Karnataka High Court
Commissioner Of Income-Tax vs Maganathi Amba Devi on 8 April, 1986
Equivalent citations: (1987)60CTR(KAR)137, [1986]162ITR796(KAR), [1986]162ITR796(KARN), [1986]28TAXMAN37(KAR)
JUDGMENT K.S. Puttaswamy, J.
1. In this reference made under section 26(1) of the Gift-tax Act, 1958 ("the Act"), the Income-tax Appellate Tribunal, Bangalore Division, Bangalore ("the Tribunal"), at the instance of the Revenue, has referred the following question of law for the opinion of this court "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the settlement deed dated September 21, 1972, did not result in an outright gift of an immovable property and that this deed and the agreement of September 22, 1972, have to be read together ?"
2. In order to appreciate the question referred to us, it is necessary to notice the facts as found by the Tribunal.
3. The assessee and her husband, M. Vasudeva Rao, who were the owners of certain immovable properties situated in the City of Bangalore settled them in favour of Sri M. Ramachandra Rao and Smt. M. Rajani, their son and daughter, respectively, under a registered settlement deed dated September 21, 1972. In the original settlement deed drawn up and presented for registration before the Sub-Registrar, it appears there was a condition stipulating the payment of certain annuity to the assessee and her husband which was, however, deleted on an objection taken by the Sub-Registrar to the same and that deed was registered without incorporating that clause.
4. On the very next day of the registration of the said document, the son and daughter of the assessee executed an agreement (annexure B) undertaking to pay an annuity to the assessee and her husband as originally stipulated in the settlement deed.
5. In the return filed under the Act before the Gift-tax Officer, Assessment 4, Circle-I, Bangalore, for the assessment year 1973-74, the assessee, inter alia, claimed (1) that the settlement was not a gift within the meaning of the term occurring in the Act; (2) that the annuity payable under the agreement should be considered as the consideration for the settlement, if held to be a gift under the Act. On January 27, 1975, the Gift-tax Officer completed the assessment and rejected the said claims of the assessee, valued the gift and brought the same to tax under the Act. Aggrieved by the said order of thejGift-tax Officer, the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax, Bangalore, who by her order dated June 30, 1976, dismissed the same. Aggrieved by the said orders of the Appellate Assistant Commissioner and the Gift-tax Officer, the assessee filed a second appeal before the Tribunal reiterating the very contentions urged before the Appellate Assistant Commissioner and the Goft-tax Officer. On Frebruary 17, 1978. the Tribunal allowed the said appeal and remitted the case to the Appellate Assistant Commissioner for fresh determination treating the agreement and the deed as one document. Hence, this reference.
6. Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department appearing for the Revenue, contends that in the determination of the question whether the settlement deed was a gift or not, it was not open to the Tribunal to rely on the agreement and make any determination.
7. Sr. T. V. Srinivas, learned counsel appearing for the assessee, contends that the settlement deed and the agreement had to be read as one document and the direction made by the Tribunal was legal. In support of his contention, Sri Srinivas strongly relied on the ruling of the Andhra Pradesh High Court in G. V. Krishna Rao v. First Addl. GTO [1968] 70 ITR 812 followed by the Rajasthan High Court in Sirehmal Nawalkha v. CIT [1985] 156 ITR 714.
8. In the settlement deed that was ultimately registered, there is no stipulation for payment of annuity by the son and daughter of the assessee. When one examines the settlement deed as executed and registered, there cannot by any doubt that the same constitutes a gift within the meaning of that term occurring in section 4(1)(a) of the Act. If that is so, the valuation made by the Gift-tax Officer and subjecting the same to tax under the Act does not suffer from any infirmity at all.
9. We will assume that the agreement dated September 22, 1972, is genuine and the terms and conditions stipulated are enforceable and acted upon. But still the question is whether the same can be relied on to determine the nature of the earlier transaction and its valuation thereunder for purposes of the Act.
10. We are of the view that any agreement entered into between the parties either contemporaneously or subsequently to whittle down the earlier gift or the terms of the gift cannot properly be relied on at all by the authorities under the Act. The Act and the Rules do not permit the assessee to rely on a contemporaneous or a later agreement on any of the matters stipulated in the earlier deed also. Any such attempt is fraught with grave dangers and will only lead to endless inquiries that cannot properly be held by the authorities under the Act.
11. We have carefully read the rulings relied on by Sri Srinivas. We are of the view that the ratio in those cases does not really bear on the question.
12. On the foregoing discussion, we hold that the Tribunal was in error in relying on the agreement and directing the Appellate Assistant Commissioner to treat the deed and the agreement as one and redetermine the matter.
13. In the light of our above discussion, we answer the question referred to us in the negative, in favour of the Revenue and against the assessee. But, in the circumstances of the case, we direct the parties to bear their own costs.