Income Tax Appellate Tribunal - Pune
Gift Tax Officer vs Smt. Sushilabai Himmatmal Jain on 20 September, 2000
Equivalent citations: [2002]81ITD273(PUNE)
ORDER
B.L. Chhibber, A.M.
1. A vital issue involved in this appeal by the Revenue is that when a Jain female who takes Sanyas (Diksha) and thereafter the assets which are got in succession by the adopted son of such Sanyasin attract gift-tax under Section 4(1) of the GT Act, 1958?
2. The assessee in the present case is Smt. Sushilabai Himmatmal Jain, who is a widow of one Shri Himmatmal K. Jain who died on 29th March, 1980. During his life time, Shri Himmatmal K. Jain was a partner in the firms M/s Sheshmal Fulchand & Co., Malegaon, and M/s Sheshmal Bhurmal & Co., Malegaon. He also held house properties in Malegaon and Rajasthan, gold and silver ornaments, etc. Shri Hirnmatmal K. Jain on his death left properties worth Rs. 1,90,750, details of which are to be found in the gift-tax assessment order.
3. After the death of Shri Hirnmatmal, the only person who was a legal heir was the assessee Smt. Sushilabai, as Shri Himmatmal was issueless and there was no other heir to the deceased. Accordingly, the assessee inherited all the property of the deceased Shri Himmatmal. On 3rd June, 1982, Smt. Sushilabai took in adoption her nephew Shri Harakchand as per the custom of the Jain community. In support of the said adoption, adoption deed dt 8th June, 1982, was drawn and was filed before the GTO. The deed records that the assessee Smt. Sushilabai has adopted her nephew Shri Harakchand for which she had obtained the consent of the natural parents Shri Phulchand and Smt. Kanchanben. Accordingly, the adoption was performed in the presence of the family members and according to the custom of the community and the adoption was completed on 3rd June, 1982. On adoption, Smt. Sushilabai had declared that Shri Harakchand be considered as the adopted son of Shri Himmatmal and carry on as if he is the son of her husband Shri Himmatmal. It was further declared by her that as a result of the adoption, the said Shri Harakchand had all such rights as a son of Shri Himmatmal.
4. On 5th June, 1982 Smt. Sushilabai took Sanyas (she took Diksha as per Jain religion). This fact was also incorporated in the adoption deed, as the adoption deed further goes on to state that as a result of her taking Sanyas, her adopted son Shri Harakchand will have all rights in respect of her movable and immovable property. Finally, the adoption deed records the fact that the deed is made to record the adoption made by her. The fact of above adoption as made by Smt. Sushilabai is not disputed by the GTO. but according to him, certain conditions of adoption are not fulfilled.
5. Section 11 of the Hindu Adoption and Maintenance Act, 1956, requires that adoption must be made in compliance with the conditions mentioned in the said section. This section lays down six conditions for valid adoption and breach of any such condition will render the adoption invalid. After recording these conditions as prescribed in Section 11, the GTO has stated that difference between trie age of Smt. Sushilabai and Shri Harakchand was less than 21 years. As per Section 11, if a Hindu female is adopting a male, the adoptive mother should be at least 21 years older than the boy to be adopted. According to the GTO, the fourth condition is not fulfilled. Though the exact reason why the GTO brought to tax the amount of Rs. 1,90,750 is not very precise and clear, it appears that he proceeded on the following lines. According to him, since the assessee Smt. Sushilabai had renounced the world by relinquishing her rights in the property which had devolved on her by succession on death of her husband and she had already handed over the ownership and possession of the property to the adopted son Shri. Harakchand Jain, there was a transfer by relinquishment of the rights from Smt. Sushilabai specifically in favour of Shri Harakchand Jam, impliedly bringing the second transfer within the ambit of Section 4(1) of the GT Act According to the GTO, this meant that the entire property passing through Smt. Sushilabai to Shri Harakchand was subject to charge of gift-tax and then he has stated at the end of the assessment order that the condition of adoption regarding age difference was not fulfilled. According to the GTO, therefore, the property of Rs. 1,90,750 has to be subjected to gift-tax. In support of his findings, the GTO relied on the decision of the Madras High Court in the case of His Holiness Sri La-Sri Shanmugha Desika Gnanasambanda Paramacharya Swamigal v. CED (1985) 153 ITR 390 (Mad) wherein the ratio of the decision in Krishna Singh v. Mathura Ahir AIR 1980 SC 707 was considered. The GTO also relied on another decision of the Madras High Court in Kondal Row v. Iswara Sanyasi (1911) 33 MLJ 63 in which essentials of a Sanyasi and its incidents according to Hindu law have been discussed.
