Deemed gift under Gift-tax law rejected where inherited compensation was retained to meet liabilities, not relinquished as ownership

An assessee's non-assertion of his half share in additional compensation did not amount to a deemed gift under section 4(c) of the Gift-tax Act, 1958, because he and his son were equal heirs and the compensation belonged to them in equal shares under the Hindu Succession Act, 1956. The surrounding material, including affidavits and the son's payment of tax liabilities on the assessee's behalf, showed that the amount was retained by the son to meet those liabilities rather than to transfer ownership. Mere omission to show the amount in the wealth-tax return was insufficient to prove a gift, and the Department's acceptance of revised returns for later years supported the conclusion that the assessee retained ownership. The assessment was cancelled.

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Issues: Whether the assessee's non-assertion of his half share in additional compensation, in the context of payments made by his son towards tax liabilities, constituted a gift chargeable under section 4(c) of the Gift-tax Act, 1958.

Analysis: The assessee and his son were equal heirs to the property inherited under the Hindu Succession Act, 1956, and the additional compensation belonged to them in equal shares. The surrounding material, including the affidavits and the tax payments made by the son on the assessee's behalf, showed that the amount was retained with the son to meet the assessee's liabilities and not with any intention to relinquish ownership. Mere omission to include the amount in the wealth-tax return did not by itself establish a gift, and the Department's acceptance of revised returns for later years supported the assessee's case that the amount remained his asset.

Conclusion: No gift arose under section 4(c) of the Gift-tax Act, 1958, and the assessment was rightly cancelled in favour of the assessee.

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