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Interpretation of Gift-tax Act regarding minors' claim on partnership goodwill upon reconstitution of the firm. Analysis: The case involved a partnership firm, where minor family members were admitted to the benefits of the partnership but later excluded upon reconstitution of the firm. The Gift-tax Officer assessed gift-tax on the minors' share of goodwill, treating it as a gift to the partners. The Appellate Assistant Commissioner set aside the order, stating that the minor's contribution to the firm's goodwill was minimal and not significant. The Tribunal upheld the Commissioner's decision, emphasizing the lack of goodwill accretion due to the minor's limited involvement and dependency on major partners. The judgment highlighted the legal framework governing minors in partnerships. Under the Indian Contract Act and Partnership Act, a minor cannot be a partner but may be admitted to the benefits of partnership with consent. The minor's share is liable for firm acts, but the minor is not personally liable. The minor's right to property and profits is determined by agreement, and he can inspect firm accounts. The settlement of accounts upon severance is outlined in the Partnership Act, with losses paid from profits, capital, and individually. Goodwill, though not defined, is considered an asset of the firm and can be inherited. The Court emphasized that the minor's rights and entitlements are governed by the partnership agreement. The Gift-tax Officer's assumption of the minor's share in goodwill lacked basis in the absence of examining the partnership agreement or investment by the minor's guardians. The decision on the minor's claim to assets or goodwill should be based on the partnership agreement terms, not presumption. Therefore, the Appellate Assistant Commissioner and Tribunal's decisions were upheld, ruling in favor of the assessee against the Revenue. In conclusion, the Court answered the referred question affirmatively, supporting the assessee's position. The judgment will be transmitted to the Appellate Tribunal without any cost direction.
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