Maintenance settlement transfer is not a gift where property is given in discharge of a pre-existing legal obligation.

Property transferred by a Hindu undivided family karta to his wife in discharge of her maintenance claim was held not to be a gift under the Gift-tax Act, because a transfer is gratuitous only when made voluntarily and without consideration in money or money's worth. The wife's right to maintenance under Hindu law and section 18(1) of the Hindu Adoptions and Maintenance Act, 1956, constituted pre-existing legal consideration in the form of quittance of a legal duty. As the Tribunal found the transfer arose from a family settlement at partition and was made in lieu of maintenance, it was not liable to gift-tax.

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Issues: Whether the transfer of immovable property by the karta of a Hindu undivided family to his wife towards her maintenance was a 'gift' within the meaning of the Gift-tax Act and therefore liable to gift-tax.

Analysis: A transfer is a gift only if it is made voluntarily and without consideration in money or money's worth. The wife's right to be maintained by her husband is a recognised legal obligation under Hindu law and is also reflected in section 18(1) of the Hindu Adoptions and Maintenance Act, 1956. Where property is settled on the wife in discharge of that maintenance obligation, the transfer is supported by consideration in the form of quittance of a pre-existing legal duty and cannot be treated as a gratuitous transfer. On the facts found by the Tribunal, the property was transferred pursuant to a family settlement at the time of partition and in lieu of the wife's maintenance.

Conclusion: The transfer was not a gift within section 2(xii) of the Gift-tax Act, 1958, and was not liable to gift-tax. The question was answered in favour of the assessee.

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