6. The assessee appealed to the Dy. CGT(A). The assessee filed before the learned Dy. CGT(A) new evidence in the form of an affidavit of brother of Smt. Sushilabai and an affidavit of natural father of Shri Harakchand to prove the age of the assessee and Shri Harakchand. The assessee also filed the horoscope of Shri Harakchand and Smt. Sushilabai, copy of LJC policy, receipt of Porwal Jain Sangh, Sheoganj. certificate from school regarding date of birth of Shri Harakchand and certificate from the secretary of Shri Porwal Jain Sangh, Sheoganj regarding the customs of adoption of any major or married member by the members of Porwal Jain Society and photographs of the Diksha ceremony of Smt. Sushilabai Before admitting the additional evidence, specific opportunity was given by the learned Dy. CGT(A) to the GTO who stated that he had no objection for admission of the evidence submitted by the assessee in support of her claim. The Dy. CGT(A) firstly discussed the decision of the Madras High Court referred to by the GTO which apparently had no bearing on the facts of the present case. As regards the difference in age of the assessee and her adopted son, the Dy. CGT(A) observed that the age of Smt. Sushilabai was mentioned in the adoption deed as about 50 years and the age of Shri Harakchand was mentioned as 30 years which led the GTO to observe that the condition regarding age difference of more than 21 years was not fulfilled. The Dy. CGT(A) observed that the GTO had not tried to ascertain the exact date of birth of both the parties, but from the evidence produced before him, the date of birth of Smt. Sushilabai was 1st June, 1929 and the date of birth of Shri Harakchand was 26th Nov., 1952. This clearly showed that at the time of adoption, the age of Smt. Sushilabai was more than 21 years of the age of Shri Harakchand and there was no violation of the condition of Section 11. Thus, the objection of the GTO that the adoption was not valid as per Section 11 of the Hindu Adoptions & Maintenance Act was not correct. The Dy. CGT(A) also went through other provisions of the Hindu Adoptions and Maintenance Act, 1956, and observed that in view of the certificate from Shri Porwal Jain Sangh, Sheoganj, the assessee had fulfilled all the conditions in Section 10 of the Hindu Adoptions and Maintenance Act and there was a valid adoption by Smt. Sushilabai. Thereafter, the learned Dy CGT(A) observed that all the properties belonging to Smt. Sushilabai passed to the legal heir Shri Harakchand on 5th June, 1982 when Smt. Sushilabai took Sanyas and, accordingly, there was no question of levy of gift-tax as, according to him, the assessee had not gifted directly or indirectly any property to Shri Harakchand who had inherited the properties on the civil death of Smt. Sushilabai. He accordingly cancelled the gift-tax assessment.
