1971 (8) TMI 41

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....f the Gift-tax Act, 1958 ? " The reference relates to the assessment year 1964-65 the accounting period being the year ending with August 16, 1963. The assessee was the sole proprietor of a boarding and lodging house at Alleppey by name, Dhanalakshmi Vilas. With effect from August 17, 1962, the assessee converted his proprietary business into a partnership with N. Ramakrishnan Poti and N. Viswanathan Poti, who were his employees. The partnership is evidenced by the deed dated December 4, 1962, a copy of which is produced as annexure " A ". The Gift-tax Officer took the view that by taking the two partners in the business the assessee parted with 2/3rd of his goodwill in favour of the partners and held that this is a gift of 2/3rd share o....

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.... gift is proved to the satisfaction of the Gift-tax Officer to have been made bona fide for the purpose of such business, profession or vocation. " Two conditions must be satisfied in order that the above proviso can apply. The first is that the gift should be made in the course of carrying on a business. The second is that the gift should have been made bona fide for the purpose of the business. In Commissioner of Gift-tax v. Dr. George Kuruvilla in interpreting section 5(1)(xiv) of the Gift-tax Act, 1958, a Division Bench of this court took the view that the above provision can apply if it is shown that the gift was made on grounds of commercial expediency and in order to directly or indirectly facilitate the carrying on of the busi....