M.S. Menon, C.J.
1. This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under Section 26(1) of the Gift-tax Act, 1958. The assessment year concerned is 1959-60 and the questions referred to are:
' (1) Whether a specific transfer of goodwill is necessary to invoke the provisions of the Gift-tax Act
(2) Whether by the transfer of the business the father had impliedly transferred the goodwill that attached to that business and
(3) Whether the calculation of the value of the goodwill by the Gift-tax Officer is correct '
2. The assessee was the proprietor of Sreeman Motors and Sree Krishna Talkies. The proprietary business was transformed into a partnership business, the partners being the assessee and his four sons.
3. The contribution of each of the five partners to the assets of the partnership was Rs. 22,100. The assessee gave his sons an amount sufficient for 'their contribution, namely, Rs. 22,100 each or Rs. 88,400 in all. The whole arrangement was effected by necessary adjustments in the books of the business.
4. It is clear beyond doubt that the value of the gift to the four sons should be considered as four-fifths of the market value of Sreeman Motors and Sree Krishna Talkies. This is evident from Sub-section (1) of Section 6 of the Gift-tax Act, 1958, which provides that the value of any property other than cash transferred by way of gift should be estimated to be the price which in the opinion of the Gift-tax Officer it would fetch if sold in the open market on the date on which the gift was made.
5. According to the assessee, the value of the gift to his four children together will amount to only Rs. 88,400. What they really got by way of the gift from the assessee, however, was not the said sum but four-fifths share of the business. The business has apparently been valued by the department at Rs. 1,76,630, and it should follow that the value of the gift of four-fifths of the business will be Rs. 1,41,304 or, in other words, Rs. 52,904 more than the figure of Rs. 88,400 indicated by the assessee. It is this figure of Rs. 52,904 that has been styled the department and the Appellate Tribunal as the value of the goodwill of the business.
6. We see nothing wrong in what has been done. The market value of Sree-man Motors and Sree Krishna Talkies has been properly estimated at Rs. 1,76,630 . and the gift-tax confined to four-fifths of the said amount, namely, Rs. 1,41,304. The tax demanded, Rs. 7,504.32, is the tax on four-fifths of the market value, namely, Rs. 1,41,304.
7. In the light of what is stated above the questions referred have to be answered against the assessee and in favour of the department. We do so, but . in the circumstances of the case without any order as to costs.
8. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by Sub-section (6) of Section 26 of the Gift-tax Act, 1958.