1992 (8) TMI 99 - AT - Income Tax

Tribunal exempts jewellery transfer to daughter-in-law from gift tax citing social custom

The Tribunal ruled in favor of the assessee, finding that the transfer of jewellery to the daughter-in-law during the son's marriage was not subject to ... On The Occasion Of Issues:Levy of gift-tax on transfer of jewellery to daughter-in-law on son's marriage.Analysis:The appeal was filed against the confirmation of gift-tax levy by the Commissioner (Appeals) on the transfer of jewellery to the daughter-in-law during the son's marriage. The GTO disallowed the exemption under section 5(1)(vii) based on a decision by the Andhra Pradesh High Court regarding a similar case of gift from father to daughter. The Tribunal in that case held that the transaction was not taxable as it was the father's obligation to conduct the daughter's marriage. However, the GTO distinguished this case, stating that since the son had independent taxable income, there was no obligation for the father to gift the daughter-in-law.The assessee relied on the decision of the Calcutta High Court and a Board's Circular, arguing that the gift was customary and accepted by the Department. The Commissioner distinguished the Calcutta High Court decision, emphasizing that it involved a gift to an unmarried daughter from an HUF, unlike the present case. The Commissioner also rejected the Madras High Court decision cited by the assessee, stating it was not applicable as it involved a gift to a relative dependent on the assessee.During the Tribunal proceedings, the assessee's advocate argued that the gift was a social obligation customary in the community, and failure to comply would harm the father-in-law's reputation. The Departmental Representative contended that since the son had independent income, the father-in-law had no obligation to maintain the daughter-in-law, making the exemption under section 5(1)(vii) unavailable.The Tribunal found that the social custom of gifting to the daughter-in-law existed in the assessee's community, creating a customary and social obligation on the father-in-law to make the gift. Citing the Calcutta High Court's decision, the Tribunal held that moral and social obligations could exempt a transaction from being considered a gift under the Gift-tax Act. Consequently, the transfer in this case was deemed not a gift, and the appeal was allowed.