B.K.MEHTA, J. -
(1.)A few facts need be stated to appreciate the question which has been referred to us by the Appellate Tribunal. The relevant assessment year in this case is 1963 -64. The assessee was a partner in the firm carrying on business under the name and style of M/s. Chhotalal Vadilal. There were two other partners besides the respondent -assessee. A partnership deed of November 12, 1958, was executed between the partners in respect of the said partnership business. According to the said partnership deed, the respondent -assessee had seven annas interest whereas the other two partners, namely, Shri Gunvantlal Chhotalal and Shri Pravinchandra Vadilal, had four annas and five annas share, respectively, in the profit and los of the partnership business. It appears that this partnership continued till the assessment year 1962 -63. However, from the beginning of S. Y. 2018, relevant to the assessment year 1963 -64, with which we are concerned here, there was a change in the constitution of the firm. A new partnership deed was executed on November 1, 1961, between the respondent -assessee, Gunvantlal Chhotalal and Ramniklal Chhotalal. According to this new partnership deed the respondent -assessee's share was fixed at 25% in the profit and loss of the business. Gunvantlal Chhotalal continued to have 25% of share in the new partnership business. The original partners, Shri Pravinchandra Vadilal, retired and Ramniklal Chhotalal, the son of the respondent -assessee, joined the partnership business in his place. The two minor sons of the respondent -assessee, Kiritkumar and Deepakkumar, were admitted to the benefits of partnership having 12% and 13% shares, respectively, in the profits of the partnership business. Ramniklal Chhotalal was given 25% share in the profit and loss of the new partnership business. It appears that the Gift -tax Officer on the above facts held that the assessee by depriving himself of the 19% share of profit, gifted away 19% share in the goodwill of the firm. The value of the goodwill was determined at Rs. 2,22,021 and the respondent -assessee's share at 19% therein was determined at Rs. 42,184 which was treated as the amount liable to bear gift -tax. The respondent -assessee, therefore, went in appeal before the Appellate Assistant Commissioner, who, however, held, relying on the decision of the Gujarat High Court in Commissioner of Gift -tax v. Karnaji Lumbaji, that there was no gift of the goodwill by the respondent -assessee. It appears, however, that the learned Appellate Assistant Commissioner held that though there was no gift in respect of the share of the respondent -assessee in goodwill, there was gift of the right to receive future profits in favour of the minors, Kiritkumar and Deepakkumar. He, therefore, proceeded to value the said right and ultimately determined the value of gift at Rs. 1,44,247. The respondent -assessee, therefore, went in appeal before the Tribunal. The Tribunal confirmed the view of the Appellate Assistant Commissioner that there was no gift of the share of the respondent -assessee in the goodwill. It then proceeded to examine the definition of 'gift' under the Gift -tax Act and was of the opinion, having regard to the said definition, that in order to attract the liability under the Gift -tax Act, there should be transfer of existing movable or immovable property. In the opinion of the Tribunal, the right to share future profit was a future property and not existing property. As the right to share future profit was not considered to be existing property, the Tribunal held that there was no gift of any property and in that view of the matter, allowed the appeal of the respondent -assessee and set aside the order of the Appellate Assistant Commissioner. At the instance of the revenue, therefore, the Tribunal has referred the following two questions to us :
'(1) Whether, on the facts and in the circumstances of the case, the benefits of partnership given to minors, Kiritkumar Chhotalal and Deepakkumar Chhotalal, was a gift under the Gift -tax Act, 1958 ?' (2) Whether, on the facts and in the circumstances of the case, there was a gift under the provisions of the Gift -tax Act, 1958, when Shri Ramniklal Chhotalal joined as a partner ?'
(2.)AT the time of hearing of this reference, Mr. K. H. Kaji, the learned advocate appearing on behalf of the revenue, did not press question No. 2, in view of the decision of this court in Commissioner of Gift -tax v. Karnaji Lumbaji. As regards question No. 1, his contention is that in so far as there was reconstitution of the firm between the respondent -assessee, Gunvantlal Chhotalal and Pravinchandra Vadilal, whereby Pravinchandra Vadilal retired and Ramniklal Chhotalal joined the business of partnership in his place and the two minor sons of Chhotalal were admitted to the benefits of partnership, the result was that the share of Chhotalal, respondent -assessee herein, was reduced from 44 paise in the profits of the said old partnership business to 25 paise in the new partnership business and the value of his property was diminished. Consequently and to that extent, therefore, there was a transfer of property which would be included within the definition of the term 'gift' under section 2(xii) of the Gift -tax Act. In the submission of Mr. Kaji, therefore, the Tribunal was in error in holding that there was no transfer of any existing movable property and what was transferred was only the right to receive profits in future.
In order to appreciate this contention of Mr. Kaji, we refer to a few of the relevant provisions of the Gift -tax Act. Section 2(xii) of the Gift -tax Act defines what is a 'gift'. It reads as under :
'2. Definitions. - In this Act, unless the context otherwise requires, - (xii) 'gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under section 4.'
(3.)THE term 'property' has been defined by clause (xxii) of section 2, which reads as under :
'(xxii) 'property' includes any interest in property, movable or immovable.'