1982 (8) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Validity and completeness of the settlements due to lack of consent from minor donees.
2. Validity of the settlements under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961.

Detailed Analysis:

1. Validity and Completeness of Settlements Due to Lack of Consent from Minor Donees:

The primary issue was whether the settlements executed by the assessee in favor of his brother's minor daughters were ineffective and incomplete due to the lack of consent from the minor donees, and thus not liable for gift-tax under Section 5 of the Gift Tax (G.T.) Act. The GTO held that the transactions were chargeable to gift-tax as the definition of "gift" in the G.T. Act does not require the donees' consent. However, the AAC disagreed, stating that the lack of consent, coupled with the revocation of the gift deeds within a few days, indicated that the property never passed to the donees, making the gifts invalid for tax purposes.

The Tribunal supported the AAC's view, referencing the Kerala High Court decision in CGT v. Kesavan Nair [1974] 96 ITR 365, which held that the consent of the donee is essential to validate a gift under the G.T. Act. The Tribunal distinguished the cases cited by the Revenue, concluding that the settlements were incomplete and inoperative due to the lack of consent from the minor donees, thus not liable for gift-tax.

2. Validity of the Settlements under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961:

The second issue was whether the settlements were invalid under the Land Reforms Act and thus could not attract gift-tax. The AAC initially held that the documents were void under Section 22 of the Land Reforms Act. The Revenue contended that the settlements could not be declared void without an authorized officer's declaration under Section 22. However, the court noted that the settlements fell under Section 23 of the Act, which declares transactions void if executed after the notified date but before the publication of a notification under Section 18(1).

The court held that the settlement deeds executed in February and March 1970 were void ab initio under Section 23 of the Land Reforms Act. This statutory declaration rendered the transactions non-existent in law for all purposes, including the G.T. Act. Thus, the settlements were void and could not be subjected to gift-tax.

Conclusion:

The court concluded that the settlements were void under the Land Reforms Act, making it unnecessary to address whether the consent or acceptance of the donee was required to validate the gifts under the G.T. Act. Consequently, the court answered the referred question in the affirmative and against the Revenue, stating that the gifts of agricultural lands by the assessee to his brother's minor daughters were incomplete and not liable to gift-tax. The Revenue was ordered to pay the costs of the assessee, with counsel's fee set at Rs. 500.