TaxTMI 
TaxTMI 
2000 (2) TMI 183
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....appeals. 3. The difference between the value of taxable gift returned and those assessed by the GTO, and relief allowed by the Commissioner (Appeals) have been for the following reasons: 4. By four Gift Deeds dated 30-3-1973, the assessee made gifts of certain properties to two donees concomitantly vesting certain property rights with the first Donee - a Private Limited Company and vesting, absolute rights to obtain certain specified sums of money with the second Donee - the Charitable Trust under each of the Gift deeds. The assessee under each of the Gift Deeds gifted certain sums lying in his credit in the partnership firm M/s. Gaekwad Real Estate Traders in which he was a partner. Thus it appears that the actionable claim was gifted to a Company and a Charitable Trust concomitantly. The Donee Company was given the possessory rights absolute, of whole of the actionable claim so gifted and the Charitable Trust was vested with the right, title and interest in certain sums that the Company should pay annually to it. Such payment to be made by the Company to the Charitable Trust is provided by the Donor - the assessee as an obligation cast upon the Company while making the gifts ca....
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....ion under section 80G of the I.T. Act are claimed as exempt under section 5(1)(v) of the Gift-tax Act, 1958. The GTO however adopted the value of the respective credit balances transferred by the assessee to the Donee Companies as the value of gifts involved and declined to reduce such value by the values, if any, for the stipulations, in regard to the payments made to the Charities. According to the GTO, the stipulations in regard to the payments to the Charities were mere promise and were not existing properties. By referring to the definition of "gift" as per the Transfer of Property Act and the Gift-tax Act, the GTO inferred that under the law, gift was possible only that of an existing property and hence there was no gift to the Charities in the eyes of law. The GTO as well as the Commissioner (Appeals) have taken into consideration one of the Gift Deeds as a sample and applied their reasoning to all other Gift Deeds which were similarly drafted. In the case of gifts made by the assessee to M/s. Pratap Investment (P.) Ltd., the gift was of credit balance of Rs. 30,00,000, out of a credit balance of Rs. 1,20,00,000 lying to the credit of Donor's account with the firm M/s. Gaekw....
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....uantify the value of gift to the Charities in the Gift Deed relating to M/s. Pratap Investments (P.) Ltd. with the stipulations of payments to Sir Pratapsinghrao Gaekwad Charities. The value of gift to the Charities has been taken at Rs. 29,04,000 leaving the balance of Rs. 96,000 as value of taxable gift to the Company and it is mentioned in the Gift Deed that stamp duty is paid on that basis. In support of such valuation the assessee has filed a Valuation Report dated 21-4-1973 from Shri P. B. Agashe. In the said valuation report the gift to Charities has been valued at Rs. 29,02,839 leaving the taxable element of gift to the Company at Rs. 97,161. The relevant portion of the Valuation Report dated 21-4-1973 is extracted by the Commissioner (Appeals) in his order as under: "Since the Donee has accepted the gift with the stipulated conditions, he must be confident of getting a minimum yield of Rs. 1,80,000 per annum on the Fund Property which is required to keep the corpus of the Gift Property intact. We may, assume, therefore, that the corpus of the gift property will never be required to be drawn upon to meet the future annual payments. Further in the absence of any past experi....
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....ame to Rs. 72,619. After the receipt of this report, the Commissioner (Appeals) required the assessee to produce Mr. V. H. Vora to find out the basis of his report and as to why, although he has referred to the report of Shri K. A. Pandit, he has not given any basis for ignoring the report of Shri Pandit. For some reasons or the other, Shri V. H. Vora was not produced before the Commissioner (Appeals) and the learned Commissioner (Appeals) thereafter proceeded to dispose of the appeal on merits taking into consideration the four sets of Valuation Reports by observing as under in paras 9 and 10 of the impugned order: "9. On merits, the position is that now we have four sets of valuation reports - all done by qualified Actuaries and all furnished by the appellant. The relevant figures in respect of the deed we are considering in detail may be recapitulated in a tabular form as below: ---------------------------------------------------------------------------------------- Sr. No. Name of the Valuer Date of the Report Value of gift Value of to Charities taxable Gift ----------------------------------------------------------------------------------------- 1. Shri P.B. Agashe 21-04-1....
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.... gifts to the Charities rather than follow the circuitous way of determining the present market value of the gift to the main donee. Apart from this basic approach, it is pertinent to note that Shri K. A. Pandit's report is more detailed and more precise even to the extent of reasoning being given for each and every thing and precise formula is also indicated in the report. Therefore, in principle, the methods and parameters adopted in Shri Pandit's report have to be preferred and hence the inferences drawn by him have to be preferred to the inferences drawn by the other two learned Valuers, namely, Shri Agashe and Shri Vora. Accordingly, the learned Commissioner (Appeals) relying on the second valuation report of Shri K. A. Pandit, re-computed the taxable gift at Rs. 50,12,163 as against the value adopted by the GTO at Rs. 1,35,00,000 as under : ------------------------------------------------------------------------------------------- Sr.No. Name of the Name of Charities Value taxed Value of gift Value of main donee by ITO to Charities taxable Gift ------------------------------------------------------------------------------------------- 1. Pratap Invs Pratapshinghrao 30,00,0....
