1978 (8) TMI 98 - AT - Income Tax

Summary

Issues:
- Whether the partition between two brothers resulted in a gift by the assessee under section 4(1)(c) of the Gift Tax Act.

Analysis:
The case involves an appeal by the assessee against the order of the AAC, which held that the partition between two brothers resulted in a gift by the assessee under section 4(1)(c) of the Gift Tax Act. The Gift Tax Officer (GTO) observed that the assessee allotted more land to his younger brother than his entitled share, treating the excess value as a gift. The assessee contended that the extra land was given in consideration of his brother relinquishing his interest in a residential building. The GTO considered it a gift, but the assessee argued it was an exchange supported by consideration. The GTO, however, taxed the value of the gift despite the assessee's explanation.

In the appeal before the Appellate Tribunal, the assessee sought relief, arguing that the transaction was a mutual exchange and not a gift under section 4(1)(c) of the Gift Tax Act. The Tribunal found substance in the appeal, noting that the authorities erred in assuming it was a gift. The Tribunal analyzed the details of the transaction, where the assessee purchased the property, and through a partition deed, allocated the residential building to himself and compensated his brother with extra agricultural land. The Tribunal observed that the arrangement was not malicious and was a mutual exchange to avoid impracticable partition of the residential building. The Tribunal agreed with the assessee's counsel that it was a mutual arrangement and not a gift, reversing the decisions of the lower authorities and allowing the assessee's appeal.

The Tribunal's decision was based on the understanding that the transaction was a mutual exchange of rights between the two brothers, done to avoid the impractical partition of the residential building. The Tribunal emphasized that the arrangement was not intended to divert revenue and was a genuine exchange of property rights. The Tribunal concluded that the transaction did not fall under the provisions of section 4(1)(c) of the Gift Tax Act, as it was a mutual arrangement supported by proper consideration. The Tribunal reversed the decisions of the lower authorities and allowed the assessee's appeal, providing relief from the tax imposed on the alleged gift value.