2011 (7) TMI 423 - HC - Income Tax

Gift Tax - Whether the Tribunal was right in holding that the property was transferred out of love and affection and hence there is an element of gift involved while the petition for divorce was filed on the same date of settlement and the same was pending before the Court - the property had been transferred by the assessee to her husband out of love and affection and that the marriage was subsisting at the time of the transfer of the property, as the divorce had taken place, only on 29-6-1990 -The Tribunal had further pointed that the assessee had not produced any materials to show that the property purchased in the year, 1968, was out of the funds of her husband - Thus, in the absence of any such materials, the Tribunal, had rightly held that the transaction in question attracted gift tax - Decided against the assessee.

Summary

Issues:
1. Whether the property transfer was a gift or settlement during divorce proceedings?

Analysis:
The appellant was assessed to Income-tax for the assessment year 1989-90, and a notice under section 16 of the Gift Tax Act, 1958, was issued based on a survey report indicating a gift of an immovable property and a motor car to the appellant's husband. The appellant claimed it was a settlement due to a dispute with her husband and a pending divorce petition. The Gift Tax Officer valued the gifts and levied tax, which was challenged by the appellant.

The Commissioner of Income-tax (Appeals) confirmed the assessment, leading to an appeal before the Income-tax Appellate Tribunal. The Tribunal found the property transfer was out of love and affection, dismissing the appeal. The appellant contended that the transfer was not a gift due to the pending divorce and lack of love and affection. The Tribunal upheld its decision, stating the transfer was genuine and attracted gift tax.

The High Court upheld the Tribunal's decision, noting the lack of evidence that the property was purchased with the husband's funds. The Court rejected the appellant's argument of no love and affection, as the marriage was subsisting at the time of the transfer. The Court also mentioned the repealed provision regarding benami transactions, emphasizing the transfer was based on love and affection without evidence of being purchased with the husband's money.

In conclusion, the Court dismissed the tax case appeal, affirming that the property transfer was a genuine gift out of love and affection, not acquired with the husband's funds. The Court found no grounds to interfere with the Tribunal's decision, emphasizing the lack of evidence to support the appellant's claims.