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Section 4 of the Gift-tax Act, 1958 - Deemed gift - Assessment year 1974-75 - Whether when a partnership firm is reconstituted resulting in reduction of share of profits of some partners and consequential increase in share of profits of others, it would result in a gift exigible to tax - Held, yes Section 5(1)(xiv) of the Gift-tax Act, 1958 - Exemption - Gift in course of business - Assessment year 1974-75 - Whether in order to attract provisions of section 5(1)(xiv), gift should have been made in course of carrying on business and that there should be complete identity between person who makes gift and person who carries on business - Held, yes FACTS The assessee and his three sons were partners in a firm. The assessee had 40 per cent share in it till 31-3-1973. On 11-4-1973, a new deed of partnership was entered into by the assessee and his three sons who were the existing partners in the firm. In that partnership, the assessee's share was reduced to 25 per cent. The assessee willingly surrendered 15 percent of his share to the three sons. This relinquishment was held to be a deemed gift by the assessing authority. On appeal, the AAC accepted the plea of the assessee that he was entitled to exemption under section 5(1)(xiv). On further appeal, the Tribunal held that there was a gift exigible to gift-tax by the assessee relinquishing 15 per cent of his share in the profits in the firm. It was further held that the assessee was not entitled to exemption under section 5(1)(xiv). On reference: HELD When a partnership firm is reconstituted resulting in the reduction of the share of profits of some partners and the consequential increase in the share of profits of others, it would result in a gift exigible to tax under the Gift-tax Act. It has been held so by the Madras High Court in CGT v. T.S. Shanmugham [1977] 110 ITR 237. In view of the above decisions, it was to be held that there was a gift exigible to gift-tax by the assessee in relinquishing 15 per cent of his share in the profits of the firm. The question or relief under section 5(1)(xiv) was a pure question of fact. In order to attract section 5(1)(xiv), the gift should have been made in the course of…

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