1971 (12) TMI 32

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..... red firm, Kasetty Rangappa and Sons, for several years. By December 15, 1956, all the other partners of the firm retired and he became the sole proprietor of the business which he carried on as such till March 31, 1957. On April 1, 1957, he converted the business from a proprietary business into a partnership business, with himself and three other persons as partners. His share in the partnership business was 6/16ths while that of the other three partners was 4/16ths, 4/16ths and 2/16ths, respectively. Admittedly, the entire capital of the business was contributed by the assessee alone, the other partners being mere working partners. The gift-tax Officer was of the view that the conversion of the proprietary business in to a partnership bus .....

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..... not be charged under this Act in respect of gifts made by any person in the course of carrying on a business, profession or vocation, to the extent to which the gift is proved to the satisfaction of the Gift-tax Officer to have been made bona fide for the purpose of such business, profession or vocation." It is apparent that the gift must satisfy two conditions before an assessee can claim the benefit of the exemption. They are : (1) it must be made in the course of carrying on a business, and, (2) it must be made bona fide for the purpose of such business. In the present case, the gift could perhaps be said to have been made bona fide for the purpose of the business since the Tribunal found that the assessee admitted the three others as .....

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..... hought by the learned judges to be sufficient to attract section 5(1)(xiv). They did not consider the aspects to which we have referred. We respectfully dissent from their view. The learned counsel for the assessee, Sri C. Obulapathi Chowdary, relied on the decision of the Supreme Court in Commissioner of Gift-tax v. George Kuruvilla. The decision appears to us to be wholly irrelevant. A gift made to a son out of love and affection was held to be not a gift which, attracted section 5(1)(xiv). We are unable to see how the decision can be of any possible assistance to the assessee. The question referred to us is answered in favour of the department and against the assessee. The assessee will pay the costs of the Reference which we fix at .....

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