1969 (5) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Whether there was any taxable gift under section 2(xii), section 2(xxiv), or section 4(c) of the Gift-tax Act in respect of the assessee agreeing not to claim a share in the partial partition of 1,320 ordinary shares of Indian Dyestuff Industries Ltd.

Issue-wise Detailed Analysis:

1. Taxable Gift under Section 2(xii) of the Gift-tax Act:
The court examined whether the assessee's agreement not to claim a share in the partial partition of 1,320 shares constituted a "gift" under section 2(xii) of the Act. Section 2(xii) defines "gift" as the transfer of any existing movable or immovable property voluntarily and without consideration. The court noted that shares are considered movable property and analyzed whether the assessee had any interest in the shares prior to the partition. It was concluded that under Hindu law, the assessee had no pre-existing right to the shares before the actual partition by metes and bounds. Therefore, there was no transfer of property, and no gift occurred under section 2(xii).

2. Transfer of Property under Section 2(xxiv) of the Gift-tax Act:
The court considered whether the assessee's actions constituted a "transfer of property" under section 2(xxiv), which includes any disposition, conveyance, assignment, settlement, delivery, payment, or other alienation of property. The court reiterated that the assessee had no interest in the shares prior to the partition, and thus, there could be no disposition or alienation of property. Consequently, the court held that there was no transfer of property within the meaning of section 2(xxiv).

3. Provisions of Section 4(c) of the Gift-tax Act:
Section 4(c) deems certain actions, such as the release, discharge, surrender, forfeiture, or abandonment of any debt, contract, or other actionable claim or interest in property, as gifts if not bona fide. The court analyzed whether the assessee's agreement not to claim a share fell within these provisions. It was determined that the assessee had no actionable claim or interest in the property before the partition. Moreover, the Tribunal found that even if the assessee held some interest, her decision was bona fide. Therefore, section 4(c) was not applicable.

Conclusion:
The court concluded that there was no taxable gift under section 2(xii), no transfer of property under section 2(xxiv), and the provisions of section 4(c) were not attracted in this case. The question was answered in the negative, in favor of the assessee, and against the revenue. The Commissioner was ordered to pay the costs of the reference to the assessee.