1983 (4) TMI 101 - AT - Income Tax

Summary

Issues Involved:
1. Whether the cash payment of Rs. 50,000 on the occasion of the daughter's marriage constitutes a gift liable to gift-tax.
2. Applicability of Section 5(1)(vii) of the Gift-tax Act, 1958, regarding exemptions for gifts on the occasion of marriage.
3. Whether the payment represents a discharge of a legal obligation under Hindu law or a voluntary transfer of property.

Detailed Analysis:

1. Whether the cash payment of Rs. 50,000 on the occasion of the daughter's marriage constitutes a gift liable to gift-tax:

The assessee contended that the cash payment of Rs. 50,000 made on the occasion of the daughter's marriage was not a gift and, hence, not liable to gift-tax. The assessee relied on two Andhra Pradesh High Court decisions: CGT v. Bandlamudi Subbaiah and CGT v. Ch. Chandrasekhara Reddy. The IAC, however, concluded that the payment was a gift since it was a transfer of property without consideration in money or money's worth, and thus taxable under the Gift-tax Act, 1958. The Commissioner (Appeals) upheld this view, distinguishing the facts from the Chandrasekhara Reddy case, as the payment was made on the wedding day itself.

2. Applicability of Section 5(1)(vii) of the Gift-tax Act, 1958, regarding exemptions for gifts on the occasion of marriage:

The IAC allowed an exemption of Rs. 10,000 under Section 5(1)(vii) and an additional basic exemption of Rs. 5,000 under Section 5(2). The departmental representative emphasized that the payment of Rs. 50,000 was clearly a cash gift on the occasion of marriage and that Section 5(1)(vii) only exempts up to Rs. 10,000. The Tribunal noted that the term 'relative' in Section 5(1)(vii) includes a daughter, and thus, the exemption applies.

3. Whether the payment represents a discharge of a legal obligation under Hindu law or a voluntary transfer of property:

The Tribunal referenced the Andhra Pradesh High Court's decision in Chandrasekhara Reddy, which stated that maintenance includes reasonable expenses incident to a daughter's marriage, including presents. The High Court had observed that customary presents at marriage fall within maintenance expenses, thus not constituting a gift. The Tribunal also referred to the Calcutta High Court's decision in CGT v. Basant Kumar Aditya Vikram Birla, which held that marriage expenses, including gifts, are not liable to gift-tax. The Tribunal emphasized that the key issue is whether the payment is a voluntary transfer or a discharge of a legal obligation.

Conclusion:

The Tribunal set aside the orders of the authorities below and remanded the matter to the assessing authority to determine whether the payment of Rs. 50,000 was a usual provision for marriage in the assessee's community. If it is deemed a usual provision, it will not be considered a gift and will be exempt from gift-tax. Otherwise, the exemption under Section 5(1)(vii) will apply only up to Rs. 10,000, and the balance will be taxable as a gift on the occasion of marriage.

Final Decision:

The appeal is treated as allowed in part for statistical purposes, with the matter remanded to the assessing authority for further consideration based on the guidelines provided.