Deemed gift under the Gift-tax Act applied where property was placed in a firm, then appropriated by the sons on dissolution.

A contribution of an assessee's exclusive immovable property into a partnership with her sons, followed by quick dissolution and appropriation by the sons, was treated as a deemed gift under the Gift-tax Act. Section 2(xii) was read with section 4 to cover not only direct voluntary transfers without consideration but also deemed gifts under section 4(1)(d). On the recorded facts, the firm carried on no real business, the arrangement was found not genuine, and the sons derived substantial benefit from the conversion of absolute property into joint ownership and its later appropriation. A direct transfer was not required for section 4(1)(d) to apply.

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Issues: Whether the assessee's contribution of her immovable property to a partnership with her sons, followed by dissolution and appropriation of the property by the sons, constituted a deemed gift under the Gift-tax Act.

Analysis: Section 2(xii) of the Gift-tax Act covers not only a direct transfer made voluntarily and without consideration, but also a deemed gift under section 4. The decisive question was therefore whether the facts satisfied section 4(1)(d). The property originally belonged exclusively to the assessee. It was introduced into the firm, the firm carried on no real business, and the partnership was dissolved within a short period. On the finding recorded, the arrangement was not genuine and the sons obtained substantial benefit from the conversion of the assessee's absolute property into joint ownership and its subsequent appropriation on dissolution. A direct transfer to another person was not necessary for a deemed gift under section 4(1)(d).

Conclusion: The transaction amounted to a deemed gift under section 4(1)(d) of the Gift-tax Act and the assessee's challenge failed on that issue.

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