1979 (5) TMI 45 - AT - Income Tax

Summary

Issues:
1. Taxability of amount paid to daughters by the Karta of the HUF under the GT Act.

Comprehensive Analysis:
The appeal involved the taxability of an amount of Rs. 90,000 paid or settled by the Karta of the HUF to his daughters under the Gift Tax (GT) Act. The GTO held that the payments made to the daughters were gifts chargeable to tax under section 3 of the GT Act. The GTO specifically noted that payments to married daughters after their marriages did not qualify for exemption under section 5(1)(vii) of the Act. Additionally, payments to unmarried daughters were deemed not made on the occasion of their marriages, thus not eligible for exemption. The GTO assessed the taxable gifts to amount to Rs. 90,000, neglecting to provide the basic exemption of Rs. 10,000.

Upon appeal, the assessee contended that the transactions were not gifts but part of a family settlement executed by the Karta. The settlement was made for the daughters' maintenance, education, and other needs, not as gifts. However, the AAC dismissed this argument, stating that the settlement was executed out of fear for the daughters' future after the Karta's demise, confirming the taxability of the transfers as gifts.

The Tribunal reviewed the family settlement deed executed by the Karta on Jan 23, 1965, which allocated specific amounts to each daughter for various purposes like maintenance, education, and marriage. The Tribunal emphasized that the entire document should be considered to understand the Karta's intention fully. It was noted that the amounts earmarked for unmarried daughters were for their maintenance and other expenses, not gifts.

Regarding the settlement for married daughters, the Tribunal highlighted that the payments were referred to as their share in the partition award and under the Hindu Succession Act, daughters are entitled to a share in the property. The Tribunal concluded that these payments were transfers in lieu of their share, not gifts, and hence not taxable under the GT Act.

In light of the above analysis, the Tribunal allowed the appeal, setting aside the assessment and ruling that the assessee was not liable for tax on the gifts made by the Karta, as they did not qualify as taxable gifts under the GT Act.