1996 (3) TMI 108 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 10 of the Estate Duty Act, 1953.
2. Interpretation of the gift deed and whether a benefit was reserved in favor of the donor after two years.
3. Availability of exemption under Section 33(1)(o) of the Estate Duty Act, 1953.

Issue-Wise Detailed Analysis:

1. Applicability of Section 10 of the Estate Duty Act, 1953:
The court examined whether Section 10 of the Estate Duty Act, 1953, was applicable to the gift deed executed by the donor in favor of his daughter. The document in question, dated September 30, 1962, was analyzed to understand the donor's intentions. The court found that the donor had transferred all rights to the properties to his daughter, retaining only a monthly allowance of Rs. 1,250 for maintenance. The court concluded that bona fide possession and enjoyment of the property were immediately assumed by the daughter and retained to the entire exclusion of the donor, except for the monthly payment. The court noted that the charge created was merely a security for the monthly payment and did not impede the passing of the property. Therefore, Section 10 was not attracted.

2. Interpretation of the Gift Deed and Whether a Benefit Was Reserved in Favor of the Donor After Two Years:
The court scrutinized the gift deed to determine if any benefit was reserved for the donor after the initial two-year period. The document specified that the daughter would pay the donor Rs. 1,250 monthly for two years, and thereafter, the amount would be determined based on the donor's condition. However, the court found that the donor continued to receive the specified amount until his death, indicating no new agreement was necessary after the two-year period. The court held that the donor had divested himself of all rights in favor of his daughter, and no benefit was reserved for the donor after the initial period. Thus, the Tribunal's finding that no benefit was reserved in favor of the donor was upheld.

3. Availability of Exemption Under Section 33(1)(o) of the Estate Duty Act, 1953:
The court considered whether the gift deed qualified for exemption under Section 33(1)(o) of the Estate Duty Act, 1953. The section exempts property taken under a gift made to a close relative (spouse, son, daughter, brother, or sister) beyond five years before the donor's death. The donor died on November 25, 1967, and the gift deed was executed on September 30, 1962, clearly beyond the five-year period. The court concluded that the gift deed qualified for exemption under Section 33(1)(o), as it was made beyond the stipulated period and was either chargeable to gift-tax or not chargeable under Section 5 of the Gift-tax Act, 1958. Therefore, the transaction was exempt from estate duty.

Conclusion:
The court answered all three questions in the affirmative, against the Revenue and in favor of the accountable person. The judgment was to be sent to the Income-tax Appellate Tribunal, Cochin Bench.