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Issues involved: Appeal by revenue under Gift-tax Act against ITAT order quashing Gift-tax assessment in assessee's case.
Summary: 1. The appeal was filed by the revenue against the ITAT order quashing the Gift-tax assessment in the assessee's case for the assessment year 1989-90. The dispute arose from the declaration of two types of gifts - outright gift and revocable gift, specifically related to the gift of 6000 equity shares. The Assessing Officer alleged that the gift had escaped assessment and valued the bonus shares received by the donee as taxable. The appellate authority affirmed this assessment, but the Tribunal set it aside, stating that bonus shares were part of the original gift and not liable to gift tax based on a previous assessment for the year 1982-83. 2. The High Court referred to previous judgments emphasizing that revocable gifts could be recognized for taxation purposes under the Act, even though they may be void under general law. It was noted that bonus shares continued to be the property of the donee even after the revocation of the gift. The revenue contended that the value of bonus shares should be subject to gift tax under Section 4(1)(c) of the Act, supported by the Supreme Court's decision in Escorts Farms (Ramgarh) Ltd. case, which considered bonus shares as income from the original shares. 3. The Court held that the Tribunal erred in interfering with the assessment based on the 1982-83 case, as the present case involved different circumstances where the gift was not revocable for a certain period. It was emphasized that bonus shares were indeed subject to gift tax, as per Section 6(2) of the Act. Therefore, the appeal by the revenue was allowed, setting aside the Tribunal's order and reinstating that of the Assessing Officer.
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