Law:

Section:

Section 2(xii) of the Gift-tax Act, 1958 - Gift - Validity of - Assessment year 1984-85 - Assessees were two partners of a firm with 50 per cent share each - They admitted a third partner with 34 per cent share, without capital contribution from him in consideration of fact that he was technically qualified and looked after affairs of firm - Whether consequential reduction of 17 per cent in share of each of old partners amounted to taxable gift in favour of new partner - Held, no FACTS The assessees were partners of a firm, each having a 50 per cent share. They admitted a new partner into the firm and the new profit and loss sharing ratio became 33 per cent for each one of the old partners and 34 per cent for the new. The GTO treated the surrender of 34 per cent of share by the original two partners to the third partner as a gift liable to tax on the ground that the new partner had not brought in any capital. He rejected the contention of the assessees that the new partner was admitted on the ground that he was a technically…

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