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TMI Blog2005 (8) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the provisions of the Gift-tax Act. - - - - - Dated:- 2-8-2005 - Judge(s) : S. S. PARKAR., V. M. KANADE. JUDGMENT The judgment of the court was delivered by V.M. Kanade J. - The Revenue is challenging the judgment and order passed by the Income-tax Appellate Tribunal which has confirmed the order passed by the Deputy Commissioner of Income-tax (Appeals) and has held that respondent No. 1 was not liable to pay gift-tax and her case was exempted under section 5(1)(ii). The appeal was admitted by this court and the following substantial question of law was framed: "A. Whether the gifts made in Kashmir by the assessee a nonresident of India, out of the money transferred from other part of the country, is exempted from tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bonds and thereafter exemption was claimed in the return of income for the assessment year 1983-84. Learned counsel appearing on behalf of the appellant submitted that the aforesaid transaction of gift was a colourable transaction which had been resorted to solely for the purpose of avoiding tax. He submitted that it was open for the court to gather from the circumstances the real nature of the transaction and to draw inference whether the said transaction was made with an intention to escape tax liability. He relied on a judgment of the Supreme Court in the case of McDowell and Co. Ltd. v. CTO reported in [1985] 154 ITR 148. He invited our attention to the observation made by Justice Chinnappa Reddy who had given a separate concurring ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) had been overruled by the Supreme Court in the case of Union of India v. Azadi Bachao Andolan reported in [2003] 263 ITR 706. He also submitted that this case was also further directly covered by the judgment of the Gujarat High Court in the case of CGT v. Dipak A. Sheth reported in [2002] 254 ITR 235. He also relied on a judgment of the Delhi High Court in the case of CIT v. Antartica Investment P. Ltd. reported in [2003] 262 ITR 493. In our view, it is not possible to accept the submission made by learned counsel appearing on behalf of the appellant. Section 5(1)(ii) reads as under: "S.5. Exemption in respect of certain gifts.-(1) Gift-tax shall not be charged under this Act in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was competent to lift the corporate veil and to examine whether the transaction or the device is to evade tax. In our view, it cannot be said that the said transaction is a colourable device for the purpose of avoiding gift-tax. A concurrent finding has been recorded by both the lower authorities that the amount lying in the account of respondent No. 1/assessee in Vasco was transferred by demand draft to her account in Kashmir and there she had made a gift to 5 trusts in Kashmir. Respondent No. 1 being a non-resident of India and permanently residing in Dubai would have very well given the gift in Dubai where the gift is not taxable. It is, therefore, not possible to come to a conclusion that this was a colourable device for avoiding tax. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphatically as the British courts have done and to dissociate ourselves from the observations of Shah J., and similar observations made elsewhere', it does not appear that the rest of the learned judges of the Constitutional Bench contributed to this radical thinking. Speaking for the majority, Ranganath Mishra J. (as he then was) says in McDowell's case [1985] 154 ITR 148, 171 (SC): 'Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k transfer form duly signed by the donor. In the present case, the shares of respondent No. 1 were transferred by her to the 3 companies in Kashmir. A share is a movable property and, therefore, would also be covered under the provision of section 5(1)(ii). Respondent No. 1 having transferred the shares in Kashmir would also be squarely covered within the exemption granted by section 5(1)(ii) of the Gift-tax Act. The gift of shares was made pursuant to an agreement executed at Kashmir whereby the assessee/respondent No. 1 herein sold her 12,340 equity shares to the 3 companies in Kashmir. Both the lower authorities in our view, have not committed any error in coming to the conclusion that both the transactions were exempted under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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