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Section 4(1)(a) of the Gift-tax Act, 1958 - Deemed gift - Assessee converted his proprietary business into partnership concern by admitting his brother as a partner - Whether it amounted to making a gift of 50 per cent of development rebate reserve and goodwill, being assets of proprietary business, even though incoming partner agreed to invest capital and to manage firm's business - Held, no Facts The assessee, an individual, was running a proprietary business of publishing a newspaper. During the relevant accounting year, the assessee converted it into a partnership concern, by admitting his brother as a partner. The GTO was of the view that the assessee had thus made a gift of 50 per cent of the development rebate as well as the goodwill, and, accordingly, determined the value of the taxable gift. The AAC allowed the assessee's appeal. The AAC had found that the incoming partner had agreed to invest capital and also to look after and manage the business. The Tribunal dismissed the appeal preferred by the revenue against the AAC's order. On reference : Held The Tribunal did not reverse the AAC's finding that there was no element of gift when the assessee entered into partnership with his brother and converted his proprietary business into partnership concern. This finding was based on the material on record. In these circumstances, the admission of his brother as a partner in the business could not be gratuitous or without any consideration. The GTO picked up certain assets of the assessee's proprietary business and regarded those as the subject-matter of gift. In view of the Supreme Court's decision in CGT v. P. Gheevarghese, Travancore Timbers & Products [19721 83 ITR 403 this approach was wholly incomprehensible. As there was adequate consideration for the conversion of the business, there was no question of any gift of goodwill or development rebate reserve by the assessee to the other partner. Case referred to CGT v. P. Gheevarghese, Travancore Timbers & Products [1972] 83 ITR 403 (SC). B.K. Rawat for the Applicant. H.S. Shrivastava for the Respondent. JUDGMENT Sohani, Actg. CJ.-By this reference under section 26(1) of the Gift-tax Act, 1958…

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