1993 (4) TMI 114 - AT - Income Tax

Summary

Issues Involved:
1. Whether the transaction of relinquishing property rights by the appellants constitutes a gift under the Gift Tax Act.
2. Whether the inclusion of gold jewelry in the computation of assessable gift was justified.

Issue-wise Detailed Analysis:

1. Whether the transaction of relinquishing property rights by the appellants constitutes a gift under the Gift Tax Act:

The appellants, daughter and adopted son of the deceased Smt. B.V. Subbayamma, executed a release deed relinquishing their 2/3rd share in immovable property in favor of their father for Rs. 1 lakh. The Assessing Officer invoked Section 4(1)(a) of the Gift Tax Act, deeming the difference between the market value of their shares (Rs. 3,38,475 each) and the consideration received (Rs. 50,000 each) as a gift. The first appellate authority upheld the view that the transaction involved an element of gift, directing the GTO to exclude the value of movable properties while computing the assessable gift.

The appellants argued that the release deed was a family settlement intended to maintain peace and harmony, not a gift. The Tribunal considered the bona fides of the transaction, noting that it was executed to satisfy the wishes of their old father and maintain family harmony. The Tribunal referenced cases like Santok Singh vs. GTO and Trustees of Mt. Mapean Trust vs. First GTO, which supported the view that bona fide family settlements do not constitute gifts. The Tribunal concluded that the transaction was a bona fide family arrangement without any element of gift, stating, "No element of gift was involved in it since it was only in the nature of a bona fide family arrangement or a family settlement."

2. Whether the inclusion of gold jewelry in the computation of assessable gift was justified:

The Assessing Officer included the value of 215 sovereigns of gold jewelry, divided among the daughter and son during Subbayamma's lifetime, in the computation of the assessable gift. The first appellate authority held that there was no element of gift involved in respect of the movable properties, including the jewelry, and directed the GTO to exclude the value of the movable properties while computing the assessable gift.

The Tribunal upheld this view, noting that the jewelry was not part of the release deed and had been divided during Subbayamma's lifetime. Therefore, the inclusion of the jewelry's value in the assessable gift was unjustified.

Conclusion:

The Tribunal concluded that the gift-tax assessments made by the GTO were unjustified and set them aside, stating, "Seen from any view of the matter, the gift-tax assessments made by the GTO against the appellants are unjustified and are liable to be set aside." Both appeals were allowed.