7. Shri R.K. Jain, the learned Departmental Representative strongly supported the order of the GTO. He took us through the assessment order but could not bring out any specific material to point out how the order of the learned Dy CGT(A) was wrong. He could also not rebut the findings of the learned CGT(A) that the age difference of the assessee and her adopted son was more than 21 years
8. Shri K.A. Sathe, the learned counsel for the assessee, strongly supported the order of the learned Dy. CGT(A). According to the learned counsel, the assessment order suffers from the fact that there are no precise reasons given by the GTO to bring to tax the property of Rs. 1,90.750. The GTO has merely referred to Section 4(1) of the GT Act but has not referred to Specific clauses in this section. From the content of his assessment, it appears that he had in mind provisions of Section 4(1)(c). This is because, it is mentioned that there was a transfer by way of relinquishment of rights from Smt. Sushilabai Jam in favour of Shn Harakchand Jain by implication bringing the second transfer within the ambit of Section 4(1) of the GT Act. He drew our attention to Section 4(1)(c) which provides that where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or interest in property by any person, the value of release, discharge, surrender forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the GTO to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment. He submitted that in the present case, it has not been found as a matter of fact by the GTO that the adoption was not bona fide. Moreover, the adoption per se does not mean that there is any release, discharge, etc. He concluded that the learned Dy. CGT(A) was justified in cancelling the order of the GTO.
9. We have considered the rival submissions and perused the facts on record. The GT Act applies to transactions inter vivos between the parties and cannot have any application in regard to transmission of property by provisions of law. The definition of 'Gift' under Section 2(xii) shows that it means to be a transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or moneys worth. The expression 'transfer by one person to another' indicates that there have to be two persons, namely, donor and donee and there should be an act of transfer involved. The expression 'transfer of property' is defined in Section 2(xxiv) which means any disposition, conveyance, assignment, settlement, delivery, payment 01 other alienation of property and without limiting the generality of the foregoing, includes the creation of a trust in property, the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property, the exercise of a power of appointment (w.e.f. 1st April, 1980), whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person. The ingredients of the above clause clearly show that they refer to specific acts of parties such as creation of trust, grant of lease, mortgage, etc. The provisions of Section 2(xxiv) which are very widely worded have been interpreted by Courts to apply only to bilateral or multilateral acts and not to unilateral acts. A transfer to which two persons are not parties can never amount to a gift. In other words, unless the act is bilateral or multilateral act, it will not amount to disposition, under the deeming provisions. One thing is clear that a mere unilateral act cannot amount to disposition as understood in Section 2(xxiv) in the definition of the expression 'transfer of property'--refer judgment of the Bombay High Court in CGT v. Mrs. Jei Mavis Lubimoff (1978) 114 ITR 90 (Bom). Thus, the GT Act applies only to transactions by which property is transferred by one living person to another by various acts which cannot have any application to transfer of property by provisions of law. For example, when a person dies, his property passes to his legal heirs by provisions of law and for such transmission of property, there could be no liability to gift-tax. The position has been placed beyond doubt by Section 5(1)(x) under which the property passing under a will is exempted from gift-tax. It is to be noted that property passing by will is specifically exempted,, while property passing by inheritance on intestate death is not mentioned, obviously because it is a transfer operating by virtue of law. In the case before us, when Shri Himmatmal died, the property passed on to his wife Smt. Sushilabai, the present assessee. She became the owner of the property as per the provisions of law. When she took Sanyas on 5th June, 1982, it was a case of civil death, and, therefore, properties received by her adopted son Shri Harakchahd were received by him because of provisions of law and, therefore, there could be no question of any release of any rights in the property by Smt. Sushilabai in favour of her adopted son merely because she took Sanyas on 5th June, 1982. As held by the Madras High Court in His Holiness Sri La-Sri Shanmugha Desika Gnanasambanda Paramacharya Swamigal's case (supra), when a Hindu takes up Sanyas. his action tantamounts to civil death, and after such civil death, the individual's relationship with his family comes to an end and there is complete severance from his secular life. If, therefore, Sanyas is regarded as civil death, consequences of civil death would follow and Shri Harakchand had become the owner of the property of Smt. Sushilabai not because there was any release of the property, but because of the fact of civil death of his adoptive mother on 5th June, 1982. The second important point to be noted is that in the present case, Smt. Sushilabai first adopted a son on 3rd June, 1982, took Sanyas on 5th June, 1982 and the deed dt. 8th June, 1982 is only to record the fact of adoption. The deed itself does not create any right as such, but it merely records the fact of adoption. In Clause (5) of the said deed, the assessee had merely stated that since on 5th June, 1982, she had taken Sanyas, Shri Harakchand will take over rights of her property as her son. Thus, what has happened is according to law. This cannot be construed as a release of property by the assessee after taking Sanyas.
