TMI Blog1978 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was justified in holding that the assessee was not liable to be assessed under the Gift-tax Act, 1958, in respect of the gift of goodwill consequent on the formation of a partnership under the deed executed on April 3, 1962, on the ground that the said gift was exempt under section 5(1)(xiv) of the Act ? " Not satisfied with the above reference, the revenue sought a more specific question being referred to this court in relation to the same assessment for the same year and that has resulted in T.C. No. 4 of 1975 with the following question : Whether there is material to support the finding of the Tribunal that the gift was made bonafide for the purpose of the donor's business and could also be held to be reasonable? " The ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AND WHEREAS the party of the first part is now unwell and is not able to attend to the business more efficiently as before due to his old age ; AND WHEREAS the party of the first part has thought it would be convenient to have the business run on partnership basis ; AND WHEREAS the parties of the second and third parts who were assistants and employees under the party of the first part till 31-3-1962." The other relevant paragraphs in the deed are paras 5, 11 and 12, which were also noticed by the Tribunal and which can be seen at page 35 of the typed set of papers : " 5. The parties of the second and third parts shall be the working parties in the business and shall not be required to contribute any capital towards their shares .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the decision in CGT v. P. Gheevarghese [1972] 83 ITR 403 and also in CGT v. Dr. George Kuruvilla [1970] 77 ITR 746. It is, therefore, unnecessary and perhaps not permissible to deal with this aspect anew and afresh. The principles laid down by the Supreme Court are that it is not enough if the gift is made while running a business, but it must be established that it is in the course of business. To understand the meaning of the expression " in the course of a business " their Lordships referred to an early decision of the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory [1953] 4 STC 205 and stated that there must be a link between the business and the gift in order that the gift can be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Alagiriswami Chetti had become advanced in age. He did not live very much longer after the formation of the partnership. The Tribunal has found on the above facts that the gift was in the course of business and for the purpose of the business. This view is supported by the observations of the Supreme Court in the two decisions that we have already referred to and it is also supported by the decision of this court in CGT v. T S. Shanmugam [1977] 110 ITR 237 (Mad) and by the decision of the Kerala High Court in V.0. Markose v. CIT [1975) 98 ITR 504. The question referred to us in T.C. No. 3 of 1973, though general, is sufficiently comprehensive to deal with the points of law arising from the order of the Tribunal. Whatever that be, we w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of the partner leaving the firm that the constitution of the partnership was not made with the intention of carrying on the business or that the firm was not constituted for the purpose of the business. We do not think, therefore, that this provision that the partners can leave the firm at will is important by itself. This is particularly so in view of cl. 12 of the partnership deed which we have already noticed. It says that if any partner retires, the party of the first part, namely, the said Alagiriswami Chetti, will have the right to take over the business and run it. The continuity of the business is thus ensured and the purpose is clear that it must continue even if the newly taken partners choose to leave. Following the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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