TaxTMI 
TaxTMI 
2005 (2) TMI 481
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....these appeals, we state the facts in detail in the case of M/s. Sahara India (Firm) (G.T.A. No. 15/All./1998). We may state that the ld. CGT(A) has also passed a detailed order- in the case of M/s. Sahara India (Firm) and has followed his order in the case of M/s. Sahara India Limited (Gift-Tax Appeal No. 11/All./1998). 4. The grounds of appeal taken by the Department in the case of M/s. Sahara India (Firm) are as under:- 1. That the ld. CGT(A) has erred in law and on facts in deleting the addition on account of deemed gift of Rs. 1,70,00,000 without appreciating the provision of section 4(1)(c) of the Gift-tax Act wherein the relinquishment of right has been considered as deemed gift and accordingly non-charging of interest on the amounts advanced to the sister concern would come under the ambit of deemed gift. 2. That the ld. CGT(A) has further erred in analyzing the provisions of section 4(1)(c) of the G.T. Act in a manner which defeats the very intention of the Legislature to plug the diversion of income and thus reducing the tax liability. 5. The relevant facts are that M/s. Sahara India (Firm) (hereinafter to be referred as the assessee) is a partnership, which ca....
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....assessment computing the taxable gift of Rs. 1,70,00,000 by applying the provisions of section 4(1)(c) of the Gift-tax Act. 11. Being aggrieved, the assessee filed appeal before the First Appellate Authority contending that there was no covenant and/or mutual agreement to charge interest on the advances/loans given by the assessee to its sister concern(s) and not charging of interest cannot amount to any release, surrender, discharge or abandonment, because there was no existingright or obligation for recovery of interest. A notional or hypothetical gift cannot be a subject-matter of gift tax under the Gift-tax Act. 12. The ld. CGT(A) accepted the contention of the assessee and held that the assessee firm did not make any gift at all. He has cancelled the assessment order framed by the Assessing Officer under sections 15(3)/16 of the Gift-tax Act. Hence, the Department is in further appeal before the Tribunal. 13. The ld. D.R. strongly supported the order of the Assessing Officer. He submitted that clause (c) in sub-section 4(1) of the Gift-tax Act has been inserted to plug the loop hole by bringing in its ambit the deeming provisions of deemed gift. He submitted that the ....
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....e different proceedings and even if the addition of the interest in the income-tax proceedings has been deleted by the Appellate Authority/Authorities still a thing/right could be a subject-matter of a deemed gift under section 4(1)(c) of the Gift-tax Act. The ld. Authorized Representative of the assessee submitted that even otherwise the appeal filed by the Department against the impugned order of Id. CGT(A) has no substance. He submitted that section 4(1)(c) of the Gift-tax Act covers only certain deemed gift viz., where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person. He submitted that in order to apply provisions of section 4(1)(c) of the Gift-tax Act, there must be a pre-existing right or interest in property. He further submitted that the act of the assessee not to charge interest on the loans/advances given by it to its sister concerns, could only be considered as a benefit given by the assessee and there is no such concept under the Gift-tax Act to bring a benefit within the purview of 'Gift'. He further submitted that there could be an abandonment of a right or ....
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....balance. Therefore, there is no dispute on the fact that the parties never intended to pay and/or to receive interest on the outstanding balance amount. In view of the above, we are of the considered view that the Assessing Officer's presumption that the assessee has abandoned/surrendered the interest amount of Rs. 1.70 crores in favour of its sister concerns has no basis as there is no accrual of interest. 18. Section 4 of the Gift-tax Act includes certain transfers for the purpose of Gift-tax Act. The relevant clause (c) of section 4(1) of the Gift-tax Act, is as under: "(c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the [Assessing Officer] person responsible for the release, discharge, surrender, forfeiture or abandonment." 19. The ld. D.R. in his submission has referred the definition of 'abandonment' from the Law Lexicon. On ....
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....tax under the Income-tax Act, 1961. In a case where no income by way of interest has accrued to the assessee, there is no right, which has vested in the assessee and, therefore, the question of relinquishment and/or abandonment of the right does not arise. Thus, the provisions of section 4(1)(c) of the Gift-tax Act are inapplicable in the present circumstances of the case. In regard to the case of Sir Padampat Singhania, relied by the ld. D.R., we observe that the facts are different and are not applicable to the case before us. In the said case, the Hon'ble High Court confirmed the decision of the Tribunal to hold that the surrender of loan was not bona fide transaction and, thus, the amount surrendered or relinquished by the assessee in favour of J.K. Company was a taxable gift. In the said case, the assessee had deposited the amount with M/s. J.K. Company. The assessee surrendered the amount standing to their credit in favour of J.K. Company authorizing it to re-coup its loss. In the case before us, there is no existing right in favour of the assessee to charge interest from its sister concern(s) on the outstanding amount and, therefore, the question of abandoning the right or a....