1992 (8) TMI 97 - AT - Income Tax

Summary

Issues:
Transfer of shares as a gift under Gift-tax Act and exemption under section 5(1)(vii) of the Act.

Analysis:
The appeal concerned the transfer of shares by the head of a Hindu Undivided Family (HUF) to his daughter on the occasion of her marriage. The primary issues were whether the transfer qualified as a gift under the Gift-tax Act and alternatively, whether exemption under section 5(1)(vii) of the Act applied to the transaction.

The HUF transferred shares worth Rs. 37,600 to the daughter, claiming it was a gift on the occasion of her marriage. The Gift Tax Officer (GTO) rejected the claim of exemption under section 5(1)(vii) due to a time gap between the marriage and the gift. The Deputy Commissioner upheld the decision, citing a previous case law. However, the first ground challenging the gift as taxable was not addressed.

Before the Tribunal, the assessee argued that the transfer was not a taxable gift and alternatively, qualified for exemption under section 5(1)(vii). The Tribunal considered the voluntary nature of the transfer to determine if it constituted a gift, emphasizing the obligation of an HUF to cover marriage expenses. The time gap between the marriage and the gift was explained by the mother-in-law's death, justifying the delay.

The Departmental Representative contended that the transfer did not meet the definition of a gift and that the exemption under section 5(1)(vii) did not apply as the gift was not made on the occasion of the marriage. The Tribunal analyzed the definition of 'gift' and the exemption provision, concluding that the transaction was not taxable under the Gift-tax Act. The Tribunal clarified that the obligation of the HUF to cover marriage expenses justified the transfer of shares, even with a time gap between the marriage and the gift.

In the final analysis, the Tribunal held that the transaction did not qualify as a taxable gift under the Gift-tax Act. The Tribunal emphasized the obligation of the HUF to provide for marriage expenses, justifying the transfer of shares to the daughter. The Tribunal allowed the appeal, ruling in favor of the assessee.