Gift-tax valuation must deduct donor's liabilities where the transfer is a composite conditional gift with attached burden.

For gift-tax valuation, a transfer made subject to the donees' acceptance of the donor's liabilities must be treated as a composite and conditional gift. Because the obligation to discharge the donor's debts formed part of the very transaction, the amount representing that burden could not be ignored when determining open-market value under the Gift-tax Act. The liability attached to the transfer was therefore deductible in valuing the gifted property, and the reference was answered in favour of the assessee.

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Issues: Whether, for gift-tax valuation, the amount of Rs. 1,75,000 payable by certain donees in discharge of the donor's debts had to be deducted from the value of the gifted property.

Analysis: Section 3 of the G.T. Act charges tax on gifts, section 2(xii) defines gift as a transfer without consideration in money or money's worth, and section 6 requires valuation at the price the property would fetch in the open market on the date of the gift. The gift deed made the transfer to the specified major donees subject to their acceptance of the obligation to discharge the donor's liabilities, so the liability formed part of the very transaction of gift. The document was construed as a composite and conditional gift, and the tax authority could not ignore the burden attached to the transfer while determining market value.

Conclusion: The liability of Rs. 1,75,000 was deductible in valuing the gifted property, and the answer to the reference was in the assessee's favour.

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