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TMI Blog1987 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... d in question is a bona fide one and as such, it is not hit by section 4(1)(c) of the Gift-tax Act, 1958 ?" The relevant assessment year is 1973-74. By a will dated January 15, 1951, executed by Mohan Lal Sanghi, father of Smt. Ayodhya Kumari, wife of Sah Roop Narain, the assessee, the testator bequeathed his properties at Kota comprising of Brij Talkies, Mohan Kutir and Mohan Mansion in favour of Anil Kumar, son of Smt. Ayodhya Kumari, and Sah Roop Narain, while giving his daughter, Smt. Ayodhya Kumari, and her husband, Sah Roop Narain, the life interest to enjoy the income from these properties without having any right to alienate or encumber the same in any manner. For the assessment years 1963-64 to 1971-72, the assessment was completed in the case of Anil Kumar including the value of these properties treating them as his properties. It appears that an objection was taken to the failure to tax the income from these properties in the hands of Sah Roop Narain and his wife, Smt. Ayodhya Kumari. Accordingly, the Wealth-tax Officer commenced proceedings against them It then transpired that Sah Roop Narain and his wife, Smt. Ayodhya Kumari, had executed a release deed dated May 27, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from the property ; that it is not a transfer of property " as defined in section 2(xxiv) of the Act or a " gift within the meaning of section 2(xii) of the Act. The Tribunal also gave detailed reasons to hold that this act of relinquishment by the assessee and his wife is genuine with no element to indicate that it was otherwise. It was held that this action had merely accelerated Anil Kumar's right in the property as its owner and the transaction being bona fide it was not even a " deemed gift " under section 4(1)(c) of the Act. Hence, this reference at the instance of the Revenue. The contention of learned counsel for the Revenue is that the act of relinquishment by the assessee and his wife was not unilateral in character, but a bilateral act inasmuch as Anil Kumar by his conduct had accepted the same, even though execution of the release deed was merely by the assessee and his wife and not by Anil Kumar. He argued that it was a case of " transfer of property " as defined in section 2(xxiv) amounting to a " gift " as defined in section 2(xii) of the Act. He also contended that the transaction was not bona fide, since the release deed was executed merely to circumvent an ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o determine its disposition in favour of any person other than the donee of the power ; and (d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person " 4.(1) For the purposes of this Act,-... (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment (e) where a person who has an interest in property as a tenant for a term or for life or a remainderman surrenders or relinquishes his interest in the property or otherwise allows his interest to be terminated without consideration or for a consideration which is not adequate, the value of the interest so surrendered, relinquished or allowed to be terminated or, as the case ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indu undivided family of self-acquired property by a coparcener was not a gift under the Act, since it was a unilateral act which did not amount to transfer of property and it did not even require the acceptance by the other members of the Hindu undivided family. Accordingly, by the Finance Act, 1971, sub-section (2) was inserted with effect from April 1, 1972, along with the corresponding amendment in clause (xii) of section 2 to treat such a: transaction as a gift. A similar difficulty arising as a result of judicial decisions, particularly the above Bombay High Court decision led to insertion of clause (e) in sub-section (1) of section 4 and the corresponding amendment in clause (xxiv) of section 2 of the Act by the Finance Act, 1980, with effect from April 1, 1980. In our opinion, the above legislative history of the relevant statutory provisions clearly supports the conclusion that a transaction like the present one is not a " gift " as defined in clause (xii) of section 2 and it is not a " transfer of property " within the meaning of that expression in clause (xxiv) of section 2 as the provisions stood prior to the amendments made by the Finance Act, 1980, with effect from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be considered to be a " gift" as defined in clause (xii) of section 2 of the Act. It is significant that in this decision the insertion of clause (e) in subsection (1) of section 4 by the Finance Act, 1980, with effect from April 1, 1980, was referred to support this conclusion and it was added that the conclusion would have been different if section 4(1)(e) was applicable to the case. However, the relevant assessment year involved being prior to the insertion of clause (e), the benefit of clause (e) was held to be not available. It was further held that there being no finding that the release deed was not executed bona fide by the assessee in favour of her children, the same could not be treated as a " deemed gift" under section 4(1)(c) of the Act. It is also clear from these decisions that the conclusion reached by us is supported by adequate authority on the point. The decisions cited by learned counsel for the Revenue are not directly on the point and, therefore, they do not require any consideration. As already indicated, section 4(1)(c) is also not available to the Revenue because of a clear finding by the Tribunal that execution of the release deed was bona fide. Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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