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TMI Blog1973 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... . 40,000 to Shri Hiralal Manilal and Rs.25,000 to Smt. Savitaben Hiralal on 2nd February, 1963. She filed a voluntary return for these gifts under the Gift-tax Act showing the assessment year as 1964-65 and the previous year as S. Y. 2019 which commenced on 29th October, 1962, and ended on 17th,October, 1963. On the basis of this return, the Gift-tax Officer carried out the assessment on the amount of Rs. 65,000. The assessee contended before the Gift-tax Officer that the year of assessment for both the gifts should be the year 1963-64 and not 1964-65. She, however, failed in this contention before the Gift-tax Officer, and, hence, took the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial year. According to the Tribunal, this would be so even if for other sources of the donor's income the accounting period is the Samvat year. Being aggrieved by this decision of the Appellate Tribunal, the department has preferred this reference in which the above question is referred to us for our opinion. So far as the Gift-tax Act is concerned, the expression " previous year " is defined in section 2 thereof as under : " 'Previous year' in relation to any assessment year-- (a) in the case of an assessee having no source of income, profits or gains or having a source of income, profits or gains in respect of which there is no previous year under the Income-tax Act, means the twelve months ending on the 31st day of March immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered is in which of the three sub-clauses of clause (xx) of section 2 of the Gift-tax Act, the case of the assessee falls. Now, so far as sub-clauses (a) and (b) are concerned, the Tribunal ruled them out as is clear from the following excerpt from the statement of case submitted to us : " Before the Tribunal the assessee contended that the correct assessment year in his case should be 1963-64 in accordance with the provisions of the Gift-tax Act. The Tribunal referred to the definition of the 'previous year' under clause (xx) of section 2. Sub-clause (a) of clause (xx) relates to an assessee having no source of income or having a source of income but there is no previous year under the Income-tax Act. Admittedly, the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the event of earning income, and then deciding what would be the " previous year " if the assessment of that income were to be made in the hands of the donor under the Income-tax Act. The reasoning of the Tribunal is contained in the following observations : " On a plain reading of sub-clause (c) it appears to us that by a legal fiction the previous year is to be found out in respect of any gift coming under sub-clause (c) as if an assessment were to be made under the Income-tax Act. It is too well-known that the legal fiction cannot be extended beyond the purpose for which it is enacted. We must, therefore, strictly construe the legal fiction and decide as to what would be the 'previous year' by assuming that an assessment under the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under the Income-tax Act is to be made " is not correct. Assessment for gift-tax has to be made under the Gift-tax Act and not under the Income-tax Act. But for making that assessment we have to borrow the definition of the expression " previous year " as given in section 3 of the Income-tax Act if sub-clauses (a) and (b) do not apply. If this is so, " gift " cannot be treated as " income " in the hands of the donor. It is the donor who is principally liable to tax under the Gift-tax Act and the donor receives no income when he makes a gift. To hold that gift is income in the hands of the donor is to introduce a judicial fiction where the legislature has introduced none. Gift remains a gift and the only inquiry which is required to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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