9911796707
TMI Blog1972 (11) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in the profit-sharing ratio and from August 29, 1957, the assessee's share being fixed at one-third and the shares of the other two partners being fixed at one-third each. The Gift-tax Officer took the view that the relinquishment of one-sixth share by way of reduction of the assessee's share from one-half to one-third without any consideration amounted to a gift in favour of the other two partners of the firm, and called upon the assessee to file a gift-tax return for the assessment year 1959-60. The assessee claimed that no gift-tax was attracted, there being no element of gift when one partner gives up a portion of his interest in the partnership concern in favour of the other partners as a result of re-shuffling of the shares. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between partners cannot be construed as a transfer by one partner in favour of others, that it was always open to the partners of the firm by mutual agreement to change the profit-sharing ratio amongst themselves and that unless such a change in the profit-sharing ratio was brought about by an express transfer of the share of one partner in favour of another, it is not possible to infer an implied transfer in the case of every change in the profit-sharing ratio. Ultimately, the Tribunal held that there was neither a transfer nor a surrender of any share of the assessee in favour of the other two partners so as to constitute a gift and that, therefore, the value of the one-sixth share could not be taxed in the hands of the assessee. At the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n partners resulting in the diminution of a partner's interest and corresponding increase in the interest of the other partners without any consideration will not amount to a gift cannot be accepted as correct. We have to, therefore, hold that the distribution between the other partners by way of realignment of the one-sixth share of the assessee did amount to transfer of property amounting to a gift chargeable to tax. However, in this case, the Gift-tax Officer has regarded the transaction as a gift of one-sixth share in the goodwill of the firm and has evaluated the said one-sixth share of the goodwill and brought the same to charge. But it is well established that goodwill is only one of the assets of the partnership. Sections 14 and 55 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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