1988 (3) TMI 126 - AT - Income Tax

Business Expenditure, Development Allowance, Expenditure Incurred, Fixed Assets, Written Down Value

Summary

Issues Involved:
1. Whether the transfer of Rs. 1 lakh by the assessee to her daughter constituted a gift under the Gift-tax Act.
2. Whether the transfer of Rs. 1 lakh was an expenditure in connection with the marriage of the daughter under the Hindu Adoptions and Maintenance Act.
3. The relevance of the daughter's financial independence in determining the nature of the transfer.

Issue-wise Detailed Analysis:

1. Whether the transfer of Rs. 1 lakh by the assessee to her daughter constituted a gift under the Gift-tax Act:

The assessee initially filed a return of gift showing a taxable gift of Rs. 95,000 but later revised it, claiming no gift was made. The transfer of Rs. 1 lakh to her daughter was through a cheque accompanied by a letter stating it was for marriage expenses. The authorities did not accept the revised return, leading to this appeal. The Tribunal noted that the transfer of money, conceived initially as a gift, was later retracted based on advice that it could not be termed as a gift under the Gift-tax Act. However, the Tribunal held that the transfer of Rs. 1 lakh was indeed a gift as it conferred absolute and unfettered ownership over the money to the daughter. The Tribunal emphasized that merely setting apart money does not discharge the legal obligation of meeting marriage expenses, thus classifying the transfer as a gift assessable under the Gift-tax Act.

2. Whether the transfer of Rs. 1 lakh was an expenditure in connection with the marriage of the daughter under the Hindu Adoptions and Maintenance Act:

The assessee argued that under the Hindu Adoptions and Maintenance Act, an unmarried daughter is entitled to maintenance, including marriage expenses. The Tribunal agreed that parents are under a legal obligation to meet marriage expenses but distinguished between incurring expenditure and providing money for future expenses. The Tribunal found that the marriage was not imminent, and the money was transferred without any precondition, making it a gift rather than an expenditure on marriage. The Tribunal noted that the obligation to meet marriage expenses is contingent and cannot be discharged by merely transferring money well in advance of the marriage. Therefore, the transfer did not qualify as an expenditure in connection with the marriage under the Act.

3. The relevance of the daughter's financial independence in determining the nature of the transfer:

The Departmental Representative argued that the daughter had sufficient resources and was not dependent on the mother, referencing her wealth and income. The Tribunal found this contention of little relevance, stating that the obligation of a parent is both legal and moral. The affluence of the child would only be relevant in a legal dispute over maintenance but does not change the nature of the expenditure incurred by the parent. The Tribunal maintained that the transfer of Rs. 1 lakh was a gift, irrespective of the daughter's financial independence.

Conclusion:

The Tribunal upheld the orders of the authorities below, concluding that the transfer of Rs. 1 lakh by the assessee to her daughter was a gift assessable under the Gift-tax Act and not an expenditure in connection with the marriage of the daughter. The appeal was dismissed.