Satish Chandra, J.
1. Sardar Wazir Singh, the assesses, carried on business as a sole proprietor under the name and style ' Kanpur Arms Corporation, Kanpur '. On 1st of May, 1973, he entered into partnership with his two brothers and one nephew. Wazir Singh transferred his business to the new partnership. In this partnership he had 29% share. The rest of the share was divided between the other persons. A regular partnership deed was drawn up on 6th of March, 1964, effective from 1st of May, 1963. For the assessment year 1964-65, the Gift-tax Officer held that 71% share of the goodwill of the sole proprietary business was gifted by Wazir Singh to his brothers and nephew without consideration and this was taxable under Section 4(a) of the Gift-iax Act. He rejected the claim for exemption under Clause (xiv) of Section 5(1) of the Act. This view was upheld by the Appellate Assistant Commissioner. The assessee then took the dispute to the Appellate Tribunal. The Tribunal held that the assessee's sole proprietary businessjdid have a goodwill and the same was transferred to the other partners to the extent of 71% of its value. It held that the transaction in question was covered by Section 4(c) and not by Section 4(a) of the Gift-tax Act. The action of the assessee in admitting three persons as partners amounted to abandonment of his right in the goodwill but since the arrangement was bona fide it was covered by the exempting Clause (xiv) of Section 5(1).
2. The Tribunal then observed :
' Before we conclude we would like to mention the fact that in para. 3 of the preamble of the partnership it is stated that on account of expansion of business and on account of advancing age and ill-health of the assessee he has agreed to admit such persons as partners coupled with another fact that the profits and the sales in subsequent years have gone up from 3 to 6 times, it cannot be said even on facts that the transfer was without any consideration.'
3. On this view the assessee's appeal was allowed.
4. At the instance of the Commissioner of Gift-tax, the Tribunal has referred the following question of law for the opinion of this court:
' Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the transaction by which the assessee admitted three persons as partners in his erstwhile proprietary business was covered by the provisions of Section 4(c) of the Gift-tax Act and, therefore, exempt under Section 5(1)(xiv) of the same Act '
5. At the direction of this court the Tribunal has referred the following question of law also to this court:
' Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the amount of goodwill was not a gift within the meaning of Section 4(a) of the Gift-tax Act '
6. A perusal of the partnership deed shows that the capital of the partnership was fixed at Rs. 77,183 of which the assessee, Wazir Singh, contributed Rs. 68,394 which was then the credit balance in his account books. The balance was contributed by the two brothers and the assessee. The assessee retained a share of 29 nP., the two brothers were given 29 nP. share and the nephew was given 13 nP., share. In the third paragraph of the preamble it was stated that it was on account of advancing age and ill-health of the aforesaid first partner (namely, the assessee) that he agreed to admit the second, third and fourth partners with effect from 1st May, 1963. In our opinion, the Tribunal was justified in holding that in fact there was consideration for the transfer of the assessee's right in the business including the goodwill. His brothers and nephew were taken in partnership so that the business could run better, which the assessee could not because of advancing age and ill-health. In addition, the new partners brought in capital to some extent into the partnership. That was consideration for the transfer of the assessee's right in the business to the other partners. Thus, the factual position is that the transfer was not without consideration. On the contrary, it was for consideration. There is no finding by the Tribunal that the consideration was in any sense inadequate. Clause (xii) of Section 2 of the Gift-tax Act defines a 'gift' as follows :
' (xii) 'Gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money, or money's worth, and includes the transferor conversion of any property referred to in Section 4, deemed to be a gift under that section.'
7. Thus the definition of this clause refers to a transfer without consideration and also transfer which is deemed to be a gift under Section 4. Onthe finding of fact that the transfer in the instant case was not withoutconsideration the transaction goes outside the purview of the definition ofthe term ' gift ' in the first part of the definition clause. The latter partrefers to Section 4.
8. Section 4 of the Act is headed as 'gift to include certain transfers' for the purpose of the Gift-tax Act. Learned counsel for the departmentsubmitted that the transaction in the present case Was exempt by Clause (a)and not by Clause (c). '.
9. These two clauses state :
' 4. (1) For the purposes of this Act,--
(a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor :.....
(c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment.'
10. In our opinion, neither of the two clauses is attracted to the transaction in dispute. The condition precedent for the applicability of Clause (a) is that the transfer should be for inadequate consideration. In the present case, there is no finding by the Tribunal that the transfer was for inadequate consideration. As ,we read the Order of the Tribunal, it appears to us that, on the contrary, the Tribunal intended to convey that there was adequate consideration for the transfer made by the assessee. In any event, in the absence of the finding that the consideration for the transfer was inadequate; Clause (a) does not apply.. .
11. In our opinion, Clause (c) is equally in applicable. Here, the assessee transferred his right in the business to the newly constituted firm. This transaction was neither release, discharge, surrender, forfeiture or abandonment. We are unable to agree with the Tribunal that the transaction in the present case was abandonment. In the case of abandonment the owner divests himself of his title but by the same transaction no one else, who till then did not have any interest, in the property, becomes the owner thereof. Here, by the transfer, the partnership, which in substance means the partners, became the owner of the partnership assets to the extent of the shares possessed by them. This, is not a ease of abandonment of his title to the extent of 71% by the assessee. Since both the Clauses (a) and (c) are inapplicable and since the transfer was for consideration, it was not a gift so as to be liable to gift-tax.
12. In this view of the matter it is unnecessary to consider whether an exemption under Clause (xiv) of Section 5(1) of the Act could be allowed.
13. On the facts and the findings mentioned above, we reframe the two questions of the Tribunal which is as follows:
' Whether, on the facts and circumstances of the case, the transfer in question was a gift as defined by the Gift-tax Act or was covered by Clause (a) or (c) of Section 4 of the Act '
14. Our answer to the question is that the transfer was not a gift as defined and was not covered either by Clause (a) or (c) of Section 4 of the Act. The assessee will be entitled to costs which we assess at Rs. 200. The fee of the counsel is also assessed at the same figure.