Income Tax Appellate Tribunal - Delhi
Mrs. Padma Jain vs Gift-Tax Officer on 1 February, 2000
ORDER
Diva Singh, J.M.
1. The present appeal fifed by the assessee is directed against the order dated 4-8-1992 of DC(A)-V, New Delhi. It pertains to assessment year 1975-76.
2. The grounds raised before us arc as under :--
"1. That the learned DC(A)-V, has legally gone wrong in upholding the order of GTO that out of relinquishment of the assessee was a gift chargeable under section 4 of the Gift-tax Act.
2. That since the demised property was an HUF and no gift/demand gift resulted by the act of relinquishment of the assessee."
3. The assessee is an individual. Her case is that she relinquished her interest in HUF property by an oral partition for distributing equally between her two sons. The GTO treated the act of relinquishment of income by the assessee as gift. The assessee's contention was that the relinquishment of rights in properly was a unilateral act which was not accepted by the GTO who completed gift lax assessment determining the taxable gift at Rs. 41,644 after allowing exemption for Rs. 5000 under section 5(l)(ii). Aggrieved by the order, the assessee went in appeal before the first appellate authority. It was submitted on behalf of the assessee before him that to make a gift complete there has to be acceptance of the gifted property by the donee. It was argued before him that it was a case of partition of HUF property, hence no gift-tax was chargeable. The assessee had acquired life interest in the demised property at the death of her late Husband who had bequeathed the enjoyment of the property to her for her life time and after her death, to her two sons under the will. She had no right to sell, to dispose of the property in the manner as she was not an owner of it.
4. Assessee's counsel drew the attention of the first appellate authority towards the provisions of 'transfer' of Property Act where the words 'gift' and 'transfer' have been defined. The contention of the assessee was not accepted by the first appellate authority also. Aggrieved by his order, the assessee is in appeal before us.
5. The counsel for the assessee reiterated the arguments on behalf of the assessee made before the GTO as well as the first appellate authority. It was Contended that the relinquishment was a unilateral act and consequently did not amount to a gift. Furthermore, the counsel for the assessee urged that it was a HUF property and a partition of ii did not invite the provisions of the Gift-tax Act. Our attention was also invited to Section 2(xii) of the Gift-tax Act wherein gift has been defined as :
"(xii) "Gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration is 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)."
Thus, the word gift means the transfer of existing property both movable and immovable by one person to another made voluntarily without consideration and it also takes care of certain other transactions which may not be directly covered by the operative part of the definition in section 2(xii) and seeks to exclude transfer within the meaning of Section 4 which contemplates deemed gift for the purpose of the Act. Our attention was also invited to Section 2(xxiv) of the Gift-tax Act wherein transfer of property is defined as :--
(xxiv) "transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment of other alienation of properly and, without limiting the generality of the foregoing, includes-
(a) the creation of a trust in property;
(b) the grant or creation of any lease, mortgage, charge, easement, license, power, partnership or interest in property;
(c) the exercise of a power of appointment (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
(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own properly and to increase the value of the property of any other person;"
Section 4 of the Act deals with deemed gift i.e., where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any surrender, forfeiture or abandonment, to the extent to which it has not been found, To the satisfaction of the gift-tax officer 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. Our attention was also invited to copy of the will made by assessee's husband, para 6 of which reads as under :--
"I devise all my lands and other immovable properly to my wife S. Padma Jain for her life as a widow's estate and after her death to my son Prakash Chandra and any other male child or male children that may be born to my present wife S. Padam Jain absolutely and in equal shares."
Our attention was also drawn to a copy of the Decree in a Suit for Declaration before the High Court of Delhi wherein at page no. 4 it is mentioned as under :--
"Defendant No. 1 had orally relinquished her interest in the HUF property bearing no- 47, Bungalow Road, Kamla Nagar, Subzimandi, Delhi-7 in favour of plaintiff and defendant no. 2 and the plaintiff and defendant no. 2 vide an oral partition had divided the said properly as aforementioned. It is ordered that a decree for declaration be and is hereby passed in the following manner;"
6. The counsel for the assessee vehemently argued that the Revenue has not established that it was a gift or it was a deemed gift. It was submitted that the unilateral action of the assessee did not amount to a gift as in a unilateral action, there was no acceptance by the other party. It was further contended by him that it was merely an acceleration of interest. Reliance was placed on CGTv. Smt. Ansuya Sarahhai [1982] 133 ITR 108/ [1981] 6 Taxman 86 (Guj.) in support of the contention that before a transaction can be termed a gift, there must be a transfer by one person to another of an existing movable or immovable property made voluntarily and without consideration. Section 2(xii) of the Gift-tax Act, 1958 r/w Section 2(xxiv)(d) requires that there must be at least two persons. The transaction must be bilateral or multilateral. A unilateral transaction by which one party releases his interest in favour a given party is not covered by this definition. Under section 4(l)(c) a release or surrender can be deemed to be a gift only if it is shown by the Revenue that the GTO was satisfied with respect lo the release or surrender that it was not made bona fide by the concerned party. Assessee also relied upon CGTv. Ansuya Sarabhai (Smt.) [1999] 239 ITR 262 (SC) wherein the Supreme Court affirmed the decision of the Gujarat High Court in Ansuya Sarabhai (supra).
