Income Tax Appellate Tribunal - Chennai
J.S. Kamath vs Gift Tax Officer on 27 February, 2004
Equivalent citations: (2004)85TTJ(CHENNAI)43
ORDER
N.R.S. Ganesan, J.M.
1. This appeal of the assessee relates to the asst. yr. 1991-92.
2. The assessee and his brother, Mr. J.R. Kamath, jointly purchased an immovable property in plot No; 68 in Sriram Co-operative House Building Society Ltd., at Coimbatore. The assessee has also put up a construction along with his brother in the abovesaid land. On 22nd Oct., 1990, the assessee executed a deed of maintenance in favour of his daughter, Ms. S. Sharmila and thereby the assessee transferred his half share in the property along with the building to his daughter in lieu of her maintenance. The AO treated this transfer as a gift by the assessee in favour of his daughter and levied gift-tax. On appeal by the assessee, the first appellate authority confirmed the order of the AO. However, the first appellate authority found that the property was not valued by the AO as per Schedule II of the GT Act. Therefore, he modified the valuation and fixed the value at Rs, 1,30,940 instead of Rs. 3,00,000 adopted by the AO. The assessee filed the second appeal against this order of the first appellate authority before Tribunal.
3. Shri T.N. Seetharaman, the learned counsel for the assessee, submitted that the assessee is a Hindu and he purchased the property along with his brother. Under Section 20 of the Hindu Adoptions and Maintenance Act, 1956, the assessee is bound to maintain his children and, therefore, in lieu of such maintenance, he executed a deed transferring the land property in favour of his daughter. The learned counsel placed his reliance on the judgment of the apex Court in the case of CIT v. B.S. Apparao (2001) 248 ITR 103 (SC) and submitted that in a similar circumstance, the Supreme Court held that the transfer made in lieu of maintenance to a daughter cannot be construed as a gift. Furthermore, such a gift was exempted under Section 5(1)(vii) of the GT Act. The Supreme Court confirmed the views taken by the Tribunal and the High Court in respect of transfer of land worth about Rs. 1,00,000 after referring to Section 5 (1)(vii) of the GT Act. Therefore, the decision of the Supreme Court is squarely applicable to the facts of the present case. Since the assessee is bound to maintain his daughter, the transfer made by the assessee in lieu of such a maintenance is exempted and no gift tax can be levied.
4. On the contrary, Shri K. Srinivasan, the learned Departmental Representative, submitted that Section 5(1)(vii) of the GT Act exempts the payment of gift to a maximum of Rs. 10,000 and, therefore, any amount which exceeds Rs. 10,000 cannot be exempted under Section 5(1)(vii). In this case, admittedly, the first appellate authority has fixed the value of the property at Rs. 1,30,940 and the assessee has not challenged this value adopted by the first appellate authority. Therefore, the assessee is not entitled for exemption as provided in Section 5(1)(vii) of the GT Act in respect of the amount which exceeds Rs. 10,000. The learned Departmental Representative further submitted that there is no legal obligation on the part of the assessee for making any provision for maintenance. Therefore, the lower authority has rightly levied gift-tax.
