1986 (7) TMI 185 - AT - Income Tax

Summary

Issues:
Interpretation of Married Women's Property Act in relation to an insurance policy taken for the benefit of the assessee's son. Determination of liability for gift-tax on the amount received from the insurance policy. Applicability of previous court decisions on similar cases.

Analysis:
The case involved the assessee taking an insurance policy for Rs. 50,000 under the Married Women's Property Act for the benefit of the assessee's son, with the wife appointed as the trustee. The policy was an anticipated endowment assurance policy with profit, where amounts were payable at different intervals over 15 years. The assessee received Rs. 10,000 from the policy, which was passed on to the son, leading to a gift-tax return showing a gross gift of Rs. 10,000. The GTO initially levied gift-tax, but the AAC later accepted the assessee's claim, resulting in an appeal by the revenue.

The main contention was whether the assessee was liable for gift-tax on the amount received from the insurance policy. The departmental representative argued against the exemption, while the assessee's counsel supported the AAC's decision. The tribunal considered the provisions of the Married Women's Property Act and previous court judgments to reach a decision.

The tribunal observed that a policy taken by a married person for the benefit of their wife and children falls within the ambit of the Married Women's Property Act, constituting a trust. As long as the trust remains, the policy ceases to be the property of the assessee and is not under their control. Citing court precedents, the tribunal emphasized that once a trust is created, and the assessee has no control over the policy, the question of making a gift does not arise. The amount received from the policy is intended for the son's benefit, and the assessee is obligated to pass it on to the son.

Referring to an unreported decision by the Bombay High Court, the tribunal concluded that premiums paid under Married Women's Property Act policies were not considered gifts. Applying the same rationale to the present case, the tribunal upheld the AAC's decision, stating that no gift-tax was leviable as the policy was taken for the son's benefit under the Married Women's Property Act. Consequently, the appeal by the revenue was dismissed, affirming the AAC's order.

In summary, the tribunal ruled that the insurance policy taken under the Married Women's Property Act for the benefit of the assessee's son constituted a trust, absolving the assessee from gift-tax liability on the amount received from the policy. The decision was supported by legal interpretations of the Act and previous court judgments, leading to the dismissal of the revenue's appeal.