- (1.) The High Court of Kerala answered in the affirmative and against the Revenue the following question : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no element of gift was involved when the assessee retired from the firms in which he had been a partner - The Revenue is in appeal by special leave.
(2.) The assessment year with which we are concerned is the Assessment Year 1973-74. The assessee retired with effect from 1st April, 1972 from two firms in which he was a partner. The Gift Tax Officer assessed him to gift tax on the basis that, upon such retirement, there was a gift because the assessee had surrendred his rights in the firm. The assessee appealed and the Appellate Assistant Commissioner upheld the assessee's contention that there was no voluntary act by him and that he had only relinquished his right and interest in the firms so that there was no gift. Before the Tribunal it was urged on behalf of the Revenue that the amounts taken by the assessee from the firms for his shares therein was less than the market value thereof since the goodwill of the firm had not been taken into account. There had, therefore, been a relinquishment of his shares, which was a gift. The Tribunal took the view that on retirement, the retiring partner was only entitled to get the value of his share in the partnership assets less liabilities. It was, therefore, merely an adjustment of rights between the retiring partner and the continuing partners in the assets of the partnership and there was no element of transfer of interest by the retiring to the continuing partners. From out of the order of the Tribunal, the question, quoted above, was posed to the High Court . The High Court took much the same view as that taken by the Tribunal.
(3.) The learned Attorney General, appearing for the Revenue, drew our attention to the definitions of "gift" and "transfer or propeprty" in the Gift Tax Act. "Gift" is defined as under : " '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 or conversion of any property referred to in Section 4, deemed to be a gift under that section. Explanation :- A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of Section 27 of the Income-tax Act by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money's worth shall be deemed to be a gift made by such person. "Transfer of property" is defined as under : " 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes - (a) the creation of a trust in property; (b) the grant or creation of any lease, mortgage, charge, easement licence, power , partnership or interest in property; (c) the exercise of a power of appointment (whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made) of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and (d) any transaction entered into by any person without intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person." In the submission of the learned Attorney General, when the assessee did not voluntarily take what he was entitled to upon retirement from the two firms, he gave up what he did not take to the other partners and there was a gift by him to them thereof. He laid emphasis on the fact that the definition of "transfer of property" included a 'settlement' and, in his submission, there was a settlement of accounts here.;