2000 (2) TMI 183 - AT - Income Tax

Summary

Issues Involved:

1. Valuation of taxable gifts.
2. Exemption under section 5(1)(v) of the Gift-tax Act.
3. Validity of gifts to Charities.
4. Taxability of written-off amounts as deemed gifts.

Issue-wise Detailed Analysis:

1. Valuation of Taxable Gifts:

The assessee, an individual assessed to tax, made several gifts during the assessment year 1973-74 and declared a taxable gift of Rs. 4,32,224. The Assessing Officer (AO) assessed the total gift at Rs. 1,36,48,110. On appeal, the Commissioner of Gift-tax (Appeals) reduced the valuation to Rs. 50,12,163. The difference in valuations arose from the interpretation of four Gift Deeds dated 30-3-1973, where the assessee gifted credit balances in a partnership firm to a Private Limited Company and a Charitable Trust, creating an onerous gift. The AO considered the entire credit balances as taxable gifts, while the Commissioner (Appeals) allowed deductions for the amounts payable to Charities, considering them as over-riding titles.

2. Exemption under Section 5(1)(v) of the Gift-tax Act:

The assessee claimed exemptions for the value of gifts to Charitable Trusts under section 5(1)(v) of the Gift-tax Act. The AO rejected this, stating that the stipulations for payments to Charities were mere promises and not existing properties. The Commissioner (Appeals) accepted the assessee's argument, recognizing the stipulations as binding and creating an over-riding title in favor of the Charities. The valuation of gifts to Charities was done based on actuarial reports, with the Commissioner (Appeals) favoring the report by Shri K. A. Pandit over others.

3. Validity of Gifts to Charities:

The AO argued that the gifts to Charities were not valid as they were promises for future payments. The Commissioner (Appeals) disagreed, holding that the stipulations created enforceable rights for the Charities, thus constituting valid gifts. The Tribunal upheld this view, stating that under the Gift-tax Act, deemed gifts include future obligations if they create enforceable rights. The Tribunal directed the AO to value the gifts based on the actuarial report by Shri K. A. Pandit, without considering subsequent non-payments to Charities.

4. Taxability of Written-off Amounts as Deemed Gifts:

The AO included amounts written off by the assessee as taxable gifts, amounting to Rs. 1,53,106. The Commissioner (Appeals) upheld this, noting that the write-offs were not bona fide, as they involved close relatives of the assessee. The Tribunal agreed, stating that under section 4(1)(c) of the Gift-tax Act, the onus was on the assessee to prove the bona fide nature of the write-offs, which was not done. The Tribunal upheld the inclusion of these amounts as deemed gifts.

Conclusion:

The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, directing the AO to revalue the gifts based on the actuarial report by Shri K. A. Pandit, excluding subsequent non-payments to Charities. The Tribunal upheld the inclusion of written-off amounts as deemed gifts, affirming the Commissioner (Appeals)'s decision.