9911796707
TMI Blog2005 (8) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 under the Gift-tax Act, 1958?" The brief facts which are necessary for deciding this appeal are as under: It is the case of the Revenue that one Ashok Chowgule deposited an amount of Rs. 7,85,631 in Central Bank, Vasco on October 21, 1982. Before the said amount was deposited in August, 1981, 20 companies of Chowgule house were floated at Kashmir. Thereafter on October 25, 1982, a demand draft of Rs. 7,90,000 was issued by the State Bank of India, Vasco, in the assessee's name and it was made payable in SBI Bank, Kashmir. On October 30, 1982, a savings bank account was opened at State Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 judgment and submitted that in view of the aforesaid observation it was the duty of the court to examine whether a legal device had been used to avoid tax. He submitted that both the lower authorities had not taken into consideration the ratio of the said judgment and had not examined whether the transaction was in fact a colourable device to escape tax liability. He submitted that in the present case respondent No. 1 though is admittedly a non-resident Indian she was also not residing in Kashmir and had no business or interest whatsoever in Kashmir and on the contrary had interest only in Goa. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 respect of gifts made by any person-(i) of immovable property situate outside the territories to which this Act extends; (ii) of movable property situate outside the said territories unless the person- (a) being an individual, is a citizen of India and is ordinarily resident in the said territories, or (b) not being an individual, is resident in the said territories, during the previous year in which the gift is made." The section clearly contemplates grant of exemption to individuals who are not ordinarily residing in India and secondly where movable property is given by way of gift outside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai 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. In any case, even otherwise, if a person is entitled to an exemption in law and accordingly makes a plan to avoid the tax liability which he is otherwise legally entitled to it would not amount to a tax evasion. The Supreme Court in a recent case in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 has to a very large extent watered down the ratio laid down in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) and has observed that the observations made by Chinnappa Reddy, J. in the said judgment do not necessarily reflect the observations of the other hon'ble judges. The Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges/emphasis supplied) This opinion of the majority is a far cry from the view of Chinnappa Reddy J.: 'In our view the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether a provision should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.' We are afraid that we are unable to read or comprehend the majority judgment in McDowell's case [1985] 154 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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