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Assessment of land value as income in the hands of Hindu Undivided Family (HUF) based on a gift by Nawab to Shri Sewal Singh, whether the land transfer was a gift or remuneration for services rendered, and the applicability of gift-tax assessment order. Analysis: The case involves a dispute regarding the assessment of a piece of land transferred by the Nawab of Malerkotla to Shri Sewal Singh, a member of the HUF, and whether the value of the land should be considered as income of the HUF. The Income Tax Appellate Tribunal held that the land transfer was primarily a payment in lieu of services rendered by Shri Sewal Singh as general attorney to the Nawab, thus making the amount taxable income of the HUF. The Tribunal rejected the argument that the land was gifted to Shri Sewal Singh in his individual capacity, as this plea was not raised before the lower authorities. During the proceedings, the Gift Tax Officer assessed the transaction as a gift in the hands of the Nawab. The Tribunal referred several questions of law to the High Court, focusing on whether the land transfer constituted income assessable in the hands of the HUF and if it was remuneration for services rendered. The High Court noted that the central issue was whether the transfer was a gift or remuneration for services. The Court disagreed with the Tribunal's conclusion that the land transfer was not a gift, emphasizing the contents of the gift deed which clearly indicated a gift made out of love and affection, not as remuneration. The Court highlighted that there was no contractual or legal obligation for the Nawab to pay remuneration to Shri Sewal Singh, and the gift was based on the Nawab's genuine affection towards him. Drawing parallels to a Supreme Court case, the Court concluded that the transaction was indeed a gift and not payment for services rendered. The Court also disagreed with the Tribunal's interpretation of the applicable legal principles. Consequently, the Court answered the key question in favor of the assessee, ruling that the transaction was a gift and not remuneration. In light of this determination, the Court did not find it necessary to address the other questions raised in the appeal. The judgment was delivered jointly by Justices B. S. Dhillon and G. C. Mittal, with Justice Mittal concurring with the decision. The Court ordered that the revenue bear the costs of the proceedings.
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