9911796707
TMI Blog2000 (2) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of taxable gift returned and those assessed by the GTO, and relief allowed by the Commissioner (Appeals) have been for the following reasons: 4. By four Gift Deeds dated 30-3-1973, the assessee made gifts of certain properties to two donees concomitantly vesting certain property rights with the first Donee - a Private Limited Company and vesting, absolute rights to obtain certain specified sums of money with the second Donee - the Charitable Trust under each of the Gift deeds. The assessee under each of the Gift Deeds gifted certain sums lying in his credit in the partnership firm M/s. Gaekwad Real Estate Traders in which he was a partner. Thus it appears that the actionable claim was gifted to a Company and a Charitable Trust concomitantly. The Donee Company was given the possessory rights absolute, of whole of the actionable claim so gifted and the Charitable Trust was vested with the right, title and interest in certain sums that the Company should pay annually to it. Such payment to be made by the Company to the Charitable Trust is provided by the Donor - the assessee as an obligation cast upon the Company while making the gifts causing it to be an onerous gift in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,50,000 standing to (i) M/s. Gaekwad Rs. 56,677 the credit of Shri Agencies (P.) Ltd. F. P. Gaekwad with M/s. Gaekwad Real Estate (ii) Ranjitsinh Rs. 16,93,323 Traders Gaekwad 6. Rs. 10,00,000 standing to (i) Alaukik Trading Rs. 32,387 the credit of Shri and Investment F.P. Gaekwad with five Pvt. Ltd. persons (ii) Gaekwad Foundation Rs. 9,67,613 -------------------------------------------------------------------------------- The value of property gifted to the Charitable Trusts which are enjoying exemption under section 80G of the I.T. Act are claimed as exempt under section 5(1)(v) of the Gift-tax Act, 1958. The GTO however adopted the value of the respective credit balances transferred by the assessee to the Donee Companies as the value of gifts involved and declined to reduce such value by the values, if any, for the stipulations, in regard to the payments made to the Charities. According to the GTO, the stipulations in regard to the payments to the Charities were mere promise and were not existing properties. By refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of clean gift of credit balance of Rs. 30,00,000. The stipulations of payments to the Charities were accepted by the Donee Company and what is really important is that the acceptance of the terms and stipulations of the gift tax deed is recorded in the Gift Deed itself on behalf of the concerned Charities viz. Sir Pratapsinghrao Gaekwad Charities. Accordingly, the learned Commissioner (Appeals) held that the stipulations of payments to the Charities are binding on the Donee and they have been accepted as such by the Donee and the Charities and the payments stipulated for the Charities would constitute over-riding title. The Commissioner (Appeals) then proceeded to quantify the value of gift to the Charities in the Gift Deed relating to M/s. Pratap Investments (P.) Ltd. with the stipulations of payments to Sir Pratapsinghrao Gaekwad Charities. The value of gift to the Charities has been taken at Rs. 29,04,000 leaving the balance of Rs. 96,000 as value of taxable gift to the Company and it is mentioned in the Gift Deed that stamp duty is paid on that basis. In support of such valuation the assessee has filed a Valuation Report dated 21-4-1973 from Shri P. B. Agashe. In the said va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pandit who gave the report as under: "Shri Pandit fixed the value of charitable portion at Rs. 27,37,127, leaving the balance of Rs. 2,62,873 as the portion of taxable gift to the Company. To the main report, he gave an addendum in the following terms : 'I hereby certify that the value of the gift assuming that no income is paid during the first five years, would work as Rs. 18,86,186'." Thereafter, it appears that the assessee sought more time for filing further Valuation Report and it did file the Valuation Report dated 9-9-1982 from Shri V. H. Vora. According to that report the value of gift to the Charities came to Rs. 29,27,381 and the taxable gift to the company came to Rs. 72,619. After the receipt of this report, the Commissioner (Appeals) required the assessee to produce Mr. V. H. Vora to find out the basis of his report and as to why, although he has referred to the report of Shri K. A. Pandit, he has not given any basis for ignoring the report of Shri Pandit. For some reasons or the other, Shri V. H. Vora was not produced before the Commissioner (Appeals) and the learned Commissioner (Appeals) thereafter proceeded to dispose of the appeal on merits taking