Y. K. Sabharwal, J. - (1.) At the instance of the assessee, three questions that were referred to the High Court for its opinion under Section 26(1) of the Gift Tax Act, 1958 are as under : (1990 Tax LR 832 at p. 833) (Kant) 1. "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a deemed gift taxable under the Gift Tax Act, 1958 for assessment year 1970-71 in respect of arrangement in pursuance of agreement dated 21-11-1969 between the assessee and M/s. Khoday Industries Pvt. Ltd. 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that a partnership firm is an assessable entity under the provisions of Gift-Tax Act, 1958 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the gift, if any, in the arrangement was not exempt under the provisions of Sec. 5(1)(xiv) of the Act -
(2.) The High Court having answered the questions against the assessee, these appeals have been preferred by the assessee. The appellant has not pressed question Nos. 2 and 3. The only question that is required to be examined is first question.
(3.) The appellant, a partnership firm, was carrying on various business. The partnership firm consisted of seven partners. On 20th November, 1969, four partners retired from the firm which was reconstituted by the remaining partners by taking into reconstituted firm, the children of the outgoing partners. On 21st November, 1969, the newly constituted firm entered into an agreement with a private limited company floated by the four outgoing partners. Under the said agreement, the firm granted licence and pernmission to the private limited company as a licensee to carry on and conduct the business of manufacturing Indian made liquors, carbon-papers, typewriting-ribons etc. and for running the busi ness handed over the premises, buildings, plants, machineries and all other equipments which were being used by the firm for the said business. The period of licence provided in the agreement was five years subject, however, to the termination by e ither party, giving to the other six months notice in writing. As a consideration for the agreement, the license agreed to pay a minimum fee or compensation of Rs. 50,000/- per month and maximum of Rs. 60,000/- per month.;