1985 (5) TMI 88 - AT - Income Tax

Issues Involved:

1. Determination of whether the transaction was a family settlement or a gift.
2. Validity of the gift without registration under Section 123 of the Transfer of Property Act.
3. Deduction of loans advanced by family members.
4. Exemption under Section 5(1)(viii) of the Gift-tax Act, 1958.
5. Valuation of the property for gift-tax purposes.

Issue-wise Detailed Analysis:

1. Determination of whether the transaction was a family settlement or a gift:

The primary issue was whether the transaction in question was a family settlement, thereby not attracting gift-tax, or a gift as deemed by the Gift-tax Officer (GTO). The assessee claimed that the property in question was subject to a family settlement due to an inability to repay loans advanced by his wife and sons. However, the GTO and Commissioner (Appeals) held that the transaction was a gift, not a family settlement. The Tribunal noted that for a family settlement, members must have some antecedent title, claim, or interest in the property, which was not present in this case. The property was shown as the individual property of the assessee from 1959-60 to 1972-73, and mere loans by family members did not create any antecedent title. The Tribunal agreed with the lower authorities that it was a case of transfer of self-acquired property without adequate consideration, thus a deemed gift under Section 4(1)(a) of the Gift-tax Act.

2. Validity of the gift without registration under Section 123 of the Transfer of Property Act:

The Tribunal considered whether the gift was valid without registration. According to Section 123 of the Transfer of Property Act, a gift of immovable property must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The transfer in this case was not registered, making it invalid as a gift. Consequently, the Tribunal concluded that the transaction could not be termed a gift within the meaning of Section 2(xii) of the Gift-tax Act, thus no gift-tax was leviable.

3. Deduction of loans advanced by family members:

The assessee contended that the amount of Rs. 73,891 advanced by family members should be deducted. The GTO had already deducted this amount while calculating the taxable gift. The Tribunal found no justification to interfere with the orders of the authorities below in allowing the debts owed at Rs. 73,891 only.

4. Exemption under Section 5(1)(viii) of the Gift-tax Act, 1958:

The assessee claimed an exemption under Section 5(1)(viii) of the Gift-tax Act to the extent of Rs. 50,000 for the gift to the spouse. The GTO allowed a deduction of Rs. 5,400, considering the value of the gift falling to the share of the wife at Rs. 53,791 and the amount of Rs. 48,391 to be repaid to her. The Tribunal upheld this deduction as correct after setting off the loan amount.

5. Valuation of the property for gift-tax purposes:

The Tribunal referred to its consolidated order dated 23-5-1985 in WT Appeal Nos. 107 to 109 of 1984, where the value of the same property was considered for the assessment years 1971-72 to 1973-74. The Tribunal adopted the same value for the property in question, agreeing with the valuation adopted by the GTO.

Conclusion:

The Tribunal concluded that the transaction was neither a family settlement nor a valid gift due to the lack of registration as required under Section 123 of the Transfer of Property Act. Consequently, no gift-tax was leviable, and the appeal by the assessee was allowed.

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