1971 (12) TMI 7 - HC - Income Tax

This is not a case where there is such dearth of material. The document has used the word kalakshepam which definitely and undisputedly indicated the purpose of the gift. The donor at that time was advanced in age. His son was studying in an important college in the city of Madras. The word has been understood by the Tribunal as including not only the general needs of the son but also his educational needs. We are not prepared to say that the meaning attributed to the word in the context in which it was used in the document and in the circumstances in which the document was executed is wrong and we have not been shown any decisive meaning of the word kalakshepam which compel us to take a different view. - Answered in favor of assessee

Summary

Issues:
Interpretation of gift under section 5(1)(xii) of the Gift-tax Act for educational purposes.
Validity of the clarification deed executed after the assessment period.

Analysis:
The case involved a reference under section 26(1) of the Gift-tax Act, 1958, regarding an assessment for the year 1964-65. The primary issues were whether the gift made for the education of the assessee's son was exempt under section 5(1)(xii) of the Act and if the Tribunal was correct in considering a clarification deed dated August 23, 1966. The gift was a property valued at Rs. 20,000 given by Dr. C. J. Antony to his son studying in Loyola College, Madras. The Gift-tax Officer valued it at Rs. 1,05,200 after allowing exemptions. The assessee claimed exemption based on the educational purpose of the gift under section 5(1)(xii) of the Act.

The assessing authority and the Appellate Assistant Commissioner initially rejected the assessee's contention. However, a clarification deed executed after the assessment specifically mentioned that the gift was intended to meet the educational needs of the son. The Tribunal accepted this interpretation, considering the word "kalakshepam" in the deed, indicating both general and educational expenses. The Tribunal's decision was based on the understanding that the gift was made so the son wouldn't rely on the father for educational and general needs, encompassing both aspects.

The revenue contended that the Supreme Court's decision in Commissioner of Gift-tax v. Dr. George Kuruvilla should apply, emphasizing the nexus with the business for exemptions. However, the Court distinguished the present case from Kuruvilla, stating that the word "kalakshepam" clearly indicated the gift's purpose for the son's education. The Court upheld the Tribunal's reliance on the clarification deed, noting it was for clarifying terms and not a subsequent event affecting the assessment period. The Court answered both questions in favor of the assessee, emphasizing the valid educational purpose of the gift under section 5(1)(xii) and the admissibility of the clarification deed in interpreting the gift's intent.

In conclusion, the Court's judgment favored the assessee, recognizing the educational purpose of the gift under the Gift-tax Act and validating the consideration of the clarification deed in determining the gift's intent. The decision highlighted the importance of interpreting the language and context of the gift document to ascertain the donor's intentions, especially concerning exemptions under the Act.