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TMI Blog1979 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... his son, daughters, grandchildren, sons-in-law and daughters-in-law, totalling in all 23 persons, 14.80 acres. Seven of these persons, who were all majors, were required to discharge debts contracted on promissory notes amounting to Rs. 1,75,000. The assessee, in his gift-tax return claimed that this sum of Rs. 1,75,000 should be deducted from the value of the lands gifted and that the balance alone should be assessed to gift-tax. The GTO was of the view that this sum did not constitute a charge on the property gifted and that since the gift was not made subject to the discharge of the liability of Rs. 1,75,000 and since the creditors could not also proceed against the properties for the satisfaction of the debts, the gifted properties wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : In substance the meaning of the clause is that the donor wanted to make provisions for the respective donees, that he had borrowed certain monies from different parties amounting to Rs.1,75,000 and that these liabilities have to be discharged by the specified donees It is also mentioned that the respective donees who were to discharge the debts had accepted the settlement on the basis of their having to discharge the sum of Rs. 1,75,000. The question is whether the property gifted is to be valued by taking into account the obligation to discharge Rs. 1,75,000 or whether the properties could be valued without taking into account, the debts amounting to Rs. 1,75,000. Section 3 of the G.T. Act provides for charging to tax gifts made by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to discharge the liability and the other covering the properties in favour of persons who were to, or who had agreed to, discharge the liabilities. The fact that all of them have been put together in a composite document does not mean that the effect would be different from a case where there is a gift in favour of certain persons subject to their having to discharge the debts or liabilities. Under the Mahomedan law, there is no prohibition of a gift subject to a condition like this. In fact, there are instances of gifts considered to be valid under the Mahomedan law where the income from the property, for instance, has to be made over to the donor either for some time or for life. In Ali Jan v. Phaguni, AIR 1950 Pat 300, a gift of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y fiction, to the extent of the inadequecy of the consideration. In the present case, the gift to the seven donees cannot be dissociated from their obligation to discharge the liabilities. . In such a case, the gift would be without consideration to the extent of the value over and above Rs. 1,75,000. It appears to us that this case falls under the second category described above. In such a case, only the net value after adjusting the consideration would constitute the gift. Even if the gift is considered as falling under the first category, the terms of the document cannot be ignored. It is a clear case of conditional or onerous gift, and the value of the gifted property is what it would fetch in the market subject to this condition. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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