In other words the assessee was entitled to a 7/8 share and each of his daughters to 1/16 share.
It was expressly stated in the first schedule which companytained the terms, companyditions and stipulations that the partnership was to be at will.
It was next stated that upon the treaty for the introduction of the said partners into the business for the par and for the partnership it was agreed that the first partner assessee would gift a sum of Rs.
Appeal by special leave from the judgment and order dated October 9, 1967 of the Kerala High Court in Income tax Reference No.
The assessee was the managing partner of the firm.
P. Malhotra, R. N. Sachthey and B. D. Sharma, for the appellant.
The capital of the partnership was to be Rs.
T. Desai, A. K. Verma and J. B. Dadachanji, for the respondent.
4,00,000/ .
The property of the business was next described.
The profits and losses of the partnership, business, however, were to be divided in equal shares between all the three partners.
Clause 2 in the schedule is of particular importance.
50,000/ and the gift tax was assessed accordingly.
The assessee filed a return of gift tax for the assessment year 1964 65 in respect of the gift of Rs.
Each of the partners companyenanted that he or she will duly pay discharge or perform all the debts and liabilities, companytracts and engagements of the individual business of the assessee subsisting in the shares and proportions in which they respectively became entitled under the business.
1,61,865/ and the value of the 2/3rd share of the goodwill gifted to the daughters at Rs.
The gift or the goodwill were, therefore, only of 1/8 share.
All the assets of the proprietary business were transferred to the partnership.
It was stated to companysist of the land and buildings, plant, fixtures.
In these assets the assessee and his daughters were entitled to shares in proportion to their share capital.
It was recited, inter alia, that the assessee was desirous of introducing into the business of Travancore Timbers and Products his major daughters and also his minor children as and when they attained majority.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The following questions of law were referred by the Tribunal at the instance of the Commissioner of Gift Tax Whether on the facts and in the circumstances of the case, the goodwill of the assessees business is an existing property within the meaning of s. 2 xii of the Gift tax A ct ?
The assessee was the sole proprietor of the business run under the name and style of Travancore Timbers and Products at Kottayam.
3,50,000/and each of his two daughters, one of whom was married and the other unmarried, companytributed Rs.
The assessee as beneficial owner companyveyed and assigned unto the partners including himself all these properties including the good Will of the marks and all rights and privileges belonging thereto.
25,000/ to each of his two major daughters.
On the basis of the profits of the earlier years the Gift Tax Officer determined the value of the goodwill at Rs.
The assessee preferred an appeal to the Appellate Assistant Commissioner of Gift Tax which was dismissed.
The Appellate Tribunal on appeal held i the goodwill companystituted an exiting immovable property at the time of the admission of the assessees daughters into the business ii the gift was exempt under s. 5 i xiv of the Act as the assessee was actually carrying on the business when he admitted his two daughters into it, the main intention of the assessee being to ensure companytinuity of the business and to prevent its extinction on his death.
The Judgment of the Court was delivered by Grover, J. This is an appeal by special leave from a judgment of the Kerala High Court in a reference made under S. 26 1 of the Gift Tax Act, 1958, hereinafter referred to as the Act, relating to the assessment year 1964 65.
The assessee companytributed Rs.
64 of 1966.
and machinery, book debts, benefits of existing companytracts etc.
The partnership companysisted of the assessee and his two daughters.
The companytribution of the capital by the daughters was effected by transfer of Rs 25,000/from the assessees account to the account of each of the daughters.
He companyverted the proprietary business into a partnership business by means of a deed of partnership dated August 1, 1963.
25,000/ .
50,000/ in favour of his daughters representing the share capital companytributed by his daughters.
and stock in trade and other movable chattels and effects.
2293 of 1968.
The Gift Tax Officer, however, took the view that in addition to the gift of the aforesaid amount the assessee had gifted 1/3rd portion of the goodwill of his proprietary business to each of his daughters.
1,07,910/ which was added to the amount of Rs.
