COMMISSIONER OF GIFT TAX. KERALA vs GHEEVARGHESE. TRAVANCORE TIMBERS &PRODUCTS, KOTTAYAM

The Supreme Court held that the goodwill of a proprietary business transferred to a partnership, which included the assessee and his daughters, does not constitute a gift subject to tax under the Gift Tax Act. The Court clarified that under Section 14 of the Partnership Act, goodwill is part of the partnership assets and cannot be separately treated as a gift. The Court ruled that no gift tax was payable on the goodwill as it was not treated as a gift by the departmental authorities, thus upholding the High Court's decision in favor of the assessee.