TaxTMI 
TaxTMI 
2000 (2) TMI 183
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.... both have filed these 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 Compan....
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.... 97,161 to the credit of Shrimant Dealers (P.) F. P. Gaekwad with Ltd. M/s. Gaekwad Real Estate Traders (ii) M/s. Shantadevi Gaekwad Charities Rs. 29,02,839 2. Rs. 30,00,000 standing (i) M/s. Samar-Man Rs. 97,161 to the credit of Shrimant Traders Made F. P. Gaekwad with Fibers Pvt. Ltd. M/s. Gaekwad Real Estate (ii) Sir Sayajirao R....
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.... and Investment F.P. Gaekwad with five Pvt. Ltd. persons (ii) Gaekwad Foundation Rs. 9,67,613 -------------------------------------------------------------------------------- The value of property gifted to the Charitable Trusts which are enjoying exemption 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 ....
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....ompany and what is really important is that the acceptance of the terms and stipulations of the gift tax deed is recorded in the Gift Deed itself on behalf of the concerned Charities viz. Sir Pratapsinghrao Gaekwad Charities. Accordingly, the learned Commissioner (Appeals) held that the stipulations of payments to the Charities are binding on the Donee and they have been accepted as such by the Donee and the Charities and the payments stipulated for the Charities would constitute over-riding title. The Commissioner (Appeals) then proceeded to quantify 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.....
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....lance of Rs. 2,62,873 as the portion of taxable gift to the Company. To the main report, he gave an addendum in the following terms : 'I hereby certify that the value of the gift assuming that no income is paid during the first five years, would work as Rs. 18,86,186'." Thereafter, it appears that the assessee sought more time for filing further Valuation Report and it did file the Valuation Report dated 9-9-1982 from Shri V. H. Vora. According to that report the value of gift to the Charities came to Rs. 29,27,381 and the taxable gift to the company came 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 merit....
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....ail. Actually what is needed is the determination of the value of gift to the Charities because the value of the gift to the principal donee is admittedly Rs. 30 lakhs in the term we are considering in detail. In other words, the learned Valuers, Mr. Agashe and Mr. Vora are approaching the problem not directly but by a circuitous route. For doing so, they had to further presume that the main donee M/s. Pratap Investment Pvt. Ltd. in the case under consideration would not be left with any income at all for those 55 years for which the payment to Charities subsists. Those learned Valuers had to propound such a theory because they in my opinion started at the wrong end. What was really required was the determination of market value of the gift element to the Charities. This is the primary difference in approach for whatever difference it makes in the quantum of values determined. On the other hand, Shri K. A. Pandit has proceeded directly to determine the value of the gift to charities and in his report he has given more detailed reasoning and the precise formula which he had adopted for determining that value. The learned Valuers, Shri V. H. Vora has in the preamble of his report sta....
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....p; 2. Anjana Shantadevi Gaekwad 30,00,000 18,86,186 11,13,814 Dealers P. Ltd. 3. Samar Man Sir Sayajirao 30,00,000 18,86,186 11,13,814 Made Fibres Gaekwad Charities P. Ltd. 4. Gaekwad Ranjitsingh 17,50,000 11,00,275 6,49,725 Agencies Gaekwad P. Ltd. Charities 5. Gaekwad &n....
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....; --------------- Rs. 1,53,106 --------------- These amounts were due to the assessee for more than three years and these were written off by order dated 7-3-1973 by the assessee by passing Huzur Order dated 7-3-1973. The GTO however, held that this writing off tantamounted to gift and he included these two sums also in the value of taxable gift. The learned Commissioner (Appeals) upheld the action of the Assessing Officer by observing in para-12....
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....105.97 -------------------------------------------------- The undermentioned three loans/advances have been outstanding for more than 3 years: Name Amount (1) Maharaja Fatesingh Museum Trust Rs. 1,25,000.00 (2) Her Highness Maharani Padmavati Devi Gaekwad of Baroda Rs. 1,16,791.53 (3) Shrimant Ranjitsingh P. Gaekwad Rs. 36,314.44 &n....
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....sp; 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 year relevant to the assessment year when the various amounts were gifted to the respective companies, the gifts were made solely to charity and hence the said gifts were exempt from the gift-tax under the provisions of section 5(1)(v) of the Gift Tax....
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....e 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 (Appeals) erred in concluding that the value of the gift to public charities was only Rs. 84,87,837 and not as claimed by the appellant in his return of gift-tax and has further erred in holding that the total value of these taxable gifts in question amo....
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....ve 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 Commissioner (Appeals) is unwarranted on facts, against the evidence of record and in the absence of any legal evidence adduced by the Revenue in rebuttal, the assessment ought to have been made on the basis of return of gift submitted by the assessee.7.....
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.... 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 gift. The deemed gifts are the items which would not be gift in the General Law but would be regarded as gift for the purpose of Gift-tax Act. Though the first part of the definition of gift in clause (xii) of section 2 of the Gift-tax Act does talk o....
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....w, 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 years for which the payment to Charities subsists and therefore they have valued the gift to the principal donee by taking the present value of Rs. 30 lakhs which will be available to PratapsinghInvestment P. Ltd. after 55 years without any encumbrances....