1973 (4) TMI 27 - HC - Income Tax

Court rules deed not a gift under Gift-tax Act due to lack of consideration, no transfer of property.

The court concluded that the transaction evidenced by the deed dated May 7, 1963, was not considered a gift under the Gift-tax Act, 1958. It found that ... Gift Tax Act, 1958 - father sets apart properties for family members - ' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the transaction evidenced by the deed dated May 7, 1963, was not a gift and that there is no liability to gift-tax ? ' Issues Involved:1. Applicability of Section 4(1)(b) of the Gift-tax Act, 1958.2. Whether the document in question constitutes a gift as defined under Section 2(xii) of the Gift-tax Act, 1958.Issue-wise Analysis:1. Applicability of Section 4(1)(b) of the Gift-tax Act, 1958:The court examined whether Section 4(1)(b) of the Gift-tax Act, 1958, applied to the transaction evidenced by the deed dated May 7, 1963. Section 4(1)(b) states that if property is transferred for consideration which has not passed or is not intended to pass either in full or in part from the transferee to the transferor, the amount of such consideration shall be deemed to be a gift made by the transferor. The court concluded that Section 4(1)(b) is attracted only when there is a transfer stated in the document to be for consideration, but the consideration has not passed and is not intended to pass. Since the document in question did not purport to be for consideration, Section 4(1)(b) was not applicable to the case.2. Whether the Document Constitutes a Gift Under Section 2(xii) of the Gift-tax Act, 1958:The court then analyzed whether the document constituted a gift under Section 2(xii) of the Gift-tax Act, which defines a gift as the transfer of any property by one person to another without consideration. The revenue argued that the document evidenced a gift, pointing out that the definition of 'gift' in the Gift-tax Act does not require acceptance by the donee, unlike Section 122 of the Transfer of Property Act, 1882.The court considered the definitions of 'transfer of property' under both the Gift-tax Act and the Transfer of Property Act. It noted that under the Gift-tax Act, the term 'transfer of property' includes any disposition, conveyance, assignment, settlement, delivery, payment, or other alienation of property. The court highlighted that these transactions are typically bilateral, requiring the consent or concurrence of the donee.The court referred to the Supreme Court decision in Goli Eswariah v. Commissioner of Gift-tax, which held that a transaction is not a gift if there is no donor or donee and no acceptance by the donee. The court also cited the Full Bench decision in Commissioner of Gift-tax v. P. Rangasami Naidu, which supported the view that the definition of 'transfer of property' in the Gift-tax Act includes only bilateral transactions.Upon examining the clauses of the document in question, the court found that the properties were only set apart for the respective sharers and that there was no vesting of title in the executees. The document allowed the sharers to improve the properties and construct buildings, but possession and enjoyment of the properties remained with the executant during his lifetime. The court concluded that there was no 'transfer of property' as defined under Section 2(xxiv) of the Gift-tax Act.Conclusion:The court held that the Appellate Tribunal was correct in law in holding that the transaction evidenced by the deed dated May 7, 1963, was not a gift and that there was no liability to pay gift-tax. The court passed no order regarding costs and directed that the answer be sent to the Tribunal as required by law.