1990 (5) TMI 64 - AT - Income Tax

Tribunal rules in favor of Hindu undivided family (HUF) in gift-tax case, emphasizing family obligations.

The tribunal ruled in favor of the Hindu undivided family (HUF), overturning the gift-tax assessment order. It held that marriage expenses incurred by the ... Accounting Year, Business Loss, Sales Tax Act Issues:1. Assessment of gift tax on marriage expenses incurred by a Hindu undivided family for an unmarried daughter.2. Interpretation of the term 'gift' under the Gift-tax Act.3. Application of legal and moral obligations under Hindu law in determining gift tax liability.Analysis:1. The case involves an appeal by a Hindu undivided family (HUF) regarding the assessment year 1978-79, where the Karta of the HUF spent Rs. 79,141 on the marriage of his unmarried daughter. The Gift-tax Officer considered this amount disproportionate for a family with assets valued at Rs. 2,15,429 and assessed Rs. 49,141 as a gift. The Dy. Commissioner(Appeals) upheld this decision, leading to the second appeal before the tribunal.2. The primary issue revolves around the interpretation of the term 'gift' under the Gift-tax Act. The Dy. Commissioner(A) held that the excess amount spent on the marriage constituted a gift under section 2(xii) of the Act. However, the appellant contended that as per Hindu law, the Karta of an HUF is obligated to bear marriage expenses for unmarried daughters, making the entire amount exempt from gift tax.3. Referring to the Calcutta High Court decision in CGT v. Basant Kumar Aditya Vikram Birla, the tribunal emphasized the legal and moral obligations of an HUF to cover marriage expenses for unmarried daughters. The court held that such expenses are not considered gifts under the Gift-tax Act if incurred from the family fund, as daughters have a right to demand marriage expenses from joint family funds. Citing precedents, the tribunal concluded that the expenses incurred by the Karta for the daughter's marriage did not constitute a gift, as they were in line with the family's obligations and not a voluntary transfer.4. The tribunal distinguished between expenses like diamond ornaments and customary items like silk sarees, dhotis, and feast expenses. While certain expenses could be considered as presents to the bride, the overall expenditure was deemed legitimate marriage expenses. By aligning with the Calcutta High Court decision and the Andhra Pradesh High Court ruling, the tribunal ruled in favor of the appellant, overturning the gift-tax assessment order and emphasizing the rights of unmarried daughters in HUFs to have their marriage expenses met from joint family funds.In conclusion, the tribunal's decision highlights the significance of legal and moral obligations under Hindu law in determining gift tax liability for marriage expenses incurred by an HUF, emphasizing that such expenses are not considered gifts under the Gift-tax Act when met from joint family funds.