Void transfer under land reforms law cannot constitute a taxable gift where no property passed

A transfer prohibited by Section 22 of the Tamil Nadu Land Reforms Act, 1961 was treated as void ab initio, so no property passed under the deed for gift-tax purposes. The authorised officer's declaration was only procedural and did not create the invalidity. On that basis, the transaction dated 24 February 1970 could not constitute a valid gift, and its value was excluded from gift-tax liability in favour of the assessee.

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Issues: Whether the transaction dated 24 February 1970 was void and therefore not a gift at all, or whether it was a valid gift transferring property for tax purposes.

Analysis: The transaction was found to be hit by Section 22 of the Tamil Nadu Land Reforms Act, 1961. A transfer falling within that prohibition was treated as void from its inception and not merely void for the purposes of land reforms proceedings. The declaration by the authorised officer was regarded only as a procedural step for implementation of the statute and not as the source of invalidity. Since no transfer of property had taken place under the deed, the document could not support gift-tax liability.

Conclusion: The transaction was void and no gift arose from it; the exclusion of its value from gift-tax was upheld in favour of the assessee.

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