Deemed gift rule for release of life interest depends on proving bona fide relinquishment and absence of tax motive.

A release, surrender, abandonment or similar relinquishment of an interest in property is treated as a deemed gift under section 4(1)(c) of the Gift-tax Act, unless the person claiming the exception proves that the act was bona fide. The burden of establishing bona fides lies on the assessee, and the inquiry must consider the surrounding circumstances, including any tax motive. A release of life interest in waqf property therefore falls prima facie within the deeming provision, but the exemption depends on factual proof of genuine relinquishment. Where bona fides have not been properly examined on the existing record, the matter requires fresh determination.

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Issues: Whether the release of a life interest in waqf property was a deemed gift under section 4(1)(c) of the Gift-tax Act, 1958 unless the assessee established that the release was bona fide.

Analysis: The statutory provision treats a release, surrender, abandonment or similar relinquishment of an interest in property as a gift, subject to the exception that it will not be deemed a gift if the GTO is satisfied that the act was bona fide. The burden to bring the case within that exception lies on the person claiming the benefit of it. A release of life interest in property is therefore prima facie within the charging fiction, and the bona fides of the release require factual examination, including the surrounding circumstances and any tax-related motive. Since neither the GTO nor the appellate authority had properly examined this aspect on the existing record, the matter required fresh determination after giving the assessee an opportunity to prove bona fides.

Conclusion: The release was held to fall within the deeming provision unless bona fides were proved, and the assessment issue was sent back for fresh enquiry with the burden on the assessee to establish bona fide relinquishment.

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