7. Learned DR, on the other hand, relied upon the impugned order as well as the assessment order. It was contended by him that property acquired under a will would lose the character of a HUF. It was further argued by him that the satisfaction of the GTO was required where the transaction was held to be bona fide. The present case is an act of transfer without consideration, hence not bona fide and he sought to distinguish Annsya Sarahhai (supra) and it was not applicable to the present case.
8. After hearing the rival submissions and going through the record as well as the case law cited, we are of the considered opinion that the ground raised by the assessee is liable to be accepted. The assessee has relied upon Gujarat High Court decision which squarely covers the present case. Facts in the relevant case were as under :--
"The assessee, A, was the sister of the late, S. S had crated a trust in 1949, whereby he had transferred certain properties to trustees with a direction that the net income from the properties was to be paid to A during her lifetime for her absolute use and benefit. After the death of A the trustees had to transfer and assign the trust property absolutely to the children and grandchildren of S in certain specified proportions. The assessee was paid the net income from the properties for a number of years. In July, 1964, A, out of natural love and affection, released and surrendered her rights, title and interest for life in the net income of a portion of the trust properly in favour of the children and grandchildren of S, and discharged the trustees of their obligation to pay her the net income for her life of that portion of the trust property."
Further, on the question whether the transaction amounted to a gift within the meaning of section 2(xii) or could be deemed to be a gift within the meaning of section 4(f)(c), it was held by the High Court that:--
"the release deed in question did not effect any gift, bilateral or multilateral, between the parties as contemplated by section 2(xii) read with section 2(xxiv)(d) of the Gift-lax Act. Nor was the revenue able to show by arriving at any positive finding that the transaction was not a bona fide one and hence was a deemed gift within the meaning of section 4(l)(c) of the Act. The transaction effected by the release deed was not taxable under the Gift-tax Act,"
This decision was affirmed by the Supreme Court in Ansuya Sarabhai's case (supra) wherein it was held that:--
"the Tribunal and also the High Court found that the assessee, A had surrendered or released her life interest in the portion of the properly and it enabled the releasees who were the beneficiaries to resume possession of the entire corpus of the properly a little earlier. In other words the interest of the beneficiaries in that portion of the property was accelerated. The transaction was held to be bona fide. It was a unilateral act. In such circumstances there was no transaction eligible to lax within the meaning of the Gift-tax Act."
9. On perusing the impugned order, we find that the learned DCIT(A) held as under :--
"... In this case, the appellant has surrendered her right in the properly under Hindu Law whether the act of relinquishment or right is permissible or not, that is a different issue. In this case, the Hon'ble High Court has accepted the claim of the two sons by passing a declaratory decree. The appellant has, to that extent, indirectly gifted her right in the property to her sons. In turn, indirectly they have accepted the gift by moving the court for a declaration decree they got the absolute right to own and enjoy the property in question. Hence, there being no force in the arguments of the learned counsel, the appeal is dismissed."
10. We find that the present case is squarely covered by the decision of the Gujarat High Court relied upon by the assessee. This decision was affirmed by the Supreme Court. In the present case, the release or relinquishment was a unilateral action on the part of the assessee - the first part of the definition in section 2(xii) requires at least two persons. Furthermore, under section 4(l)(c), release or surrender can be taken to be a gift only if it is shown by the Revenue that the GTO was satisfied with respect to the release or surrender that it was not made bona fide by the concerned party. Apart from this, the Revenue has not been able to show by arriving at any positive finding that the transaction was not a bona fide one and hence was a deemed gift within the meaning of Section 4(l)(c) of the Act. Consequently, we come to the conclusion that the act of release in favour of the beneficiaries amounts to an acceleration of interest. There is no dispute over the fact that a transaction was bona fide. In such circumstances, we are of the view that there is no transaction exigible to tax within the meaning of the gift-tax.
11. In the result, the appeal of the assessee is allowed.