1974 (4) TMI 23

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....r partnership deed was drawn up on 6th of March, 1964, effective from 1st of May, 1963. For the assessment year 1964-65, the Gift-tax Officer held that 71% share of the goodwill of the sole proprietary business was gifted by Wazir Singh to his brothers and nephew without consideration and this was taxable under section 4(a) of the Gift-tax Act. He rejected the claim for exemption under clause (xiv) of section 5(1) of the Act. This view was upheld by the Appellate Assistant Commissioner. The assessee then took the dispute to the Appellate Tribunal. The Tribunal held that the assessee's sole proprietary business did have a goodwill and the same was transferred to the other partners to the extent of 71% of its value. It held that the transacti....

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....he Tribunal was right in holding that the amount of goodwill was not a gift within the meaning of section 4(a) of the Gift-tax Act?" A perusal of the partnership deed shows that the capital of the partnership was fixed at Rs. 77,183 of which the assessee, Wazir Singh, contributed Rs. 68,394 which was then the credit balance in his account books. The balance was contributed by the two brothers and the assessee. The assessee retained a share of 29 nP., the two brothers were given 29 nP. share and the nephew was given 13 nP., share. In the third paragraph of the preamble it was stated that it was on account of advancing age and ill-health of the aforesaid first partner (namely, the assessee) that he agreed to admit the second, third and fou....

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.... clause. The latter part refers to section 4. Section 4 of the Act is headed as "gift to include certain transfers" for the purpose of the Gift-tax Act. Learned counsel for the department submitted that the transaction in the present case was exempt by clause (a) and not by clause (c). These two clauses state: "4. (1) For the purposes of this Act,-- (a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor; . . . . . (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable cla....