues on retirement, and the assets and goodwill remain assets of the firm until dissolution. In the absence of material showing a transfer of property from the retiring partner to the continuing partners, any shortfall in receipt does not amount to a transfer within the Gift-tax Act. The alleged forfeiture of goodwill and import entitlement was therefore not a taxable gift, and the Revenue's appeal failed.

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Issues: Whether a retiring partner who receives the value of her share in the partnership assets, but not any separate amount towards goodwill or import entitlement, can be treated as having made a gift exigible to gift-tax.

Analysis: On retirement from a partnership, the partnership continues and the assets and goodwill remain assets of the firm. The retiring partner is entitled only to the value of her share in the partnership assets after deducting liabilities. In the absence of material showing that any property was transferred by the retiring partner to the continuing partner, the shortfall, if any, cannot be treated as a transfer within the meaning of the Gift-tax Act. The settled legal position already recognised by the apex court governs the issue.

Conclusion: The alleged forfeiture of share in goodwill and import entitlement did not amount to a taxable gift, and the Revenue's appeal failed.

Ratio Decidendi: A retiring partner's receipt of less than the asserted value of her share in partnership assets does not, by itself, constitute a transfer or gift liable to gift-tax, because the partnership assets and goodwill continue to belong to the firm until dissolution.

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