1988 (5) TMI 51 - AT - Income Tax

HUF's Gift to Daughters for Education Exempt Under GT Act: Educational Values Upheld

Gift-Tax Officer. Versus Nandkishore Sankarlal (Huf).

The Third Member, after analyzing the case where an HUF made gifts to minor daughters for education and claimed exemption under section 5(1)(xii) of the ... Exemption, Gifts For Education Of Children Issues:- Exemption under section 5(1)(xii) of the GT Act for gifts made by the assessee-HUF to minor daughters for education.- Reasonableness of the gifts made by the assessee-HUF to the daughters for educational purposes.Analysis:1. The Appellate Tribunal ITAT Ahmedabad-A considered the case where an HUF made gifts to minor daughters for education and claimed exemption under section 5(1)(xii) of the GT Act. The Gift-tax Officer initially rejected the exemption claim citing reasons related to the wealth of the minor daughters and the capacity of the HUF to make such gifts.2. The Commissioner (Appeals) disagreed with the GTO's decision, stating that the gifts were reasonable considering the educational background of the parents and the absence of a son in the family. The Commissioner held that the karta of the HUF could indeed make gifts to his own children.3. During the hearing, the Departmental Representative argued against the exemption, claiming that the HUF cannot have children and that the gifts were unreasonable. The counsel for the assessee cited various legal precedents to support the claim for exemption under section 5(1)(xii).4. The Tribunal analyzed previous decisions and highlighted the importance of ascertaining the capacity in which the gift was made. It referenced cases where gifts made by the sole surviving coparcener were considered to be in the capacity of an individual, thus qualifying for exemption.5. The Tribunal further deliberated on the reasonableness of the gifts, considering the educational plans and existing wealth of the daughters. It concluded that while one daughter's gift was reasonable, the other daughter's gift was not, based on their educational aspirations and financial situations.6. The Accountant Member disagreed with the Judicial Member's assessment of the reasonableness of the gift to one of the daughters. He emphasized the tradition of high education in the family and proposed that a portion of the gift should be considered reasonable and exempt under section 5(1)(xii).7. Due to the difference in opinion between the Judicial Member and the Accountant Member, the matter was referred to a Third Member for a decision on whether the gift made to one of the daughters was eligible for exemption under section 5(1)(xii) of the GT Act.8. The Third Member analyzed the facts and arguments presented by both sides. Considering the educational aspirations of the daughters and the family's commitment to education, the Third Member agreed with the Accountant Member's view that the gift was reasonable and should be exempted under section 5(1)(xii).9. The Third Member highlighted the importance of making a reasonable provision for education, especially considering the potential expenses for higher education abroad. Legal precedents and the family's educational background were also considered in determining the reasonableness of the gift.10. Ultimately, the Third Member's decision favored granting exemption for the gift made to the daughter, emphasizing the father's intent to provide for his daughters' education in line with the family's educational values and the practical need for substantial provisions for higher education expenses, particularly abroad.