1987 (9) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Whether the execution of the release deed is a unilateral act and not a transfer under section 2(xxiv) of the Gift-tax Act, 1958.
2. Whether the execution of the release deed is not a gift within the meaning of section 2(xii) of the Gift-tax Act, 1958.
3. Whether the release deed is bona fide and not hit by section 4(1)(c) of the Gift-tax Act, 1958.

Detailed Analysis:

Issue 1: Unilateral Act and Transfer under Section 2(xxiv)
The Tribunal held that the release deed executed by the assessee and his wife was a unilateral act, where they abandoned their life interest to enjoy the income from the property. It was determined that this act did not constitute a "transfer of property" as defined in section 2(xxiv) of the Gift-tax Act, 1958. The Tribunal reasoned that the execution of the release deed was a unilateral act that did not require acceptance by Anil Kumar, the beneficiary. The court agreed with the Tribunal's view, emphasizing that the legislative amendments made by the Finance Act, 1980, which introduced clause (e) in section 4(1), indicated that such a transaction was not considered a transfer or gift before these amendments.

Issue 2: Definition of Gift under Section 2(xii)
The Tribunal concluded that the release deed did not amount to a "gift" within the meaning of section 2(xii) of the Act. The definition of "gift" under section 2(xii) requires a transfer of property made voluntarily and without consideration. Since the release deed was a unilateral act and did not involve a transfer of property, it did not meet the criteria of a gift. The court supported this conclusion by referring to the legislative history and judicial precedents, including the Bombay High Court's decision in CGT v. Mrs. Jer Mavis Lubimoff and the Supreme Court's decision in Goli Eswariah v. CGT, which held similar transactions as not constituting a gift.

Issue 3: Bona Fide Nature and Section 4(1)(c)
The Tribunal found that the release deed was executed bona fide, with no element indicating otherwise. Consequently, the transaction did not fall under the deeming provision of section 4(1)(c) of the Act, which applies to non-bona fide transactions. The court emphasized that the Tribunal's finding of bona fide execution was crucial in determining that the release deed was not a deemed gift. The court also noted that the legislative amendments made in 1980, specifically the insertion of clause (e) in section 4(1), were intended to address similar issues but were not applicable to the assessment year 1973-74.

Conclusion:
The court answered all three questions in favor of the assessee, affirming the Tribunal's view that the release deed was a unilateral act, not a transfer or gift under the relevant sections of the Gift-tax Act, and was executed bona fide. The reference was thus answered against the Revenue, with no costs awarded.