Residuary legislative power supports gift-tax on land and buildings, but deemed gifts need recorded bona fide satisfaction.

Parliament's residuary legislative power under Article 248 and Entry 97 of List I extends to a tax on gifts of land and buildings, because a gift-tax is distinct from a tax on the land or buildings themselves; the constitutional challenge to the Gift-tax Act, 1958 therefore failed. Under section 4(c), however, a release, surrender or abandonment can be treated as a deemed gift only if the Gift-tax Officer is not satisfied that the transaction was bona fide. In the absence of a recorded finding on that statutory satisfaction, the assessment based on the transaction could not be sustained and required reconsideration on remand.

---

---

Issues: (i) Whether the Gift-tax Act, 1958 was beyond the legislative competence of Parliament insofar as it applied to gifts of land and buildings; (ii) Whether the impugned transaction could be treated as a gift without a finding that the Gift-tax Officer was bona fide satisfied as required by section 4(c) of the Gift-tax Act, 1958.

Issue (i): Whether the Gift-tax Act, 1958 was beyond the legislative competence of Parliament insofar as it applied to gifts of land and buildings.

Analysis: Article 248 of the Constitution of India confers exclusive residuary legislative power on Parliament, including power to legislate on taxes not mentioned in the State or Concurrent Lists. Entry 97 of List I of the Seventh Schedule carries the same residuary breadth. A tax on gifts of land and buildings is distinct from a tax on lands and buildings themselves under entry 49 of List II. The power to tax gifts is therefore not excluded from Parliament merely because the subject matter of the gift is land or buildings.

Conclusion: The challenge to the vires of the Act failed, and the Act was held valid insofar as it applied to gifts of land and buildings.

Issue (ii): Whether the impugned transaction could be treated as a gift without a finding that the Gift-tax Officer was bona fide satisfied as required by section 4(c) of the Gift-tax Act, 1958.

Analysis: Section 4(c) treats a release, surrender or abandonment as a deemed gift only to the extent the Gift-tax Officer is not satisfied that the transaction was bona fide. The record disclosed no finding that the Officer had reached the required bona fide satisfaction that the deed was in substance a gift rather than a relinquishment of life interest. The appellate authority also had not addressed that aspect, so the matter required reconsideration.

Conclusion: The matter was liable to be remanded to the appellate authority for rehearing in accordance with section 4(c) of the Gift-tax Act, 1958.

Final Conclusion: The constitutional challenge to the gift-tax legislation failed, but the assessment based on the particular transaction could not stand without the requisite finding under section 4(c), so the connected writ matters were disposed of by dismissing one and allowing the other with remand.

Ratio Decidendi: Parliament may validly tax gifts under its residuary legislative power, and a deemed gift under section 4(c) cannot be sustained unless the statutory authority records the requisite bona fide satisfaction on the nature of the transaction.

---