TMI Blog1973 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 749 (Ker) it was held that it would be enough to show that the gift was made on grounds of commercial expediency and in order to directly or indirectly facilitate the carrying on of the business, profession or vocation, and that it is not necessary to prove that any benefit actually accrued to the business or that the gift was made with a view to earn profits for the business. The object of better ordering of the business of the assessee by itself was, in this case, considered to be sufficient for claiming exemption under the section. In a subsequent case, Commissioner of Gift-tax v. P. Gheevarghese [1968] 68 ITR 132 (Ker), construing the phrase "for the purpose of such business, profession or vocation" in section 5(1)(xiv) of the Act it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Ltd. [1971] 82 ITR 166 (SC)) the expression 'for the purpose of the business' is essentially wider than the expression 'for the purpose of earning profits'. It covers not only the running of the business or its administration but also measures for the preservation of the business, protection of its assets and property. It may legitimately comprehend many other acts incidental to the carrying on of the business. Another test that has often been taken into consideration is whether the expenditure was necessitated or justified by commercial expediency." On the facts of that case it was held that 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 natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure continuity of the business. It was also pointed out that there should be some integral connection or relation between the making of the gift and the carrying on of the business. In the latter case, I.T.R. No. 43 of 1970 (Smt. Muttu Ammal v. Commissioner of Gift-tax), it was held that the mere existence of natural relationship between the donor and the donee, and the intention that the business should continue is not sufficient to hold that the gift was "in the course of carrying on of the business". The question whether the gift was "for the purpose of the business" was not considered in this case, since the two requirements were held to be cumulative. In another case also this court had occasion to consider the scope of section 5(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. In the light of these principles we will examine the case in hand. The short facts are as follows: M/s. Olesha Ayurveda Vaidyasala was owned by one K. Narayana Pillai. There was a main vaidyasala at Olesha with 6 branches at various other places. On August 17, 1962, he converted this business into a partnership concern, the partners being himself, his wife, his two sons and five daughters, each of them having a 1/9th share in it. A partnership deed was subsequently executed on March 28, 1963. Narayana Pillai died an January 14, 1965. The Gift-tax Officer determined the value of the gift at Rs. 85,830. In so valuing he included Rs. 30,000 being the sum total of each gifts by Narayana Pillai to his two sons, and four daughters (Rs. 5,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on by the partnership, it had the advantage of the goodwill which the assessee had before he entered into the partnership. Entering into partnership would constitute a transfer by virtue of the provisions of section 2(xxiv)(b) ; in other words, when the assessee entered into the partnership to carry on the same business there was a transfer of the goodwill; and there is no reason to hold why the transfer did not amount to a gift." Annexure " A " is the partnership deed. Though it is stated in the preamble that the partnership was formed with the intention that "the business should thrive with the co-operation and support of the proposed partners" there is no evidence at all as to how the daughters could be of any help to achieve th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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