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....um Trust be treated as donation to the corpus of the Trust and the remaining total amount of Rs. 1,53,105.97 be written off. Sign Manual Indumati Mahal, Baroda 7th March, 1973. Remarks Copies of the Huzur Order are sent as under : 1. The Superintendent, Investments & Taxes 2. Khangi Accounts Branch 3. Khangi Audit Branch True Copy Sd/- Superintendent Obviously, both the amounts involved were due from the appellant's very near relatives and it was decided by the appellant in the previous year relevant to the assessment year under consideration that he would not take back those amounts from them. I agree with the GTO that they are clearly liable to gift tax. Addition of these two amounts of Rs. 1,53,106 is upheld."7. Before us, the learned AR of the assessee submitted that the Commissioner (Appeals) ought to have held that the entire gifts made to the various Donee Charities were entitled to exemption under section 5(1)(v) of the Gift Tax Act. The ld. AR of the assessee further submitted that the Commissioner (Appeals) ought to have held that inasmuch as each of the various charities were entitled to receive the entire income from the gifted properties in the previous ye....
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....R of the assessee further submitted that the appeal filed by the assessee against the order of the GTO dealt with the issue whether any deduction from the total value of the gifted properties was required to be made while arriving at the value of the taxable gift and did not deal with the issue regarding the proportion of the gift to be regarded as a gift made for charitable purposes. Having decided the issue in appeal (i.e. the question whether any deduction was to be made), in favour of the assessee, the jurisdiction of the Commissioner (Appeals) came to an end. The ld. AR submits that the action of the Commissioner in determining what portion of the value of the gifted properties was for charitable purposes, and hence was exempt from tax being beyond the scope of the appeal before the Commissioner (Appeals), and the action of the Commissioner in going into and deciding upon the aforesaid question was in excess of jurisdiction.7.6 The ld. AR of the assessee further submitted that the Commissioner (Appeals) erred in holding that the appellant had made taxable gifts in relation to the gifts in question to the extent of Rs. 50,12,163. He further submitted that the Commissioner (Appe....
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....mentioned in the Deed of Gift bearing appropriate stamp duty. The learned AR of the assessee submitted that the addendum of the report of Shri K. A. Pandit being passed on various assumptions not warranted by the clear terms of the gift could not have been relied upon for the purpose of arriving at the value of the taxable gift at Rs. 11,12,814 consisting the Gift Deed executed in favour of Pratapshingh Investments P. Ltd. In any event, it was submitted that on a correct interpretation of the relevant clause of the Gift Deed, the Charitable Trust could not be kept out of the income accruing in the said years and the Charitable Trust was entitled to assert its right to such income.7.11 The ld. AR of the assessee submitted that the Commissioner (Appeals) was not correct in observing that for some reason or the other, the assessee prolonged the proceedings. Instead of calling upon the GTO to file his report, the Commissioner (Appeals) called upon the assessee to file a report on the basis of certain assumptions as required by the Commissioner (Appeals) which were contrary to the provisions of the Gift Deed. The learned AR of the assessee accordingly pleaded that the order of the Commi....
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..... 30 lakhs has been gifted by the assessee to the Donee Company and further stipulations regarding the payments to Charities do not create any existing property which can be regarded as gift to the Charities out of the said gift of credit balance of Rs. 30 lakhs. The Assessing Officer has also observed that in terms of section 124 of the Transfer of Property Act where a gift comprises of both existing and future property, gift as to the future property is void. The Assessing Officer has also observed that the Gift Deeds are not registered. In this connection we are of the opinion that the Gift-tax Act is a complete code in itself and there is no provision in the Gift-tax Act corresponding to the provisions of sections 123 and 124 of the Transfer of Property Act. Therefore, consideration arising from the definition of gift in the Transfer of Property Act cannot and must not be imported while construing the provisions of the Gift-tax Act. Further, section 4 which defines gifts by an inclusive definition deemed certain transfers as gifts. While under the Transfer of Property Act and the General Law, gift would be possible only of existing property; the Gift-tax Act envisages deemed gi....
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.... of the assessee will have to be calculated by reducing the amount of credit balance gifted by the assessee to the various Companies/first, donees by the amount represented by the present value of the stipulations of payment to the Charities. 10. Now, coming to the quantification of the value of gift, it is seen that the assessee has furnished four valuation reports which have been mentioned by the Commissioner (Appeals) in para-9 of the impugned order which we have also extracted in this order at page 7. We agree with the reasoning and conclusion of the learned Commissioner (Appeals) that the records of Shri P. B. Agashe and Shri V. H. Vora do not correctly deal with the situation because what is required to be done is the determination of the value of gift to the Charities, as the gift to the principal Donee i.e., the Donee No. 1 in the four Gift Deeds is admittedly the specified sum of money. In the case of Pratapsingh Investment P. Ltd. the said sum is admittedly Rs. 30 lakhs. Shri P. B. Agashe and Shri V. H. Vora, the ld. Valuers have approached the problem by assuming that the main donee Pratapsingh Investment P. Ltd. would not be left with any income at all for those 55 year....
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....t comes to Rs. 2,62,873 and the value of gift to the Charities at Rs. 27,37,127. We direct that the remaining gifts should also be valued accordingly on the basis of the report of Shri K. A. Pandit. 11. As regards the ground relating to other two gifts of Rs. 36,314 to Shri Ranjitsingh Gaekwad and Rs. 1,16,792 to H. H. Maharani Padmavati Devi is concerned, we are of the opinion that the ld. Commissioner (Appeals) was perfectly justified in upholding the action of the Assessing Officer in treating these amounts as deemed gift because under the provisions of section 4(1)(c) the value of a debt in case of release, discharge, surrender etc. becomes liable to gift tax in so far as the said release, discharge, surrender, etc. is not bona fide. "Bona fide" means good faith implying the absence of fraud, unfair dealing or acting, whether it consists in simulation or dissimulation. In order that the transaction is bona fide, it must be shown that everything was done in an open and straight-forward manner. The language used in the clause has been so drafted so as to throw onus on the assessee for establishing to the satisfaction of the GTO that the transaction in question was bona fide. In t....