5. Having heard the learned representatives on both sides, We also perused the material available on record. Admittedly, the assessee has executed a deed of maintenance on 22nd Oct., 1990, in favour of his daughter, S. Sharmila. It is also not in dispute that the property was originally purchased by the assessee along with his brother. The assessee has transferred his half share in the property in favour of his daughter by the document dt. 22nd Oct., 1990. The assessee has filed a copy of the deed of maintenance. The maintenance deed says that the property was purchased after the birth of the assessee's daughter and it was earmarked for her maintenance. We also find that the assessee and his brother intended to handover the property at the time of marriage after completing the construction. However, they could not complete the construction as proposed. It is also indicated in the maintenance deed that the assessee's daughter is likely to be married in near future and the assessee was making a provision for maintenance of the assessee's daughter. Section 5(1)(vii) of the GT Act reads as follows :
"to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees ten thousand in value in respect of the marriage of each such relative;"
From the reading of this section it is very clear that any gift made by the assessee to a relative dependent for support and maintenance on the occasion of the marriage of such relative, subject to maximum of Rs. 10,000 in value in respect of marriage of each such relative, is not liable for gift-tax. It appears now the value is increased to Rs. 1,00,000. It is also very clear that the limitation is prescribed in respect of gift made on the occasion of the marriage. In this case the document shows that the assessee's daughter was likely to get married in the near future. It is nobody's case that the marriage of the assessee's daughter was arranged and the present document for maintenance was executed to avoid a gift at the time of marriage. The assessee, just like any other father, was under the bona fide belief that his daughter would be getting married in the near future. Therefore, it cannot be said that the assessee has made any gift on the occasion of the marriage of his daughter or at the time of marriage of his daughter. Therefore, the document dt. 22nd Oct., 1990, could not be construed as a gift made on the occasion of the marriage.
6. Admittedly, the assessee is a Hindu and, therefore, the Hindu Adoptions and Maintenance Act, 1956, would be applicable. Section 3(b) of the Hindu Adoptions and Maintenance Act, 1956, defines "maintenance" as follows :
" 'Maintenance' includes--
(i) in all cases, provision for food, clothing, residence, education and medical attendance and treatment;
(ii) in the case of an unmarried daughter, also the reasonable expenses of and incident to her marriage;"
In view of the above definition, it is very clear that the assessee is bound to provide food, clothing, residence, education and medical attendance and treatment. In case of unmarried daughter, the assessee has to meet a reasonable expenditure of her marriage. Section 20 of the Hindu Adoptions and Maintenance Act says that, a Hindu is bound, during his life time, to maintain his legitimate or illegitimate children and his aged or infirm parents. A legitimate or illegitimate child may also claim maintenance from parents so long as the child is a minor. The obligation to maintain the unmarried daughters is extended when the unmarried daughter is unable to maintain herself out of her own earnings or other property. Therefore, the assessee was under a legal obligation to maintain his daughter. It is not the case of the Revenue that the assessee's unmarried daughter was having sufficient funds or property to maintain herself. The only objection of the Revenue is that under Section 5(1)(vii) of the GT Act what was exempted is only Rs. 10,000 and not more than that. Therefore, there was a gift. Under the Hindu Adoptions and Maintenance Act, the assessee is bound to maintain his daughter. The "maintenance" is defined in the Hindu Adoptions and Maintenance Act. Therefore, the assessee has to discharge his statutory obligation as provided under the Hindu Adoptions and Maintenance Act, 1956. In respect of food, clothing, residence, education and medical attendance and treatment, no limitation is prescribed in the GT Act. The assessee is also bound to meet the marriage expenditure of his daughter. This marriage expenditure is also not referred in Section 5(1)(vii) of the GT Act. What is referred in Section 5(1)(vii) of the GT Act is gift on the occasion of the marriage. Even though the assessee originally intended to handover the property at the time of marriage, in fact, the property was handed over even before the marriage was arranged. The matter would have been different if the property was given at the time of marriage or after the marriage in pursuance of a promise made at the time of marriage. In that event, we may say that the property was gifted in pursuance of promise made at the time of marriage and, therefore, it was a gift made on the occasion of the marriage. That is not the case in our hand. The property was given even before the likelihood of the marriage. Therefore, in our opinion, this property was given to the assessee's daughter only as a maintenance.
