1994 (11) TMI 162 - AT - Income Tax

Diversion By Overriding Title, Gift Tax, In Part, Interest In Firm, Partnership Firm, Share Income, Tax Authorities

Summary

Issues:
Exclusion of share income from taxable income due to gift by assessee to another entity.

Analysis:

1. The appeal pertains to the assessment year 1982-83 and focuses on the exclusion of share income from the assessee's taxable income. The assessee had gifted a portion of her share in M/s Munjal Sales Corporation to M/s Thakur Devi Investments Pvt. Ltd. The gift was accepted by the donee, and other partners of the corporation also consented to the transfer.

2. The Gift-tax Officer computed the taxable gift at a higher amount than declared by the assessee, leading to a dispute. The Assessing Officer initially assessed the entire share income from M/s Munjal Sales Corporation in the assessee's hands, but the CIT(A) later accepted the contention that the share income gifted to M/s Thakur Devi Investments Pvt. Ltd. should not be included in the assessee's taxable income.

3. The Departmental Representative relied on a previous Tribunal decision against the assessee in a similar case, arguing that there was a diversion by an overriding title. However, the assessee's counsel contended that the previous decision was based on a concession made by the counsel and should not prejudice the current appeal.

4. The assessee's counsel cited relevant case laws to support the claim that the share income had been validly gifted and diverted by overriding title to the donee entity. The Tribunal analyzed the gift deed, partner confirmations, and other details to conclude that the gift was valid, and the share income should be excluded from the assessee's taxable income.

5. The Tribunal held that the provisions of section 60 of the Income-tax Act were not applicable in this case, as the gift was valid and accepted by the department. The overriding title created in favor of the donee entity divested the assessee of the gifted share income. Section 29 of the Indian Partnership Act was deemed not to interfere with the assessee's claim.

6. The Tribunal distinguished the facts of the present case from previous decisions cited by the Departmental Representative, emphasizing that the gift was valid and the share income had been effectively diverted to the donee entity. Considering all facts and circumstances, the Tribunal upheld the CIT(A)'s decision to exclude the share income from the assessee's taxable income.

7. Consequently, the appeal was dismissed, affirming the exclusion of the share income derived from the gift made by the assessee to M/s Thakur Devi Investments Pvt. Ltd.