9911796707
TMI Blog1991 (7) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... case as found by the Tribunal are simple and not unusual. Abdul Karim Mohammed, a businessman in Cochin, executed document styled as "settlement will" gifting certain movables to the assessee-respondent in the shape of business assets valued by the Gift-tax Officer at Rs. 67,578. The document was executed on April 24, 1964 and, at the time of execution, the donor was seriously ill. He died of the illness after about six weeks. In gift-tax assessment proceedings, the assessee claimed exemption for this gift under section 5(1)(xi) of the Act which provides that a gift shall not be charged under the Gift-tax Act in respect of a gift made by any person in contemplation of death. The Gift-tax Officer rejected the claim of the assessee and brought the said amount to tax. But on appeal, the Appellate Assistant Commissioner held to the contrary. He allowed the exemption sought for on the ground that the gift was in contemplation of death, He has relied upon the circumstances under which the gift was made and the events which followed thereafter to reach his conclusion. He has described the facts and circumstances as follows : "Now, I agree with Sri Karunakaran that the absence of any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and that it was in such a state of mind that he made the settlement. The materials referred to, relied on and discussed by the Appellate Assistant Commissioner in the appellate order are sufficient enough to lead to a reasonable conclusion that the donor was, at the time of execution of the document, ill and that he expected to die shortly of his illness." The Tribunal, however, did not agree with the exemption allowed to the assessee. It has stated that the finding recorded by the Assistant Commissioner that the donor was ill at the time of gift and that he died thereafter of the illness alone is not sufficient to hold that the gift was made in contemplation of death. In order to satisfy the requirements of gift in contemplation of death, there must be two other conditions to be satisfied (i) there must be delivery of possession of the gifted movables to the donee (ii) that the gift is entitled to take effect only in the event of the donor's death and that, if the donor recovers from the illness, the property should revert to him. On the first condition, the Tribunal found on facts that there was delivery of possession of the gifted movables. On the second condition, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t gift-tax shall not be charged under the Act in respect of gifts made by any person in contemplation of death. Explanation (d) to subsection (2)] of section 5 states that "gifts made in contemplation of death" has the same meaning as in section 191 of the Indian Succession Act, 1925. Section 191 of the Indian Succession Act deals with the requirements of gifts made in contemplation of death. It reads as follows: "191. Property transferable by gift made in contemplation of death. - (1) A man may dispose, by gift made in contemplation of death, of any movable property which he could dispose of by will. (2) A gift is said to be made in contemplation of death where a man, who is ill and expects to die shortly of his illness, delivers to another the possession of any movable property to keep as a gift in case the donor shall die of that illness. (3) Such a gift may be resumed by the giver ; and shall not take effect if he recovers from the illness during which it was made ; nor if he survives the person to whom it was made." The requirements of a "gift in contemplation of death" as laid down by section 191 of the Indian Succession Act are : (i) the gift must be of movable prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not conclusive to determine the nature and validity of the gift. The party may produce evidence aliunde to prove that the donor had gifted the property when he was seriously ill and contemplating his death with no hope of recovery. These factors, in conjunction with the factum of death of the donor, may be sufficient to infer that the gift was made in contemplation of death. It is implicit in such circumstances that the donee becomes the owner of the gifted property only if the donor dies of the illness and if the donor recovers from the illness, the recovery itself operates as a revocation of the gift. It is not necessary to state in the gift deed that the donee becomes the owner of the property only upon the death of the donor. Nor is it necessary to specify that the gift is liable to be revoked upon the donor's recovery from the illness. The law acknowledges these conditions from the circumstances under which the gift is made. Reference may be made to the following passage from Halsbury's Laws of England (4th edn., vol. 20, p. 41, para 67): "There is an implied condition that the gift is to be retained only in the event of death, even though the donor does not expressly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the donor, from the particular illness, or his survival of the peril which existed at the time of the gift and in contemplation of which the gift was made. The recovery of the donor from the particular illness, or his survival of the peril which existed at the time of the gift and in contemplation of which the gift was made will of itself operate as a revocation of the gift." In the light of these principles and in view of the findings recorded by the Tribunal about the serious sickness of the donor and his state of mind at the time of making the gift in question, it can be reasonably concluded that the gift was not absolute and irrevocable. On the contrary, it will be legitimate to infer that the gift was in contemplation of death. Any other view in this case would be inappropriate. No account in this regard would be complete unless it is held that marz-ul-maut gift with which we are concerned is also entitled to exemption from gift-tax under section 5(1)(xi) of the Act, Counsel for the Revenue argues that the exemption provided under section 5(1)(xi) of the Act is not available to the assessee since section 191 of the Indian Succession Act is not applicable to a marz-ul- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the right of the heirs which attaches to the property of the mariz. And, as it is an act of bounty, it is effective so far only as the law allows and that is a third. And, being a contractual disposition, it is subject to the conditions relating to gifts, one among them being the taking of possession by the donee before the death of the donor." (Vol. 1, 4th edn., 1985. pp. 59-60). From these principles of Mahomedan law, it will be clear that the gift made in marz-ul-maut could be regarded as a gift made in contemplation of death since it has all the requisites prescribed under section 191 of the Indian Succession Act. The only limitation under the Mahommedan law is that the disposition is restricted to a third on account of the right of the heirs. A Marz-ul-maut gift cannot, therefore, take effect beyond a third of the estate of the donor after payment of funeral expenses and debts unless the heirs give their consent after the death of the donor, to the excess taking effect. Whether there is any such consent given in this case by his heirs is the subject-matter of enquiry to be made by the Tribunal. It may be stated that the second question referred to the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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