The main legal principle established in the judgment is that the terms of the contract or agreement between the parties are determinative factors in considering the exigibility of transfer of rights as gifts assessable to tax under the Gift-tax Act.

Mohammed, J.

This is a reference under Section 26(1) of the Gift-Tax Act at the instance of the Commissioner of Gift-tax, Trivandrum. The questions of law referred by the Income-tax Appellate Tribunal, Cochin Bench to this court for decision is extracted below:

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in finding dial the transfer in question has not resulted in any gift assessable to gift-tax in the view that the capital brought in by the incoming partners can be taken as consideration for the transfer of 65% of the assessee's interest in the business?"

2. The facts which are necessary for deciding the reference are summarised thus: The assessee was the proprietress of a trading concern known as 'M/s Gunbow Trading Company ' doing business in coir products. In the year 1979 the said establishment was transformed into a partnership firm, the assessee continuing as one of the partners. The other partners are her two major daughter and her husband in his capacity as trustee of a trust called' Krishnadev Trust'. Three minor daughters of the assessee and two minor children of two married daughters are the beneficiaries of the trust. A partnership deed was executed wherein the shares of each partners were specified. The assessee has 35% share and two major daughters, 15% each and the remaining 35% goes to the Trust. Three incoming partners had invested Rs. 10,000/- each and the said amount was treated as their respective share of capital in, the partnership business in view of the terms of the deed. The Gift-tax Officer, however, completed the assessment for the year 1980-1981 under Section 15(3) of the Act fixing the goodwill of the proprietory business at Rs. 28,754/-. The officer .further found that the assessee had gifted 65% of her right to share profits to the incoming partners. The contention of the assessee that transfer of interest was supported by consideration was rejected. Finally the Officer has passed an assessment order dated 31.12,1980 (Annexure-A) fixing the value of taxable gift at Rs. 58,750/-. As against the said order passed by the Gift-Tax Officer, the assessee filed an appeal which was rejected by the Appellate Assistant Commissioner as per his order dated 2.1.1982 (Annexure-B). The assessee filed a further appeal before the Income Tax Appellate Tribunal. The Tribunal agreed with the contention of the assessee mat the transfer in question has not resulted in any gift assessable to tax and accordingly passed an order allowing the appeal on 31.10.1983 (Annexure - C). As against the said order the Revenue has filed an application under Section 26(1) of the Gift-Tax Act requiring to state a case to this court. Accordingly, the Tribunal referred the questions stated above for the decision of this court.

3. When this reference came up before a Division Bench of this court, it was pointed out mat there are two conflicting Division Bench decisions on the questions to be answered by this court in the present proceeding. Those decisions are:

(1) Commissioner of Gift-tax v. Ganapathy Moothan (1972) (84 I.T.R.758) and

(2) Commissioner of Gift Tax v. K.A, Abdual Razack and others (1992) 196 I.T R.578). That is how this case same up for decision before this larger Bench.

4. The question referred to this court for decision basically rests on the finding of the Tribunal, which is extracted below:

"We, however, agree with the assessee that the transfer in question has not resulted in any gift assessable to gift-tax. The Gift-tax Officer has evaluated the interest surrendered by the assessee in the business in favour of the incoming partners at the figure of Rs. 28,754/- The recital in the partnership deed in clause 5(b) clearly shows that the incoming partners had brought in Rs. 30,000/- as capital. This would be consideration for the assessee transferring 65% of her interest in her proprietory business. The consideration at the figure of Rs. 30,000/- is more than the valu