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TMI Blog1988 (9) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant that these two gifts were intended for the future education of the appellant's son, who was studying in the M.B.B.S. course during the relevant accounting year and that, therefore, the said gifts were exempt u/s 5(1)(xii) of the Act. 3. The GTO, after referring to the provisions contained in section 5(1)(xii) of the Act, held that the said provision of law emphasised the following three factors for purposes of the gift to claim exemption and that they must relate to the period ending 31-3-1983 :-- "(i) The section starts with the word 'For the education of . . .' and does not say 'For the future education of . . .' (ii) The details of 'education' or the prospectus of 'education' which the child is going to take up abroad or elsewhere should be clearly brought to the notice of the Income-tax Officer and he must be satisfied. (iii) 'The circumstances of the case', i.e., the conditions or the mode or the cost of education, the child is going to take up should also be placed before the Income-tax Officer and the same should be satisfied." 4. The GTO held that in the present case no such details, as required by the three factors, could be furnished, but that it was si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther pointed out that at the time when the gifts were made in 1983, the donee was already studying in M.B.B.S. course and it was not as if the appellant had no idea at all about the educational course of his son for which the gift was intended. The appellant further contended that the GTO was not justified in making the sweeping statement that the car was meant for personal purpose without appreciating that the car was sold and encashed only to meet the expenses of education. 6. The AAC held that the analysis of the three factors for granting exemption u/s 5(1)(xii) of the Act mentioned in paragraph 3 of the assessment order were rightly made by the GTO and that he agreed with the said analysis. He then referred to the fact that the details of higher education abroad were not placed before the GTO, and that at a time when the gift was made in 1983, the details of the proposed plan of the future education abroad of the donee, for example, the specific course to be pursued, the foreign stay or the proposed study to be prosecuted and the period of higher education abroad, etc., were not known even to the donor. The AAC held that it was also admitted that the donee completed his M.B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that there was no dispute that the donee had gone abroad in the year 1987 to pursue his further studies in Ireland and that all these facts were placed before the departmental authorities in the course of the assessment proceedings and that the inferences and conclusions drawn by the departmental authorities were based on mere suspicion, surmises and conjectures to deny the exemption claimed by the appellant u/s 5(1)(xii) of the Act. The learned counsel argued that the facts of the case clearly established that the appellant's son was pursuing his studies in medicine in Madras and that he went abroad after obtaining his M.B.B.S. Degree course in the year 1986, and that the appellant's intention in making this gift for the purpose of the education of his son was fully established and that, therefore, the appellant was entitled to the exemption claimed by him u/s 5(1)(xii) of the Act. The learned counsel, therefore, argued that the orders of the authorities below should be set aside and the appellant's claim for such exemption u/s 5(1)(xii) should be allowed. 7A. Shri V.D. Gopal, the learned departmental representative, refused the arguments of the learned counsel by poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ableness of the gift made for educational purposes, the learned departmental representative fairly stated that for pursuing higher studies in a foreign country like England and Ireland, the amount of Rs. 54,942 would hardly be sufficient and, therefore, could be held to be reasonable on the facts and circumstances of the case. 8. We have carefully considered the rival submissions of the parties in the light of the materials placed before us. 9. At the outset we must point out that there is no dispute that the appellant had made gifts to the tune of Rs. 54,942 during the previous year both and in the form of a Fiat car in favour of his son. The dispute raised by the department is only in regard to the appellant's claim for exemption u/s 5(1)(xii) of the Act in respect of these gifts as for the education of his son Shri P. Suresh Rao. 10. Section 5(1)(xii) of the GT Act reads as follows :-- "5. (1) Gift-tax shall not be charged under this Act in respect of gifts made by any person-- (xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the Gift-tax Officer as being reasonable having regard to the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift at Rs. 2,43,500 and after deducting the income from the property during the period necessary for the education of all the donees, allowed deduction of only Rs. 1,03,400 representing the total expenses calculated as allowable, and taxed the balance of Rs. 1,40,100 for the purpose of gift-tax. On appeal, the AAC enhanced the estimated amount required for the educational purposes of all the donees at Rs. 1,69,080 and also reduced the valuation of the gifted property. The AAC held that the income from the gifted properties was not an element forming part of the circumstances of the case to be taken into account for determining the reasonableness of the gift allowable u/s 5(1)(xii). There was an appeal by the Department against this order of the AAC to the Tribunal who agreed with the AAC and held that gift-tax being levied on the corpus of the gifted property, exemption also related to the corpus of the property and, therefore, the income derived from the gifted property was an irrelevant consideration. This decision of the Tribunal was confirmed by the High Court as right in law. 12. The third decision is the one reported in the case of CGT v. M.S. Rao [1976] 102 ITR 308, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, should be exempt u/s 5(1)(xii) of the Act as it was intended for his education. Dealing with this contention of the assessee, their Lordships of the Andhra Pradesh High Court held that in order to obtain the exemption u/s 5(1)(xii), the assessee must establish that the gift was made for the education of his minor son, that the intention of the donor that the gift was for facilitating or providing for the education of his children must normally be gathered from the very terms and recitals of the gift deed, and that there was no specific mention of the fact that the minor son was gifted the house property with a view to provide for his education. As nowhere in the document any such reference had been made nor the same could be gathered from the document in the said case. Their Lordships of the Andhra Pradesh High Court held that the gift was not entitled to exemption u/s 5(1)(xii) of the Act. This was the case that was relied on by the learned departmental representative in support of his contentions before us. 14. The latest decision on the subject is that of the Bombay High Court in the case of K.M. Sheth v. CGT [1988] 170 ITR 406. In that case, the assessee settled on trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education abroad." It would be noticed that the car was gifted by the appellant to his son on 29-3-1983 as could be seen from Annexure-B of Part-II of the return. He had also gifted cash of Rs. 4,942 to his son on 22-6-1982. Together these two amounted to Rs. 54,942 which was shown as the total gift made by the appellant in favour of his son during the previous year. The argument advanced on behalf of the Revenue that there was no contemporaneous evidence of a gift for educational purposes is sufficiently met by these circumstances which indicate the intention of the appellant in making these gifts to his son who was studying in the medical course at the relevant time. It would further be noticed that the claim for exemption u/s 5(1)(xii) of the Act has been made by the appellant within a period of four months of making the gift to his son in the gift-tax return filed by him which is a verified declaration and a solemn statement filed before the GTO. Therefore, this would constitute contemporaneous evidence of the intention of the donor in making the gift of his car on 29-3-1983 in favour of his son. We have already referred to the fact that the R.C. Book was transferred in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is argued on behalf of the Revenue that these were subsequent events which should not be looked into and that the facts of the case as indicated in the income-tax records of the appellant showed that the gift to the son was used as a medium to avoid tax on profits arising u/s 41(2) of the Act and capital gains on the sale of the old car of the assessee. In support of this, the learned departmental representative placed before us the depreciation statements filed by the appellant along with his income-tax returns for the three years ending 31-3-82 to 31-3-84. On the basis of these statements, Shri Gopal strenuously urged that the intention of the appellant in making the gift of the old car was not for the purpose of the education of his son but for the purpose indicated by him earlier. We are unable to accept this contention of the learned departmental representative, as we find no justification for such an inference being drawn against the appellant for the mere circumstance that he had purchased new car during the year ended 31-3-1983 and also in the next year. If once the department accepts the genuineness of the gift of the car made by the appellant to his son, the further q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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