Compromise settlement and release of liability did not create a taxable or deemed gift under the Gift-tax Act.

A compromise settlement involving waiver of a co-operative housing society's claim was not a taxable gift or deemed gift by the assessee-company. The release of liability formed part of a genuine dispute settlement, with consideration moving under the broader compromise, so it could not be treated as absent merely because it was indirect or routed through a third party. The statutory deeming rule under section 4(1)(c) of the Gift-tax Act applied only where the discharge was not bona fide to the satisfaction of the Gift-tax Officer, and the society, as a separate entity, was the one empowered to release its own claim. The addition was therefore unsustainable.

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Issues: Whether the waiver and discharge of a member's liability by a co-operative housing society, arranged as part of a compromise settlement involving the assessee-company, constituted a taxable gift or deemed gift made by the assessee-company under section 4(1)(c) of the Gift-tax Act, 1958.

Analysis: The release of liability was part of a genuine settlement of disputes concerning the property and the society's claims. The statutory definition of gift requires a transfer made without consideration in money or money's worth, and section 4(1)(c) applies only where a release or discharge is not found bona fide to the satisfaction of the Gift-tax Officer. The consideration for the settlement moved as part of the broader compromise and could not be treated as absent merely because it was indirect or came through a third party. The society, being a separate corporate entity, was the person empowered to release its own claim, and the assessee-company was not the person responsible for the discharge within the meaning of section 4(1)(c).

Conclusion: No taxable gift or deemed gift was made by the assessee-company; the addition could not be sustained and the assessee succeeded.

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