7. The assessee, being a Hindu, is under legal obligation to maintain his daughter. The first appellate authority appears to have misdirected himself in interpreting Section 5(1)(vii) of the GT Act. According to the first appellate authority, when a daughter is dependent on a father for support and maintenance, gift to the extent of Rs. 10,000 alone is qualified for exemption. In our view, this observation of the first appellate authority is not correct. When a daughter is dependent on a father for support and maintenance, the gift made by the father on the occasion of the marriage of each daughter to the extent of Rs. 10,000 is exempted. The expenditure incurred by a father in respect of his daughter with regard to food, education, residence, medical attendance and treatment, no monetary limitation is prescribed under the GT Act. In respect of his unmarried daughter, the assessee is also under the legal obligation to meet a reasonable expenditure on marriage and incidental expenses thereto. The GT Act is silent on these aspects. Therefore, when the assessee incurred expenditure for discharging his legal obligation under the Hindu Adoptions and Maintenance Act, in our view, it cannot be said that there was a gift.
8. "Gift" is defined in Section 2(xii) of GT Act, 1958, which reads as follows :
"'gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in Section 4, deemed to be a gift under that section."
Therefore, it is very clear that there must be a transfer from one person to another in respect of existing movable or immovable property voluntarily and without consideration. In this case, the transfer was made in lieu of statutory obligation to maintain and to incur the marriage expenses. Therefore, the subject-matter of this transaction now under consideration is not a gift within the meaning of Section 2(xii) or under Section 4 of the GT Act. We agree with the first appellate authority that the obligation of the parents to meet the expenditure of children is only to the extent of a reasonable limit. The question would be what is "reasonable". It again depends upon the status, extent and value of the property owned and gifted and financial position of each and every family. A sum of Rs. 1,00,000 may be reasonable to one family and it may not be reasonable to other family. Similarly, when a child is hospitalised, the parents would like to spend any amount for treatment. Therefore, the words "reasonable limit" are a flexible one and it would depend on the facts and circumstances of each case. In our view, every parent has not only a moral obligation but also a legal obligation to incur expenditure within their limit for the purpose of their children's education, food, clothing, residence, medical treatment, etc. In respect of unmarried daughter, they have to incur reasonable expenditure on their marriage depending upon family status. There cannot be any limitation on such expenditure. In our view, it cannot be the intention of the legislature to treat each and every expenditure made by a parent in respect of their respective children as a gift. Even before enactment of Hindu Adoptions and Maintenance Act, 1956, every parent had a moral and pious obligation to maintain their respective children. Likewise, every child had moral and pious obligation to maintain its respective parents. Only to codify the existing custom which was prevalent in Hindu community, the legislature enacted Hindu Adoptions and Maintenance Act, 1956. Therefore, the existing moral and pious obligation was converted into a legal obligation. This right of maintenance can also be enforced by respective parties through Court of law. When legal position is like that, the first appellate authority is not correct in restricting the maintenance to the extent of Rs. 10,000 alone. It is not the case of the Revenue that the assessee's daughter was able to maintain herself out of her own earnings. It is also not the case of the Revenue that the property gifted was excessive and unreasonable. The fact remains that the assessee's daughter is entitled for maintenance and in lieu of such maintenance transfer of property was made. Therefore, in our view, there cannot be any gift in the subject transaction.
9. The apex Court in the case of B.S. Apparao (supra) held that under Section 20 of the Hindu Adoptions and Maintenance Act, 1956, a Hindu is bound to maintain his daughter and his obligation extends to the extent that she cannot maintain herself out of her own earnings or other property. The Supreme Court held that the settlement made by the assessee in favour of the minor daughter was exempted. The Supreme Court also held that a transfer of property to meet the obligation under law cannot be regarded as a gift within the meaning of the GT Act. In this case also the assessee has transferred the property in order to meet the obligation under Section 20 of the Hindu Adoptions and Maintenance Act, 1956. Therefore, there cannot be any gift within the meaning of GT Act.
10. In view of the foregoing discussion, we are unable to uphold the orders of the lower authorities. Accordingly, we set aside the same and hold that there is no gift in the transfer of property to the assessee's daughter by the deed of maintenance dt. 22nd Oct., 1990. Accordingly, the orders of the lower authorities am set aside.
11. In the result, the appeal of the assessee stands allowed.