1987 (4) TMI 108 - AT - Income Tax

ITAT allows exemption for gift to son's education under Gift-tax Act

The Appellate Tribunal ITAT Cochin allowed the appeal, directing the Gift-tax Officer to grant the exemption claimed by the assessee under section ... Exemption, Gift For Education Of Childern Issues:1. Exemption claim under section 5(1)(xii) of the Gift-tax Act, 1958 for a gift made to the son for education.Comprehensive Analysis:The appeal before the Appellate Tribunal ITAT Cochin involved a dispute regarding the exemption claim under section 5(1)(xii) of the Gift-tax Act, 1958 for a gift made by the assessee to her son for education. The assessee had gifted Rs. 1,25,000 as capitation fee to her son for admission to a medical college. The Gift-tax Officer initially rejected the exemption claim on the grounds that the son was an adult with his own business and financial resources, and that the gift was made by the mother instead of the father, who was considered the primary guardian for educational expenses.Upon appeal to the Appellate Assistant Commissioner (AAC), it was found that the son had indeed paid the capitation fee to the medical college and had his own business and financial obligations. The AAC held that due to the son's financial standing, it would be unreasonable to allow any part of the gift as a deduction under section 5(1)(xii) of the Act. The AAC's decision was based on the son's income from business and wealth-tax assessments.The assessee further appealed to the Appellate Tribunal, providing evidence of the payment made by the son for educational purposes and detailing the son's financial situation, including his income and wealth-tax assessments. The Tribunal considered the relevant provisions of section 5(1)(xii) and the interpretation of the term 'children' in the Gift-tax Act. It was noted that the word 'children' was not defined in the Act, and the age of the child was deemed irrelevant for the purpose of claiming exemption under section 5(1)(xii).The Tribunal referenced a judgment by the Patna High Court, which clarified that 'children' included any issue of the assessee capable of receiving education, regardless of age. Additionally, the Tribunal highlighted that the Act did not specify whether the donor should be the father or the mother, making the gender of the donor irrelevant. The Tribunal also emphasized that the financial dependence of the donee on the donor was not a determining factor for claiming exemption under section 5(1)(xii).Considering the family background, the financial standing of the donor, and the educational needs of the donee, the Tribunal concluded that the gift made for educational purposes was reasonable and fell within the scope of exemption under section 5(1)(xii) of the Gift-tax Act, 1958. Consequently, the Tribunal directed the Gift-tax Officer to allow the exemption claimed by the assessee, thereby allowing the appeal.In conclusion, the Tribunal's decision clarified the interpretation of the relevant provisions of the Gift-tax Act and upheld the assessee's entitlement to exemption for the gift made for educational purposes to her son, based on the circumstances and legal principles outlined in the judgment.