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1. Whether a gift made by a firm is liable to be taxed under section 3 of the Gift-tax Act, 1958? Detailed Analysis: The case involved a reference from the Income-tax Appellate Tribunal regarding the taxability of a gift made by a firm under the Gift-tax Act, 1958. The firm in question supplied press-mud to another entity free of cost, which was treated as a gift by the Gift Tax Officer (GTO) and taxed accordingly. The main contention was whether a firm falls within the definition of "person" under the Act, specifically under section 3. The Tribunal held that a firm does not come under the definition of "person" as per section 2(xviii) of the Act, and therefore, no tax could be levied on the gift made by the firm. The court analyzed the definition of "person" under the Gift-tax Act, which includes various entities like a Hindu undivided family, a company, an association, or a body of individuals. The counsel for the assessee argued that since the term "firm" is separately defined in the Act and not explicitly included in the definition of "person," the firm should not be taxed under section 3. However, the court rejected this argument, stating that the definition of "person" is not exhaustive and includes other categories beyond those listed. Additionally, a firm, being a collective name for a group of individuals in a partnership, falls under the category of "body of individuals or persons whether incorporated or not." Referring to a previous Supreme Court decision in M. M. Ipoh v. CIT [1968] 67 ITR 106, the court emphasized that the term "person" in tax statutes is broad enough to encompass a firm. Furthermore, the court highlighted the principle of harmonious construction of statutes and pointed out that if firms were intended to be excluded from the scope of section 3, there would be no need for section 21 of the Act, which deals with tax liability in the case of a discontinued firm or association of persons. Therefore, the court concluded that the legislative intent was to tax gifts made by firms, and the view of the Tribunal was deemed incorrect. In conclusion, the court answered the referred question in the affirmative, favoring the tax department and ruling that a gift made by a firm is indeed liable to be taxed under section 3 of the Gift-tax Act, 1958. The department was awarded costs amounting to Rs. 200.
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