( 1 ) THIS is a reference made by the Income-tax Appellate Tribunal under Section 26 of the Gift Tax Act, 1958. At the instance of the revenue, the following question is referred for the opinion of this Court in respect of assessment year 1975-76:-"whether, on the facts and in the circumstances of the case, the assessee was liable to Gift-tax under the Gift-tax Act, 1958?"

( 2 ) WE have heard Mr. B. B. Naik learned counsel for the revenue and Mr. M. J. Shah learned counsel for the respondent-assessee.

( 3 ) THE assessee along with five others including assessees brother was carrying on business in the name and style of M/s. Abadi and Co. under partnership deed dated 10-4-1971. The assessee had 22% share in the said firm while his brother had 15% share. As the assessee wanted to be a qualified Chartered Accountant, he retired from the said firm on 26-10-1973 i. e. at the end of S. Y. 2029 after withdrawing his capital from the firm. A new deed of partnership was executed on 16-11-1973 to carry on business w. e. f. 27-10-1973 i. e. the first day of S. Y. 2030. In the new firm, the assessees mother became a partner with 17% share while the share of the assessees brother was increased from 15% to 20%. On the aforesaid facts, the Gift Tax Officer asked the assessee to file his gift tax return. Along with nil return, the assessee sent a covering letter dated 23-1-1979 pointing out that he had withdrawn his capital from the firm and also contending that the assessee had to retire from the firm, as a practising Chartered Accountant cannot do any business. The Gift Tax Officer, however, held that the assessee had made a taxable gift of Rs. 63,200. 00 in favour of his mother and brother and the amount was worked out on the basis of the value of the goodwill of the firm. The assessee carried the matter in appeal where the Commissioner of Gift Tax (Appeals) accepted the assessees contention in view of the decision of this Court in Chhotalal Mohanlal 97 ITR 393 and other decisions following the said decision in Chhotalal Mohanlal (supra ). The Tribunal dismissed the appeal filed by the revenue. Hence, this reference at the instance of the revenue.

( 4 ) MR. B. B. Naik learned counsel for the revenue has submitted that the decision of this Court in Chhotalal Mohanlal has been reversed by the Supreme Court in (1987) 166 ITR 124 and, therefore, it must be held that the assessee had made a gift of the amount in question in favour of the assessees mother and brother. The learned counsel heavily relied on the principle laid down in the aforesaid decision that goodwill is property and when partners are introduced or minors are admitted to the benefits of partnership firm, share of an existing partner is reduced thereby and therefore the right to the money value of the goodwill stands transferred and the transaction constitutes a "gift" under the Gift Tax Act, 1958.

( 5 ) ON the other hand, Mr. Manish J. Shah learned counsel for the respondent-assessee has submitted that since the assessee had withdrawn his capital from the firm, there was no question of any gift made by the assessee in favour of any other person. The assessee retired on 26-10-1973 and it was 20 days thereafter that the next partnership firm was constituted, albeit w. e. f. 27-10-1973 but it was not a case of any tripartite agreement where the retiring partner got any consideration from the incoming partners. In fact the assessee did not even know who were going to be the incoming partners as the sole reason for the assessees retirement from the firm in question was that the assessee was going to be a practising Chartered Accountant and, therefore, he was prohibited from carrying on any business activity. The learned counsel for the assessee has also heavily relied on the decision of the Supreme Court in Commissioner of Gift Tax vs. T. M. Louiz (2000) 245 ITR 831. It is vehemently contended that the facts in the instant case are similar to the facts in the case of T.