1969 (3) TMI 13 - HC - Income Tax

Gift tax - partial partion of famility - at time of partition provision was made in the name of the karta s wife for payment of a sum of Rs. 50,000 to be expended by her at her discretion - Tribunal was right in law in holding that it was not a gift within the meaning of s. 2(xii) r/w s. 2(xxiv) of the GT Act

Summary

Issues:
1. Interpretation of a provision in a partition deed for payment of Rs. 50,000 to the wife of the karta of a joint family under the Gift-tax Act, 1958.

Analysis:
The High Court of Madras, comprising Judges Veeraswami and Ramaprasada Rao, delivered a judgment on the interpretation of a provision in a partition deed regarding the payment of Rs. 50,000 to the wife of the karta of a joint family under the Gift-tax Act, 1958. The Tribunal's opinion was upheld, emphasizing whether the payment constituted a gift dutiable under the Act. The key question was whether the provision made in the partition deed was intended for the maintenance of the karta's wife or if it amounted to a gift as per the relevant sections of the Gift-tax Act. The family in question decided on a partial partition on February 8, 1959, where assets worth Rs. 5,78,818 were divided, with a provision of Rs. 50,000 allocated to the karta's wife for her discretionary expenses. Additionally, Rs. 10,000 was set aside for the daughter's marriage expenses. The Tribunal concluded that the payment to the karta's wife was for consideration, aligning with her right to maintenance from the family property. The Court rejected the revenue's argument that the payment should be construed as a gift, highlighting the wife's entitlement to maintenance from the joint family property due to her status within the family. The Court emphasized that the payment was made in recognition of her right to maintenance, even though the exact extent of this fulfillment was not specified in the partition deed. The Tribunal's decision was supported by the terms of the partition, including the provision for the daughter's marriage expenses, indicating that the payment to the wife was not a gift but consideration for her maintenance rights.

Continuing the analysis, the Court addressed the argument concerning Section 2(xii) of the Gift-tax Act, which defines a gift as a transfer of property for consideration in money or money's worth. The revenue contended that the consideration for the payment to the karta's wife was not in money or money's worth. However, the Court disagreed, stating that the family's obligation to maintain the wife could be equated to money or money's worth. The concept of "money's worth" was interpreted broadly to encompass obligations that could be converted into monetary terms eventually. Therefore, the payment of Rs. 50,000 was deemed to discharge part of the family's obligation to maintain the karta's wife, constituting consideration in money's worth as per the provisions of the Gift-tax Act. Ultimately, the Court ruled against the revenue, upholding the Tribunal's decision and awarding costs to the respondent. Counsel's fee was fixed at Rs. 250.