into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of values determined. On the other hand, Shri K. A. Pandit has proceeded directly to determine the value of the gift to charities and in his report he has given more detailed reasoning and the precise formula which he had adopted for determining that value. The learned Valuers, Shri V. H. Vora has in the preamble of his report stated that he has seen the report of Shri K. A. Pandit. In spite of this he has not tried to indicate what is wrong with the report of Shri K. A. Pandit. After merely observing that he has seen the report of Shri K. A. Pandit he has proceeded to bring in his own theories and views. He could have and should have, in my opinion, indicated how and why he did not agree with the report of Shri Pandit. As indicated earlier, in my opinion, the basic approach adopted in Shri Pandit's report is preferable in so far as he has proceeded to determine the value of the gifts to the Charities rather than follow the circuitous way of determining the present market value of the gift to the main donee. Apart from this basic approach, it is pertinent to note that Shri K. A. Pandit's report is more detailed and more precise even to the extent of reasoning being given for each a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- Rs. 1,53,106 --------------- These amounts were due to the assessee for more than three years and these were written off by order dated 7-3-1973 by the assessee by passing Huzur Order dated 7-3-1973. The GTO however, held that this writing off tantamounted to gift and he included these two sums also in the value of taxable gift. The learned Commissioner (Appeals) upheld the action of the Assessing Officer by observing in para-12 of the impugned order as under : "12. The only other dispute is about the following two amounts : (i) Amount due from Mr. Ranjitsingh Gaekwad Rs. 36,314 (ii) Amount due from H. H. Maharani Padmavatidevi Rs. 1,16,792 ----------------- Total Rs. 1,53,106 ----------------- To appreciate the point, it would be better to reproduce the relevant Huzur Order dated 7-2-1973 : No. 39/1972-73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the previous year relevant to the assessment year when the various amounts were gifted to the respective companies, the gifts were made solely to charity and hence the said gifts were exempt from the gift-tax under the provisions of section 5(1)(v) of the Gift Tax Act. The ld. AR of the assessee further submitted that the Commissioner (Appeals) ought to have held that inasmuch as in the relevant previous year the Companies to whom the gifts were made did not have any beneficial interest in the said properties or the income thereof, the entire amount of gift was exempt under section 5(1)(v) of the Act.7.1 The learned AR of the assessee further submitted that the Commissioner (Appeals) has misconstrued the provisions of clause 3(iii)(c) of the Deed of Gift dated 30-3-1973, in favour of Pratap Investment P. Ltd. and that the effect and construction of the said clause read with clause 3(i)(a) is that the entire income which was received by the said Company (viz. Pratap Invs P. Ltd.) for the initial period of 5 years should be paid over to Sir Pratapsinghrao Gaekwad Charities (which is admittedly a charitable trust which is exempt under section 11 of the Act) subject to a maximum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner (Appeals) erred in concluding that the value of the gift to public charities was only Rs. 84,87,837 and not as claimed by the appellant in his return of gift-tax and has further erred in holding that the total value of these taxable gifts in question amounted to Rs. 50,12,163 as worked out by him in the annexure to the order under appeal.7.7 The ld. AR of the assessee further submitted that the Commissioner (Appeals) erred in interpreting the provisions of paragraph 3(iii)(c) of the Gift Deed and has further erred in holding that the Gift Deed itself authorised the Donee Company not to pay any amount in certain years and that this aspect could have been anticipated or taken into account for the purpose of valuation on the date on which the gift was made.7.8 The ld. AR further submitted that the Commissioner (Appeals) has further erred in interpreting clause 3(iii)(c) and has erred in taking into account subsequent events and developments for the purpose of adjudicating upon position as obtained on the date of execution of gift deed.7.9 The ld. AR further submitted that the Commissioner (Appeals) has further erred in drawing unwarranted inference from various aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Commissioner (Appeals) is unwarranted on facts, against the evidence of record and in the absence of any legal evidence adduced by the Revenue in rebuttal, the assessment ought to have been