1979 (5) TMI 97 - AT - Income Tax

Summary

Issues:
1. Whether the transfer of Rs. 30,000 to two daughters by the head of a Hindu Undivided Family (HUF) constitutes a gift for taxation purposes.
2. Whether the transfer was made without consideration or in discharge of an obligation.

Detailed Analysis:

Issue 1:
The appeal before the Appellate Tribunal ITAT Madras-B challenged the order of the AAC of GT, Madurai Range, which held that the transfer of Rs. 15,000 each to the two daughters of the HUF did not amount to a gift. The dispute arose when the Income Tax Officer (ITO) issued a notice to the head of the HUF regarding the transfer and assessed it as a taxable gift. The HUF contended that the transfer was made in discharge of its obligation to maintain, educate, and perform marriages of the daughters, hence not constituting a gift. The ITO disagreed and assessed the transfer as a gift, leading to an appeal by the HUF to the AAC, who ruled in favor of the HUF based on a decision of the Andhra Pradesh High Court.

Issue 2:
The main argument in the appeal was whether the transfer of Rs. 30,000 to the daughters should be considered a gift for tax purposes. The authorized representative of the HUF argued that the transfer was made in discharge of the obligation to provide for the daughters' expenses, thus not constituting a gift. However, the departmental representative contended that based on a decision of the Madras High Court, such a transaction should be treated as a gift. The Tribunal found that the transfer was made by the head of the HUF from his separate properties and not by the HUF itself, thereby concluding that the transfer did not amount to a gift. As a result, the Tribunal upheld the AAC's decision to dismiss the appeal and cancel the assessment made by the ITO.

In summary, the Appellate Tribunal ITAT Madras-B upheld the decision that the transfer of Rs. 30,000 to the daughters by the head of the HUF was not a gift for taxation purposes, as it was made from his separate properties and in discharge of an obligation, rather than without consideration. The Tribunal dismissed the appeal and cancelled the assessment made by the ITO, affirming the ruling of the AAC.