Gift-tax liability under a deed cannot reduce market value of gifted land where it is not an encumbrance on the property.

A donee's contractual undertaking to bear gift-tax could not be treated as a burden attached to the gifted land when fixing market value. The Court held that such liability was not a mortgage, charge, or other encumbrance on the property, and the primary statutory liability for gift-tax remained on the assessee. Accordingly, the Tribunal wrongly reduced the valuation by deducting the gift-tax liability fastened on the donees, and the gift had to be revalued without that deduction.

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Issues: Whether the value of the gifted land could be reduced by taking into account the gift-tax liability fastened on the donees under the gift deeds while determining the market value of the gift.

Analysis: The Tribunal had reduced the valuation on the basis of the location of the land, comparable sale instances, the approved valuer's certificate, and the clause in the gift deeds making the donees liable to bear the gift-tax. The Court held that the donees' contractual obligation to discharge gift-tax was not a burden attached to the property itself, such as a mortgage or charge, and therefore could not be deducted from the market value of the gifted land. The primary liability for gift-tax remained on the assessee under the statutory scheme, and any future recovery from the property did not justify valuing the gift at market value less gift-tax.

Conclusion: The Tribunal wrongly took an irrelevant consideration into account, and the valuation had to be refixed without deducting the gift-tax liability fastened on the donees; the question was answered in the negative and in favour of the Revenue.

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