1987 (10) TMI 93 - AT - Income Tax

Summary

Issues Involved:

1. Whether the amount of Rs. 37,188 assigned to Miss Veena Aggarwal was a provision for marriage and not liable to gift-tax.
2. Whether the assignment of the Life Insurance Policy falls within the ambit of the definition of 'gift' under section 2(xii) of the Gift-tax Act, 1958.

Detailed Analysis:

Issue 1: Provision for Marriage and Gift-tax Liability

The primary contention was whether the amount of Rs. 37,188 assigned to Miss Veena Aggarwal was a provision for her marriage, thereby not liable to gift-tax.

- Assessment Stage: The assessee filed a nil taxable gift return, arguing that the amount was a provision for marriage. However, the Gift-tax Officer (GTO) framed the assessment on a gross gift of Rs. 37,188, concluding it was a gift to Miss Veena Aggarwal, not a marriage provision.

- Appellate Assistant Commissioner (AAC): The AAC held that the amount was not a gift within the meaning of section 2(xii) of the Gift-tax Act, relying on the ITAT's previous decision for the assessment year 1976-77. The ITAT had considered similar provisions for Miss Veena Aggarwal's marriage as reasonable dowry.

- Revenue's Appeal: The revenue challenged the AAC's decision, asserting that the assignment of the LIC policy and the subsequent realization of Rs. 37,188 by Miss Veena Aggarwal was not for marriage purposes but constituted a taxable gift.

Issue 2: Definition of 'Gift' under Section 2(xii) of the Gift-tax Act

The key legal question was whether the assignment of the Life Insurance Policy falls within the definition of 'gift' under section 2(xii) of the Gift-tax Act.

- Judicial Member's Perspective: The Judicial Member agreed with the AAC, stating that the assignment of the LIC policy was a pious obligation of the assessee-HUF on the occasion of Miss Veena Aggarwal's marriage. The assignment was considered a dowry present, not a gift, thus not taxable under the Gift-tax Act.

- Accountant Member's Dissent: The Accountant Member disagreed, emphasizing that the assignment was declared to the LIC as a gift for love and affection. He argued that the policy assignment was not explicitly for maintenance or marriage, and the subsequent use of the amount by Miss Veena Aggarwal did not alter its nature as a gift.

- Third Member's Opinion: The Third Member analyzed the procedural aspects and the substantive issue. He agreed with the Accountant Member, noting the absence of evidence linking the assignment to a marriage provision. He emphasized that the assignment form indicated it was made out of natural love and affection, thus falling within the definition of 'gift' under section 2(xii) of the Gift-tax Act.

Conclusion:

The Third Member concluded that the assignment of the LIC policy was a gift within the meaning of section 2(xii) of the Gift-tax Act. The appeal by the revenue was allowed, and the assessment of the assigned value of the policy as a gift was upheld, subject to recomputation by the GTO considering the provisions of section 5(1)(ix) of the Gift-tax Act, 1958. The matter was referred back to the original Bench for disposal according to the majority opinion.