1990 (2) TMI 91

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.... of Rs. 5,000 the taxable gift was determined at Rs. 3,36,000. 3. The assessee (donor) had preferred an appeal raising two important points. One was in regard to valuation. That was not pressed by the learned representative before the Commissioner(A). The finding in this regard has, in these circumstances, become final. The second point was in regard to deduction of gift-tax liability. It is the claim of the assessee that the gift-tax liability is an allowable deduction. On this issue, the first appellate authority held as hereunder: ".........I hold that the GTO was not correct in his view on the allowance of the tax payable as a liability in determining the value of gifted property. He is directed to do so and revise the order of as....

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.... and Wealth-tax. 5. We may set out certain facts which are not in the region of controversy. The date of gift is 10th April, 1982 when the ornaments (movables) were actually handed over to the donee. At the same time, the donor had addressed a letter to the donee stating that the gift was subject to the condition that the donee would undertake to pay the gift-tax as the donor had no money with her. The donee appended a note to that letter signifying her willingness to undertake the gift-tax liability. The question is whether the deduction claimed can be allowed in view of the above. 6. It is a familiar principle that where a property subject to charge or encumbrance is gifted, the property should be valued as if it is free and the val....

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....ndition attached to the gift which the donees had accepted. Since the donees were discharging the liability which the donor was having earlier to the gift their Lordships of the Madras High Court held that the value of the it was deductible from the value of the gifted property. 10. It may be seem from the above that what is deductible is a liability or encumbrance that existed prior to the gift. Whether it is a liability or charge on the property or a liability personal to the donor, in either case it is anterior to the gift. It is only such encumbrance or liability that is liable to be deducted in determining the value of the gift. 11. Irrespective of the contract between the donor and the donee, the liability to gift-tax is consequ....