Gift tax treatment of spousal transfers during marriage where no proof of spouse-funded acquisition is shown

A transfer of immovable property and a motor vehicle to a spouse during a subsisting marriage may be treated as a gift for gift-tax purposes where the transferor cannot prove that the assets were acquired from the other spouse's funds. On the facts discussed, the transfer was executed as a gift settlement and the surrounding circumstances showed a voluntary disposition made out of natural love and affection. The reference to section 281A(1A) of the Income-tax Act, 1961 did not affect the analysis because that provision had already been repealed.

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Issues: Whether the transfer of immovable property and motor vehicle by the assessee in favour of her husband, during the subsistence of the marriage, constituted a gift liable to gift tax.

Analysis: The transfer was executed as a deed of gift settlement while the marriage was still subsisting. The assessee did not establish by acceptable evidence that the property had been acquired out of funds supplied by her husband, or that the transaction was anything other than a voluntary settlement made out of natural love and affection. The factual findings recorded by the authorities below supported the view that the transfer attracted gift tax. The reference to section 281A(1A) of the Income-tax Act, 1961 did not alter the result, as that provision had already been repealed and could not govern the issue.

Conclusion: The transfer was rightly treated as a gift liable to gift tax and the assessee's challenge failed.

Final Conclusion: The assessment and appellate findings were upheld, and the appeal was dismissed.

Ratio Decidendi: A transfer of property made during a subsisting marriage, without proof that it was supported by the other spouse's funds, may be treated as a gift when the surrounding facts show a voluntary settlement out of natural love and affection.

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