TaxTMI 
TaxTMI 
2005 (8) TMI 41
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..... Madhuri D. Joshi who is a resident of Pune. This gift was made by cheque at Srinagar and the amount was transferred from Vasco Bank to State Bank of India at Srinagar. The assessee claimed the exemption from payment of gift-tax in view of section 5(1)(ii) of the Gift-tax Act, 1958. The Assessing Officer however held that the whole exercise of making a gift by issuing a cheque through State Bank of India, Srinagar, was a colourable transaction for avoiding gift-tax and, therefore, directed respondent No. 1 to pay gift-tax on the said transaction. The Deputy Commissioner of Income-tax, however, by his order dated March 12, 1991, set aside the order of the Assessing Officer and held that the said transaction was not a colourable transaction.....
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.... made by Justice Chinnappa Reddy who had given a separate concurring judgment and submitted that in view of the aforesaid observation it was the duty of the court to examine whether a legal device had been used to avoid tax. He submitted that both the lower authorities had not taken into consideration the ratio of the said judgment and had not examined whether the transaction was in fact a colourable device to escape tax liability. He submitted that in the present case respondent No. 1 though is admittedly a nonresident Indian she was also not residing in Kashmir and had no business or interest whatsoever in Kashmir and on the contrary had interest only in Goa. Respondent No. 1 had made a gift by issuing a cheque on the State Bank of India,....
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....e submission made by learned counsel appearing on behalf of the appellant. Section 5(ii) reads as under: "S. 5. Exemption in respect of certain gifts.-(1) Gift-tax shall not be charged under this Act in respect of gifts made by any person: (i) of immovable property situate outside the territories to which this Act extends; (ii) of movable property situate outside the said territories unless the person- (a) being an individual, is a citizen of India and is ordinarily resident in the said territories, or (b) not being an individual, is resident in the said territories during the previous year in which the gift is made;" The section clearly contemplates grant of exemption to individuals who are not ordinarily residing in India and second....
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....t would not amount to a tax evasion. The Supreme Court in a recent case in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 has to a very large extent watered down the ratio laid down in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) and has observed that the observations made by Chinnappa Reddy J. in the said judgment do not necessarily reflect the observations of the other hon'ble judges. The Supreme Court in this judgment has considered the majority view and the view taken by Chinnappa Reddy J. and has observed that the majority judgment in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) had not endorsed the view of Chinnappa Reddy J. The apex court has observed as under: "As we shall show presently, far ....
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....not to ask whether a provision should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.' We are afraid that we are unable to read or comprehend the majority judgment in McDowell's case [1985] 154 ITR 148 (SC) as having endorsed this extreme view of Chinnappa Reddy J., which, in our considered opinion, actually militates against the observations of the majority of the judges which we have just extracted from the leading judgment of Ranganath Mishra J. (as he then was)." The Supreme Court, therefore, by the said judgment has clearly wa....