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Issues: (i) Whether the settlement made in discharge of the legal obligation to maintain a minor son was not a gift under section 2(xii) of the Gift-tax Act, 1958. (ii) Whether the settlement was a transfer for adequate consideration and therefore not a gift within the meaning of the Gift-tax Act, 1958. (iii) Whether the gift of shares was exempt under section 5(1)(xii) of the Gift-tax Act, 1958 as a gift for the education of children.
Issue (i): Whether the settlement made in discharge of the legal obligation to maintain a minor son was not a gift under section 2(xii) of the Gift-tax Act, 1958.
Analysis: The first two questions were treated as covered by earlier decisions in the assessee's own cases. No independent contrary distinction was shown on the facts.
Conclusion: The issue was answered in the affirmative and against the assessee.
Issue (ii): Whether the settlement was a transfer for adequate consideration and therefore not a gift within the meaning of the Gift-tax Act, 1958.
Analysis: The second question also stood concluded by the earlier decisions relied upon. The settlement could not be treated as supported by adequate consideration so as to fall outside the charging provision.
Conclusion: The issue was answered in the affirmative and against the assessee.
Issue (iii): Whether the gift of shares was exempt under section 5(1)(xii) of the Gift-tax Act, 1958 as a gift for the education of children.
Analysis: The exemption applied only where the gift was specifically referable to the education of children and was reasonable in the circumstances. A settlement covering food, clothing, residence, education, medical expenses and marriage expenses was not a gift made specifically for education. On the facts, the beneficiary was a child of very tender age and the provision did not show that any part of the gift was in fact for higher or specialised education.
Conclusion: The exemption was not available and the issue was answered in the affirmative and against the assessee.
Final Conclusion: The reference was answered wholly in favour of the Revenue, and no portion of the settlement qualified for exemption under the education clause.
Ratio Decidendi: Exemption for gifts for the education of children under section 5(1)(xii) of the Gift-tax Act, 1958 applies only to gifts specifically made for higher or specialised education and proved to be reasonable in the circumstances; a composite settlement for maintenance and other general family purposes does not qualify.
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