1974 TAX. L. R. 829 ::1974 Ker L T 461 ::ILR (1974) 1 Ker 411

Kerala High Court

Hon'ble Judge(s): P Govindan Nair C J , C.J. AND V. Balakrishna Eradi , J

Gift Tax Act (1958) , S.5(1)(xiv)— Exemption from gift-tax - Requisites - Firm carrying on legal profession - Admission of new partner by transferring in his favour l/4th share in partner-ship assets without any consideration - If exempt from gift-tax. Brief Note :- (A) In order to claim ex-emption from gift-tax under Section 5 (1) (xiv) of the Act the gift must be "in the course of carrying on of a business" and "it must be bona fide for the purpose of business." It must further be established that there was some integral connection or relation between the making of the gift and the carrying on of the business. 1972 Tax LR 14 (SC), Rel. on.(Para a6) The question whether the requirements of the section have been satisfied or not is not a pure question of fact but a mixed question of facts and law. The conclusion to be reached from evidentiary facts must depend upon the correct legal principles that should be applied and upon the proper legal approach.(Para a6) A firm of two partners was carrying on the business of legal profession. As the partners were not in good physical condition they decided to take a new partner who had been assisting the firm in its business for remuneration for four years. The senior partner therefore transferred his one half interest in the assets of the firm to the person....