9911796707
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Issues:
1. Assessment of gift tax on retirement of a partner and admission of his minor son to partnership. 2. Determination of whether the retirement and admission of the minor son constitute a taxable gift under the Gift-tax Act. Analysis: 1. The case involved the retirement of a partner, Ramniklal, from a partnership firm and the subsequent admission of his minor son, Ashishkumar, to the benefits of the partnership with a 25% share in the profits. The Gift-tax Officer levied gift tax on the retirement, considering it a family arrangement, and valued the gift at Rs. 39,282. The Appellate Assistant Commissioner of Gift-tax allowed the appeal, stating that the right to future profits for minors should not be subjected to gift tax. However, the Tribunal reversed this decision, deeming the retirement and admission of the minor as a simultaneous act resulting in a taxable gift. The issue was whether this constituted a taxable gift under the Gift-tax Act. 2. The High Court referred to a previous case involving a similar scenario where the court had ruled that the admission of minors to the benefits of a partnership did not constitute a gift. The court emphasized that the admission of minors to partnership benefits did not make them partners but was a reconstitution of the firm. In the present case, the court held that the retirement of Ramniklal and the admission of Ashishkumar with a 25% share did not amount to a gift. The court rejected the Tribunal's view that this action constituted a gift by Ramniklal to his minor son. It was clarified that the admission of the minor was with the consent of all partners, indicating a reconstitution of the firm rather than a gift. The court concluded that the Tribunal's decision was incorrect, ruling in favor of the assessee and holding that the admission of the minor did not amount to a taxable gift. The revenue was directed to pay the costs of the reference to the assessee.
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