2004 (4) TMI 36 - HC - Income Tax

Gift Tax Act 1958 - relevant date for assessing the gift - whether the transfer of property was completed on November 22, 1989 when the document was executed and registered or earlier? Assessee contended that the transfer of land took place even before the registration of the sale deed on November 22, 1989 - In our view the general law did not stand abrogated and the requirement of complying with the provisions of the Transfer of Property Act and the Registration Act had to be fulfilled. Held that the Tribunal is perfectly right in its view that there is a deemed gift only on November 22, 1989 when the sale deed was executed by the appellant in favour of the trust. assessee s appeal dismissed

Issues Involved:
1. Determination of the date of transfer of property.
2. Applicability of the Gift-tax Act, 1958, particularly sections 2(xii), 2(xxiv), and 4(1)(a).
3. Interpretation of relevant provisions of the Transfer of Property Act and the Indian Registration Act.
4. Validity and completion of the gift transaction.

Issue-wise Detailed Analysis:

1. Determination of the Date of Transfer of Property:
The primary question was whether the transfer of property was completed on November 22, 1989, when the sale deed was executed and registered, or earlier. The court examined the sequence of events, including the initial agreement in 1981, the delivery of property in 1978, and subsequent resolutions and agreements. The final sale deed was executed and registered on November 22, 1989, and the court concluded that the transaction was complete only upon registration.

2. Applicability of the Gift-tax Act, 1958:
The Gift-tax Officer invoked section 4(1)(a) of the Gift-tax Act, treating the difference between the guideline value and the consideration as a deemed gift. The assessee contended that the transfer occurred earlier, thus negating the applicability of the deemed gift provision for the assessment year 1990-91. The court analyzed sections 2(xii) and 2(xxiv) of the Gift-tax Act, defining "gift" and "transfer of property," respectively. The court reiterated that a gift requires a registered instrument, and thus, the transfer was valid only upon registration in 1989.

3. Interpretation of Relevant Provisions of the Transfer of Property Act and the Indian Registration Act:
Section 122 of the Transfer of Property Act defines "gift," and section 123 mandates that a gift must be effected by a registered instrument. Section 47 of the Indian Registration Act states that a registered document operates from the time it would have commenced if no registration was required, but the Supreme Court rulings clarified that registration is necessary for the completion of a sale or gift. The court cited precedents, including Ram Saran Lull v. Domini Kuer and Smt. Gomtibai v. Mattulal, affirming that the transaction is complete only upon registration.

4. Validity and Completion of the Gift Transaction:
The court examined the arguments and precedents to determine the validity of the gift transaction. The assessee's counsel argued that the agreement to sell and delivery of property constituted a transfer. However, the court emphasized that the definition of "transfer of property" in section 2(xxiv) of the Gift-tax Act does not dispense with the requirement of registration. The court referred to rulings such as CGT v. Smt. Aloka Lata Sett and CIT v. Sirehmal Nawalakha, which reinforced that a gift is complete only upon registration.

Conclusion:
The court concluded that the Tribunal was correct in its view that the deemed gift occurred only on November 22, 1989, when the sale deed was executed and registered. Therefore, the appeal was dismissed, affirming the applicability of the Gift-tax Act provisions and the necessity of registration for the completion of the gift transaction.

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