1971 (1) TMI 47 - HC - Income Tax

Summary

Issues:
1. Liability of the assessee to gift-tax assessment on properties conveyed to children under a settlement deed.
2. Whether the transaction qualifies as a family arrangement exempt from tax.
3. Exemption under section 5(1)(xii) of the Act for the gift made for the education of the minor son.

Analysis:
1. The case involved a reference under section 26(1) of the Gift-tax Act to determine if the assessee was liable for gift-tax assessment on properties conveyed to his children through a settlement deed. The assessee contended that the transaction was a family arrangement not subject to tax and that the gift to his minor son for education should be exempt under section 5(1)(xii) of the Act. The courts reviewed the facts and previous decisions to assess the validity of the contentions.

2. The court established that for a transaction to be considered a family arrangement, there must be an agreement among family members to avoid disputes and maintain harmony. In this case, the settlement deed executed by the father in favor of his children was deemed a gift made out of love and affection without consideration. The court clarified that the terms of the document did not indicate a family arrangement as it was a unilateral action by the father, making it a taxable gift under the Act.

3. Regarding the exemption claim under section 5(1)(xii) for the gift made for the education of the minor son, the court emphasized that the burden of proof lies with the assessee to establish the intention behind the gift. The court noted that the document did not explicitly mention the gift for educational purposes, and the claim was raised late in the proceedings. The appellate authorities found no evidence supporting the claim, leading to the rejection of the exemption request. Ultimately, the court upheld the decision that the assessee was not entitled to the exemption under section 5(1)(xii) for the gift made to his minor son.

In conclusion, the court ruled in favor of the income-tax department, holding the assessee liable for gift-tax assessment on the properties conveyed to his children and denying the exemption claim for the gift made for the education of the minor son. The judgment highlighted the importance of establishing the intent behind gifts and the criteria for qualifying as a family arrangement under the Gift-tax Act.