1977 (1) TMI 50 - AT - Income Tax

Summary

Issues:
1. Whether the payment of insurance premium by the assessee on her husband's policies constitutes a taxable gift.
2. Whether the exemption under section 5(1)(viii) is applicable to the gift of a fixed deposit made by the assessee to her husband.
3. Interpretation of the Hindu Adoptions and Maintenance Act and its relevance to the case.
4. Analysis of the Married Women Property Act and its impact on the insurance policies in question.

Analysis:

1. The primary issue in this case was whether the payment of insurance premium by the assessee on her husband's policies could be considered a taxable gift. The Gift Tax Officer (GTO) contended that since the assessee had paid insurance premiums exceeding Rs. 50,000 in previous years, the exemption under section 5(1)(viii) was no longer applicable. The GTO treated the entire sum of Rs. 50,000 as a taxable gift, along with the insurance premium paid. However, the Appellate Tribunal disagreed, stating that the payments were not gifts but rather a way of meeting personal obligations and household expenses, as the husband and wife shared the responsibility of family maintenance.

2. The second issue revolved around the exemption under section 5(1)(viii) for the gift of a fixed deposit of Rs. 50,000 made by the assessee to her husband. The GTO had disallowed the exemption, considering the insurance premium payments. The Tribunal, after determining that the insurance premium payments were not gifts, concluded that the fixed deposit gift fell under the exemption clause, resulting in no taxable gift for the assessee.

3. The Tribunal delved into the Hindu Adoptions and Maintenance Act to support its decision. It highlighted that under section 20 of the Act, a Hindu individual is obligated to maintain their children and infirm parents. The Tribunal emphasized that the maintenance of children includes provisions for the future, such as insurance policies. In this case, the husband had taken policies for the benefit of the wife and children, making the wife's payment of insurance premiums a part of her obligation as the major income earner of the family.

4. Furthermore, the Tribunal analyzed the Married Women Property Act, specifically section 6(1), which deems a policy of insurance for the benefit of the wife or wife and children as a trust for them. This provision ensured that the funds of the policies were designated for the wife and children, not under the control of the husband. The Tribunal concluded that the insurance premiums were not gifts, as they were part of the trust for the wife, and the husband had no control over them.

In conclusion, the Appellate Tribunal allowed the appeal, determining that there was no taxable gift in this case, as the insurance premium payments were not considered gifts, and the fixed deposit gift fell under the exemption clause.