1985 (10) TMI 108 - AT - Income Tax

Tribunal rules no gift tax liability on alleged Rs. 9 lakhs gift to mother

The Tribunal allowed the appeal, ruling that no gift tax liability existed on the alleged gift of Rs. 9 lakhs to the mother. The decision emphasized the ... Deemed Gift Issues:Gift tax liability on alleged gift of Rs. 9 lakhs to mother.Analysis:The case involves a dispute over a gift of Rs. 9 lakhs made by the assessee to his mother, resulting in gift tax being levied. The facts reveal a complex series of transactions and agreements between the assessee and his mother, involving claims and settlements over a substantial sum of money. The initial dispute arose from the father's desire to gift Rs. 50 lakhs to the assessee, leading to a series of events culminating in agreements and settlements between the parties. The mother transferred assets and agreed to hand over ornaments to settle the claims made by the assessee. Disputes and interventions by friends and relatives further complicated the matter, ultimately resulting in a written agreement in 1962, releasing the mother from all claims by the assessee.The Gift Tax Officer (GTO) relied on the Supreme Court's decision in the mother's wealth-tax assessment to hold that the amount of Rs. 9 lakhs constituted an actionable claim surrendered by the assessee to his mother, leading to the imposition of gift tax under section 4(1)(c) of the Gift-tax Act, 1958. The Commissioner (Appeals) upheld this decision. The assessee's counsel argued that the settlement in 1962 was made before the Supreme Court's decision and questioned the lack of a definitive finding regarding the bona fides of the assessee's actions. The counsel also raised concerns about collusion between the parties and discrepancies in the valuation of the claim.The departmental representative contended that the Supreme Court's decision in the mother's case was binding, precluding further examination of the enforceability and value of the claim. The representative argued that the settlement indicated surrender of the claim by the assessee and invoked section 4(1)(c) of the Gift-tax Act. The assessee's claim of having received the full amount of Rs. 50 lakhs earlier was disputed, emphasizing the outstanding amount of Rs. 9 lakhs at the time of settlement.The Tribunal analyzed the circumstances surrounding the 1962 agreement, considering the long-standing disputes, partial payments, and interventions that led to the settlement. The Tribunal concluded that the settlement was genuine, reflecting the assessee's desire to resolve uncertainties and disputes over the claim amount. The Tribunal rejected the notion of a gift, emphasizing the bona fides of the settlement and the absence of surrendering any part of the claim.In light of the arguments presented and the Tribunal's analysis, the appeal was allowed, indicating that no gift occurred in this case. The Tribunal's decision highlighted the genuine nature of the settlement and the lack of surrendering any part of the claim, ultimately leading to the dismissal of the gift tax liability on the alleged gift of Rs. 9 lakhs to the mother.