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Issues Involved:
1. Whether the transaction in question partakes the nature of a family settlement and is not liable to gift-tax. 2. Whether there was a taxable gift to the married daughter despite the transfer of agricultural lands occurring years after her marriage. Detailed Analysis: Issue 1: Nature of the Transaction - Family Settlement vs. Transfer or Alienation The primary question was whether the deed executed on March 21, 1970, could be considered a family settlement, thereby exempting it from gift-tax under the Gift-tax Act, 1958. The assessee executed a partition deed, transferring wet lands to his married and unmarried daughters. The Gift-tax Officer initially deemed this as a gift, subject to tax, since the daughters did not have a pre-existing right in the coparcenary property. However, the Appellate Tribunal held that the transaction was a family settlement, not a transfer or alienation, and thus not liable to gift-tax. The court analyzed the definition of "gift" under section 2(xii) of the Act, which requires a transfer to be voluntary and without consideration. It was established that under Hindu law and the Hindu Adoptions and Maintenance Act, 1956, a father has a legal obligation to provide for his unmarried daughter's marriage expenses and maintain her. This obligation extends to providing for a married daughter if she cannot maintain herself from her marital family. The court cited several precedents, including CGT v. Chandrasekhara Reddy [1976] 105 ITR 849, which supported the view that property given to a daughter in fulfillment of these obligations does not constitute a gift. The court concluded that the transaction was a family settlement, fulfilling the father's legal obligations under Hindu law, and thus did not attract gift-tax. Issue 2: Taxable Gift to the Married Daughter The second issue was whether the transfer of agricultural lands to the married daughter constituted a taxable gift, given the transfer occurred years after her marriage. The court referenced the legal obligation under Hindu law for a father to provide for his daughter's marriage, which can be fulfilled even long after the marriage. The court cited several cases, including Smt. Kamala Devi v. Bachulal Gupta, AIR 1957 SC 434, which held that gifts made in fulfillment of a promise made at the time of marriage are valid even if executed later. The court reaffirmed that the property given to the married daughter was in discharge of the father's pre-existing legal obligation and not a voluntary gift. Thus, it did not constitute a taxable gift under the Gift-tax Act. Conclusion The court held that the transaction was a family settlement and not a transfer or alienation liable to gift-tax. The property given to the married daughter, despite the lapse of years after her marriage, was in discharge of the father's legal obligations under Hindu law and did not constitute a taxable gift. The questions were answered in favor of the assessee, and no costs were ordered.
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