Gift-tax treatment of settlement deeds turns on statutory definition, while valuation requires a fair chance to object.

The text explains that, for Gift-tax Act purposes, a settlement deed may be treated as a gift where it represents a voluntary transfer of existing property without consideration and confers absolute ownership on the donees. It notes that the statutory definition under section 2(xii) is broader than questions of validity under personal law, so the tax character depends on the substance of the transfer. It also states that where assessment depends on valuation, the assessee must be given an opportunity to object to the valuation report and be heard before finalisation, with the valuation aspect then reconsidered accordingly.

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Issues: (i) whether the settlement deed constituted a valid gift exigible to tax under the Gift-tax Act, 1958; (ii) whether the valuation of the gifted property required reconsideration after opportunity to object.

Issue (i): whether the settlement deed constituted a valid gift exigible to tax under the Gift-tax Act, 1958.

Analysis: The governing definition of gift under section 2(xii) of the Gift-tax Act, 1958 turns on a voluntary transfer of existing property without consideration in money or money's worth. The document, read as a whole, recorded voluntary settlement of the donors' own properties in favour of the children and grandchild, expressed release of possession and enjoyment in favour of the donees, and conferred absolute ownership rights on them. The label used for the document and any controversy as to validity under Muslim personal law did not control the tax character of the transaction, since the statutory definition under the Gift-tax Act is wider.

Conclusion: The settlement deed amounted to a valid gift and was rightly brought to gift-tax; this issue is decided against the assessee.

Issue (ii): whether the valuation of the gifted property required reconsideration after opportunity to object.

Analysis: The assessment rested on valuation under section 15(6) of the Gift-tax Act, 1958. In the circumstances, fairness required that the assessees be given an opportunity to file objections to the valuation report and to be heard before finalisation of the valuation and consequential assessment.

Conclusion: The valuation question was remitted for fresh consideration after objections and hearing, and this issue is decided in favour of the assessee.

Final Conclusion: The gift-tax assessment on merits was sustained, but the valuation aspect was reopened for limited reconsideration after hearing the assessees, leaving the Tribunal's order undisturbed in all other respects.

Ratio Decidendi: For the purposes of the Gift-tax Act, 1958, the taxability of a transaction depends on whether it answers the statutory definition of gift, not on whether the transfer would be valid under personal law; where valuation affects the assessment, a reasonable opportunity of objection and hearing must be afforded before finalisation.

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