1985 (7) TMI 181 - AT - Income Tax

Summary

Issues:
1. Interpretation of the term 'children' in section 5(1)(xii) of the Gift-tax Act, 1958.
2. Whether exemption under section 5(1)(xii) is applicable to gifts made to illegitimate children.
3. Applicability of maintenance rights to illegitimate children under Hindu law.
4. Comparison of legal definitions of 'child' in different statutes.
5. Relevance of judicial precedents in determining the rights of illegitimate children under Hindu law.

Detailed Analysis:
1. The appeal before the Appellate Tribunal ITAT Madras-C related to the assessment year 1982-83. The issue revolved around the interpretation of the term 'children' in section 5(1)(xii) of the Gift-tax Act, 1958, concerning a case where the assessee made gifts to his illegitimate daughters.
2. The Gift Tax Officer (GTO) initially denied exemption under section 5(1)(xii) for the gifts made to the illegitimate daughters, arguing that the term 'children' referred to legitimate children only. The assessee claimed exemption based on the maintenance rights of illegitimate children under Hindu law.
3. The Appellate Assistant Commissioner (AAC) accepted the assessee's argument, citing provisions from the Hindu Adoptions and Maintenance Act, 1956, and directed the GTO to grant exemption for the gifts to the illegitimate daughters. The department appealed the decision, contending that illegitimate children were not covered under section 5(1)(xii).
4. The Tribunal considered the statutory provisions and judicial precedents, including a decision of the Madras High Court, which recognized the rights of illegitimate daughters under Hindu law. The Tribunal highlighted the obligations of a Hindu to maintain both legitimate and illegitimate children, as specified in relevant laws.
5. The Tribunal also compared the definition of 'child' in the Income-tax Act, 1961, which includes step-children and adopted children but does not explicitly mention illegitimate children. However, in the absence of a specific definition in the Gift-tax Act, the Tribunal relied on the interpretation provided by the Madras High Court's Full Bench decision in Narayani Ammal's case.
6. Ultimately, the Tribunal upheld the AAC's decision to grant exemption under section 5(1)(xii) for the gifts made to the illegitimate daughters, emphasizing the changing social outlook and legislative trends recognizing the rights of illegitimate children under Hindu law. The Tribunal dismissed the department's appeal based on the interpretation of the term 'children' in the context of the Gift-tax Act, 1958.