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TMI Blog1991 (11) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of valuation of this property was referred to the Valuation Cell by the WTO on 11th Feb., 1975 who estimated the fair market value of the entire property as on 31st March, 1970 at Rs. 14 lakhs. The GTO took the view that the value of the assessee's 1/4th share in the property would have been 1/4th of Rs. 13,65,000 and, therefore, the value of the 1/4th share of the deceased assessee would have been Rs. 3,41,250. Therefore, the difference between these two figures was taken as deemed gift. 2A. In appeal, the CIT(A) noticed that in the case of the cosharer Princess Yogesh Kumari, the Valuation Officer had taken the deemed gift in selection of her 1/4th share as only Rs. 19,750. He, therefore, reduced the addition to Rs. 19,750. 3. It is that addition which is challenged by the assessee before us. Firstly, it has been stated on behalf of the assessee that the difference between the market value and the apparent consideration was nominal and should have been ignored in view of the decision of the Bombay High Court in the case of CIT vs. Cawasji Jehangir Co. (P) Ltd. 1976 CTR (Bom) 181 : (1977) 106 ITR 390 (Bom). Secondly, it was pointed out that the same value i.e. Rs. 2,50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly. 5. The next point relates to the taxation of Rs. 2.5 lakhs as taxable gift. The facts in that regard are as follows : A covenant was entered into between the Government of India and the former ruler of Mewar which had merged with Rajasthan whereby the former ruler was to be paid stipulated amount of Rs. 10 lakhs only as privy purse. On his death his son the late H.H. Bhagwat Singhji was recognised as the Maharana of Mewar so as to entitle him to the privy purse. The assessee had been paying varying amounts to his family members as their "Hath Kharch" allowance. An amount of Rs. 2,50,000 was paid by the late H.H. Maharana Bhagwat Singhji to M.K. Arvind Singhji, apart from the amount of Rs. 23,404 given to him as "Hath Kharch" allowance. Thus a total amount of Rs. 2,73,404 was given to him. The GTO allowed the amount of Rs. 23,404 as per custom out of the privy purse but the additional payment of Rs. 2.5 lakhs was taxed as a gift holding that it was neither "Hath Kharch" allowance nor maintenance expenses. 6. In appeal, the CIT(A) held that the amount of Rs. 2.5 lakhs paid in addition to the "Hath Kharch" allowance could only be out of love and affection which attracted gift. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Rajasthan High Court in the assessee's own case, it was a case of gift, pure and simple. 8. The rival submissions as also the decisions referred to above have been duly considered. In terms of Art. 291 of the Constitution of India, the sums paid to a ruler as privy purse which was charged on the consolidated fund of India was to be exempt from all taxes. However, this Article was omitted by the Constitution (26th Amendment) Act, 1971. Sec. 10(19) of the IT Act, 1961, therefore, exempted the privy purse amount from the purview of income-tax. Sec 5(1)(xvi) of the GT Act, 1958, as it originally stood, also exempted gifts from privy purse for the maintenance of any relative. However, the aforesaid provisions were omitted w.e.f. 1st April, 1973 by the Ruler of Indian States (Abolition of Privileges) Act, 1971. Originally s. 5(1)(xvi) of the GT Act, 1958, prior to its omission stood as follows: (xvi) : Out of the sums, if any, guaranteed or assured by the Central Government as his privy purse if the gifts are made for (a) the maintenance of any relative dependent on him for support and maintenance; or (b) for the performance of any official ceremonies. It has also been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dequate consideration" denotes consideration other than "love and affection". When the amount of "Hath Kharch" allowance varied from the asst. yr. 1961-62, and had been allowed by the GTO, exception could not be taken to the giving of an amount of Rs. 2.5 lakhs for providing residence and for expenses of marriage and other ceremonies. It has not been disputed that expenses were incurred on marriage of M.K. Arvind Singhji and, therefore, the fact that the residence was purchased only for an amount of Rs. 1,31,408 could not be taken exception to. Having regard to all these facts, we are of the view that the taxation of the amount of Rs. 2.5 lakhs was not justified in terms of s. 2(xii) read with s. 5(1)(xvi) of the GT Act, 1958 as they stood for the assessment year in question. The addition is accordingly deleted. 9. The next ground relates to the taxation of the following amounts as gifts: (i) Rs. 25,000 paid to Princess Yogesh Kumari,, married sister of M.K. Arvind Singhji (married on 10th May, 1962) (ii) Rs.15,000 paid to Smt. Raghuraj Kumari,, married sister of late H.H. Bhagwat Singhji. The GTO took the view that they were not dependent upon the deceased assessee and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hter had not been provided enough funds for maintenance before she was married, there was nothing to prevent her from insisting on a provision after marraige. Lastly, it was said that even otherwise, when the daughter has a claim or even a semblance of claim, the family is entitled to settle the matter by an arrangement so that the honour of the family is saved. It was, therefore, held that the transfer was in discharge of the obligation or amounted to a family arrangement and, therefore, could not be held to be a gift in terms of s. 2(xii) of the GT Act, 1958. These considerations clearly apply on the facts of the present case. Therefore, in terms of the covenant and the considerations mentioned above, the amounts in question could not be taxed as gifts. Princess Yogeshwari Kumari had received gifts in varying amounts from the asst. yr. 1961-62 to the assessment year in question. The same considerations would apply in the case of Smt. Raghuraj Kumari. We, therefore, hold that these amounts were also not taxable. In the result the appeal filed by the assessee succeeds. 13. With reference to the aforementioned additions including an amount of Rs. 4,800 given by the deceased assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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