1989 (5) TMI 134 - AT - Income Tax

Summary

Issues: Liability under Gift-tax Act, Transfer of property without consideration, Declaration of trust, Ownership of funds, Transfer of property to trust, Gift-tax assessment

In this case, the primary issue is the denial of liability to be assessed under the Gift-tax Act by the assessee, who is a sanyasi and the Mattadhipathi of a Mutt. The assessee received offerings, including money, from devotees, which he deposited in a bank account and later declared a trust with a portion of the funds for charitable purposes. The Gift-tax Officer treated these receipts as income of the Mattadhipathi, leading to a gift-tax assessment. The CIT (Appeals) upheld the assessment, considering it as a transfer of property without consideration. The subsequent appeal raised the question of whether the monies received belonged to the assessee and if there was a transfer of property to the trust. The revenue argued that the trust was an independent entity to which the amounts were transferred without consideration, justifying the gift-tax assessment. However, the appellate tribunal analyzed the nature of the offerings made by devotees and the declaration of trust by the assessee to determine ownership and transfer of property.

The tribunal noted that when devotees make offerings to a sanyasi, it constitutes a dedication of the property for religious purposes, which is considered a gift without the need for formal acceptance. The tribunal referred to judicial precedents recognizing the customary position of sanyasis accepting offerings for specific purposes without becoming the owners of the funds. The tribunal emphasized that the assessee merely held the funds in trust for the intended charitable purposes, and the trust deed was a vesting declaration rather than a transfer of property. Citing legal principles from previous cases, the tribunal concluded that the assessee did not own the funds and did not transfer any property to constitute a gift. The tribunal highlighted that the application of funds for charitable purposes by the assessee was expenditure, not a gift. Therefore, the tribunal annulled the gift-tax assessment, deeming it baseless and untenable, and allowed the appeal in favor of the assessee.