1994 (9) TMI 20 - HC - Income Tax

Summary

Issues:
Interpretation of "gift" under the Gift-tax Act, 1958 in the context of settlement deeds executed for discharging obligations towards unmarried daughters.

Analysis:
The High Court of MADRAS considered a reference under section 26 of the Gift-tax Act, 1958, regarding settlement deeds executed by the assessee for his unmarried daughters. The court examined whether the transfer of property by the assessee to fulfill his obligation of maintaining and marrying off his daughters constituted a valid consideration under the Act. The court noted that the consideration, being the discharge of the liability towards the daughters, was adequate. Referring to a prior judgment, the court emphasized that the source of the liability was not crucial; rather, the discharge of the obligation itself was significant. The court held that the transfer made by the assessee was for a valid consideration and, since the consideration was found to be adequate, the transaction did not fall under the definition of a gift for tax purposes. The court distinguished a previous case related to income tax law, emphasizing that the adequacy of consideration had already been established in the present case. Therefore, the court concluded that the discharge of liability towards unmarried daughters constituted a valid consideration, ruling in favor of the assessee and against the Department.