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1971 (9) TMI 63 - SC - Income TaxWhether, on the facts and in the circumstances, any gift-tax was payable on the goodwill of the assessee's business. If the answer be in the affirmative how much share in the goodwill was liable to such tax ? Held that:- In the present case it has not been established that the requirements of section 5(1)(xiv) of the Act were satisfied. The assessee was certainly carrying on his business at the point of time when he admitted his two daughters into the firm. But from that fact alone it did not follow that the gift had been made in the course of the assessee's business nor could it be held that the gift was made for the purpose of carrying on the assessee's business. The Tribunal came to the conclusion that the partnership did provide for the continuance of the partnership business in spite of the death of the partner and that the main intention of the assessee was to ensure the continuity of the business and to prevent its extinction on his death. A true and correct reading of the deed of partnership indicates that the partners could go out from the partnership in terms of clause 2 of the schedule in the deed of partnership. Moreover, the partnership was expressly stated to be at will. The real intention of the assessee apparently was to take his daughters into the firm with the object of conferring benefit on them for the natural reason that the father wanted to look to the advancement of his daughters. It was further provided in the deed that even the minor children would, in due course, be admitted to partnership. Clause 18 of the schedule already referred to laid down that the assessee could nominate either one or all of his minor children to be partner or partners on their attaining majority and such nomination or appointment could be made even by a will or codicil. The assessee retained complete control over the running of the partnership business and it can hardly be said that he needed any help from his daughters particularly when there is no evidence that he was in a weak state of health, his age being below 50 years. Moreover, there is nothing to show that the daughters had any specialised knowledge or business experience so as to be able to assist in the development or management of the business. Thus there was no cogent material to come to the conclusion that the gift of ₹ 25,000 to each of the daughters by the assessee was " in the course of carrying on the business " of the assessee and was " for the purpose of the business ". The assessee had himself made a return in the matter of assessment of gift-tax payable under the Act in respect of the amount of ₹ 50,000 which had been gifted by him to his two daughters. The answer to question No. 3, consequently, would be in favour of the revenue and against the assessee so far as that amount is concerned.
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