made on the basis of return of gift submitted by the assessee.7.12 As regards the other two gifts of Rs. 36,314 to Shri Ranjitsingh Gaekwad and Rs. 1,16,792 to H. H. Maharani Padmavatidevi, the learned AR of the assessee submitted that the Commissioner (Appeals) erred in confirming the finding of the GTO and the documentary evidence relied on by the assessee is not properly appreciated and the addition of Rs. 1,53,106 is required to be deleted.8. The learned DR strongly relied on the order of the GTO and submitted that the Commissioner (Appeals) has erred in law and on facts in acceptingthe assessee's contention that by virtue of Gift Deeds there were two Donees, the first Private Limited Company and the second Charitable Trust. It was pleaded that the gift to the so called Charities was a mere promise and in fact no amount was intended to pass on to the Charities. It was submitted that the Commissioner (Appeals) has erred in holding that the discounted value of the amount payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envisages deemed gift. The deemed gifts are the items which would not be gift in the General Law but would be regarded as gift for the purpose of Gift-tax Act. Though the first part of the definition of gift in clause (xii) of section 2 of the Gift-tax Act does talk of existing, movable and immovable properties but it also specifically lays down that the items of deemed gift covered by section 4 would also be regarded as gift under the Gift-tax Act. Many acts and transactions which do not amount to giftunder the Transfer of Properly Act, amount to gift under the Gift-tax Act because the concept of gift under the Gift-tax Act is much wider. In the present case, prima facie clause (c) of sub-section (1) of section 4 of the Gift-tax Act would be relevant but we need not be, for the purpose of the case before us, be very specific and precise about it and suffice it to say that in case if the owner of certain property were to stipulate to pay income of that property for a number of years to some relation of his by charging the stipulated payment for stipulated period on the property itself as first charge, the Department would attempt to levy gift tax arising from the said covenants an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll for those 55 years for which the payment to Charities subsists and therefore they have valued the gift to the principal donee by taking the present value of Rs. 30 lakhs which will be available to PratapsinghInvestment P. Ltd. after 55 years without any encumbrances. However, what is required to be done is the determination of the market value of the gift element to the Charities which is the approach adopted by Shri K. A. Pandit and to this extent we agree with the finding of the Commissioner (Appeals). However, the Commissioner (Appeals) has further opined that the effect of clause 3(iii)(c) is also required to be taken into consideration for valuation and since at the time when the Commissioner (Appeals) passed the order for about 5 years practically very little payment (Rs. 5,099.61) have been made by the principal donee i.e., Pratapsingh Investment P. Ltd. to the Charities in the first five years from the date of gift and accordingly the Commissioner (Appeals) called for a valuation report from Shri K. A. Pandit on the assumption that no payment was required to be made by the principal donees to the Charities for five years and then he calculated the net value of gift to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was bona fide. In the case before us both the persons viz. Shri Ranjitsingh Gaekwad and H. H. Maharani Padmavati Devi are brother and wife of the assessee and both of them are Income-tax and Wealth-tax assessees and it cannot be argued that they are not in a position to repay the debts to the assessee. The Huzur order date 7-2-1973 passed by the assessee late Maharaja Shri Fatehsingh Gaekwad which has been extracted by the Commissioner (Appeals) in para 12 of the impugned order which we have also reproduced at page 9 of this order, do not give any reason as to why the amount due from Shri Ranjitsingh Gaekwad and H. H. Maharani Padmavati Devi were written off. On the other hand, item No. 1 in the order referred to above indicates that the amount of Rs. 1,25,000 due from Maharaja Fatehsingh Museum Trust was treated as donation by the assessee and as such it is perfectly justified to hold that the other two amounts should also be treated as donations/gifts in terms of section 4(1)(c). Accordingly we will uphold the order of the Commissioner (Appeals) in this regard. 2. In the result, the appeal filed by the revenue is dismissed and the appeal filed by the assessment year is partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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