Bona fide composite settlement defeats deemed gift treatment where the waiver is not attributable to the assessee.

A release or discharge under the Gift-tax Act is not a deemed gift where it forms part of a bona fide composite settlement supported by consideration, and the assessee is not shown to be the person responsible for the waiver. On the facts, the society waived Smt. Giraben Sarabhai's dues as part of an overall settlement ending all disputes, while the assessee-company gave up its own claims and the society paid consideration for reversionary rights. The waiver was not shown to be sham or lacking in bona fides, so no taxable gift or deemed gift by the assessee-company was established.

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Issues: Whether, on the facts of the composite agreement and waiver of the dues of Smt. Giraben Sarabhai by the society, any taxable gift or deemed gift under section 4(c) of the Gift-tax Act, 1958 was made by the assessee-company.

Analysis: Section 4(c) deems a gift only to the extent the release, discharge, surrender, forfeiture or abandonment is not found to the satisfaction of the Gift-tax Officer to have been bona fide, and the deemed gift is attributed to the person responsible for the release. The agreement showed that the society itself waived the debt as part of a composite settlement intended to end all disputes, while the assessee-company gave up its own claims and the society paid consideration for the reversionary rights. The release of Giraben's dues was not shown to be sham or lacking in bona fides, and the agreement did not establish that the assessee-company itself released any debt or was the person responsible for the waiver in the sense required by section 4(c).

Conclusion: No taxable gift or deemed gift under section 4(c) was proved to have been made by the assessee-company in favour of Smt. Giraben Sarabhai; the question was answered in the affirmative in favour of the assessee and against the Revenue.

Ratio Decidendi: A release or discharge under section 4(c) of the Gift-tax Act, 1958 is not a deemed gift when it forms part of a bona fide composite settlement supported by consideration, and the assessee is not shown to be the person responsible for the release.

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