10. The facts of the Madias High Court in the case of His Holiness Sri La-Sri Shanmugha Desika Gnanasambanda Paiamachaiya Swamigal (supra) are distinguishable. In the case before the Madras High Court, the deceased was a Sanyasi and head of Dharmapuram Adheenam. He had executed a deed of settlement in favour of his mother by which he settled certain agricultural lands. Question arose on his death whether such settlement could be taxed under Section 9 of the ED Act. Before the Asstt. Controller it was claimed that the value of the land settled by the deceased did not pass on the death of the deceased. It was claimed that the deceased was a non-dwija and he continued to be under an obligation to maintain his mother, notwithstanding his becoming Sanyasi and in that view the appellate authority directed deletion of the value of the property given in settlement. The Tribunal, however, held that the deceased after he became Sanyasi was not under an obligation to maintain his mother and consequently the settlement made by him in her favour was not supported by any consideration and had to be considered as a gift. The Hon'ble Madras High Court held that in the first place though the deceased was a non-dwija according to the Dharmapuram Adheenarn, he could be regarded as a Hindu Sanyasi; the settlement in this case was executed by the deceased after he became Sanyasi and long after he ceased to have any connection with his family. The deceased did not have any right or obligation with reference to any of the members of the earlier family after he became Sanyasi and the settlement executed by him in favour of her mother had to be regarded as a gift. In the assessee's case, however, the adoption was made before the assessee took Sanyas. On her taking Sanyas, there was a civil death of her and her adopted son became owner of her property as a result of legal transmission. There was no act on the part of the assessee after she became Sanyasi to release any property in favour of her son. In fact, on 8th June, 1982 when the adoption deed was made, she had no right in any of the property because on 5th June, 1982 itself she had taken Sanyas because of which Shri Harakchand had already become owner of the property. Thus, we hold that there was neither release nor extinguishment of any right as a result of any transaction by the assesses and accordingly, provisions of Section 4(1)(c) of the GT Act are not applicable.
11. As regards the controversy whether the adoption was valid as per Section 11 of the Hindu Adoptions and Maintenance Act, we find that the Dy. CGT(A) has rightly set the controversy at rest by accepting additional evidence after giving an opportunity of being heard to the GTO. Before the Dy. CGT(A) the assessee had filed a sworn affidavit of her brother and a sworn affidavit of natural father of Shri Harakchand to prove the age of the assessee and Shri Harakchand. The assessee also filed the horoscope of Shri Harakchand and Smt. Sushilabai, a copy of the LIC policy, receipt of Porwal Jain Sangh, Sheoganj, certificate from school regarding date of birth of Shri Harakchand and certificate from the Secretary of Shri Porwal Jam Sangh, Sheoganj regarding the customs of adoption of any major or married member by the members of Porwal Jain society arid photographs of the Diksha ceremony of Smt. Sushilabai. Before admitting this additional evidence, the Dy. CGT(A) rightly gave specific opportunity to the GTO (sic) who stated that he had no objection for admission of the evidence submitted by the assessee in support of her claim. After perusing the evidence, the Dy. CGT(A) rightly arrived at the conclusion that at the time of adoption, the age of the assessee was more by 21 years of the age of Shri Harakchand and there was no violation of any of the conditions, of Section 11 of Hindu Adoptions and Maintenance Act. Accordingly, we uphold the order of the Dy. CGT(A) on this issue.
12. In the light of above discussion, we decline to interfere and dismiss the appeal of the Revenue.
13. In the result, the appeal is dismissed.