Broad construction of gift exemption under expenditure tax law covers relinquishment of property interests.

Section 5(j) of the Expenditure-tax Act was construed broadly to exempt gifts from expenditure-tax. A transfer that is a gift under general law remains a gift, and the Gift-tax Act also covers deemed gifts such as a release or abandonment of an interest in property. The phrase in section 5(j) was held not to be limited to gifts under the Transfer of Property Act, and the words "by way of" and "in respect of" were read to cover both the gift and expenditure incurred in making it. Amounts relinquished in favour of the sons were therefore treated as gifts within the exemption and not liable to expenditure-tax.

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Issues: Whether amounts relinquished by the assessee in favour of his sons, which were treated as gifts under the Gift-tax Act, were exempt from expenditure-tax under section 5(j) of the Expenditure-tax Act.

Analysis: The exemption in section 5(j) was construed broadly. A gift under the general law remains a gift under the Gift-tax Act, while the latter Act also enlarges the concept by including transfers deemed to be gifts, including a release or abandonment of an interest in property. The expression used in section 5(j) was held not to be confined to gifts as understood only under the Transfer of Property Act. The words "by way of" and "in respect of" were read as covering both the gift itself and the expenditure incurred in making it. The later proviso to section 5(j) was also treated as showing that gifts chargeable to gift-tax were within the legislative contemplation.

Conclusion: The amounts relinquished in favour of the sons were gifts within section 5(j) of the Expenditure-tax Act and were exempt from expenditure-tax.

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