Release of life interest was not a gift, so income could not be clubbed in the assessee's hands.

A release of a life interest in gifted property was not treated as a gift where the assessee had originally received only a life interest and later relinquished it in favour of her children. Under the Gift-tax Act, a transfer is a gift only if made voluntarily and without consideration, and deemed gift treatment for a release or surrender applies only where the release is not found bona fide; no such adverse finding was recorded. The provision dealing with surrender of life interest for inadequate or no consideration was also inapplicable for the assessment year concerned. Accordingly, the income from the property could not be assessed in the assessee's hands under section 64 of the Income-tax Act, 1961.

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Issues: Whether the assessee's release of her life interest in the gifted property in favour of her children amounted to a gift so as to attract section 64 of the Income-tax Act, 1961.

Analysis: The assessee had received only a life interest under the original gift deed and later executed a release deed giving up that interest in favour of her children. Under section 2(xii) of the Gift-tax Act, a gift involves a transfer of property made voluntarily and without consideration, while section 4(1)(c) deems certain releases or surrenders to be gifts only to the extent they are not found bona fide by the Gift-tax Officer. In the present case, there was no finding that the release was not bona fide. Section 4(1)(e) of the Gift-tax Act, dealing with surrender or relinquishment of life interest for inadequate or no consideration, was not applicable to the assessment year involved.

Conclusion: The release deed did not amount to a gift and the income from the property could not be assessed in the assessee's hands under section 64 of the Income-tax Act, 1961.

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