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TMI Blog2005 (5) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... of the notice issued by the GTO under section 16 of the G.T. Act to the assessee and declaration made by Miss Priti Jaswantlal Shah on 14-1-1991 and page-183 of Hindu Law (Mulla) 15th Edition in support of the contentions of the assessee. 3. On careful consideration of the material made available with the Tribunal and analyzing the same in the light of the arguments advanced by both the parties, we find the admitted facts relating to the issue are as follows:- Miss Priti J. Shah is a partner in the following four firms viz., (1) M/s. Bio Distributors, Jaipur, (2) M/s. Bio Chem Pharmaceuticals, Madras, (3) M/s. Toyochem Laboratories, Bombay and (4) Biochem Pharmaceuticals Industries, Bombay. She declared to renounce the world and became "Sadhvi" under Swetambar Jain Sect and accordingly she issued a declaration on 14-1-1991 inter alia stating that she retired from the firms with effect from 31-12-1990 and the capital standing in her name till the date of her retirement shall be divided between her two brothers Shri Mayank and Shri Shreyans in equal shares. Apart from that, she also stated that other movable properties should also be divided between the said two brothers equally. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s presence of two persons that are donor and donee and there must be a document between them, then he started contending that the declaration made by Miss Priti J. Shah on 14-1-1991 is a unilateral document intimating that she is having shares in 4 firms and she is retiring from the said firms with effect from 31-12-1990 and she decided to renounce the world and became "Sadhvi" under the Swetamber Jain Sect and intimating that her properties are to be shared by her two brothers Shri Mayank and Shri Shreyans equally to be engaged by them absolutely and appointing her father as a person to settle the disputes, if any, that may arise between these two brothers in distributing the said assets between themselves. 6. It is contended by the Learned Representative of the assessee that it is nothing but amounting to a will or a document in contemplation of death which squarely falls within the exemption contained in Clause (x) and (xi) of section 5 of the Gift Tax Act, thereby he contends that it is not liable for any Gift Tax Act. Consequently he sought for up-holding the impugned order by dismissing the Department's appeal. 7. On careful analysis of the rival submissions made by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the revenue in the present appeal before us. 12. Section 5(1)(x) and 5(1)(xi) of the Gift Tax Act, which have been held to be applicable on the facts of this case, are as follows: Exemption in respect of certain gifts (5) Gift tax shall not be charged under this Act in respect of gifts made by any person .... (x) under a will; (xi) in contemplation of death; 13. The question before us then is whether the gift in question can be said to be a gift under will or in contemplation of death. The sole document on which the gift is said to be a gift under a will, or alternatively, a gift in contemplation of death, is a notarized declaration dated 14-1-1991 which is reproduced below for ready reference:- "I, Preeti Jaswantlal Shah, aged about 27 years, residing at 5/8, Avanti Apartments, Flank Road, Sion, Bombay-400 022, do hereby declare as follows:- That I have decided to renounce the world and become a sadhavi under the Swetamber Jain Sect. This act presupposes that I shall not have any worldly attachments. 1. That I was a partner in the firm of M/s. Biochem Pharmaceutical Industries (Bombay), M/s. Toyochem Laboratories (Bombay), M/s. Bharat Pharmaceuticals (Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to my mind, is nothing more than a statement of intent. The very preamble of declaration talks about Priti Jaiswal Shah's (PJS, in short) "decision" to renounce the world and become Sadhavi under the Shwetambar Jain Sect. There is no material to suggest that this decision was ever implemented. Mulla's Hindu Law, which has been relied upon by the assessee, also states that "A person does not become a sanyasi merely by declaring himself a sanyasi or by wearing clothes ordinarily worn by a sanyasi. He must perform the ceremonies necessary for entering the class of sanyasis; without such ceremonies, he cannot become dead to the world". There was no material before the CIT(A), to establish that such religious ceremonies have been performed. Yet, the CIT(A), without a question, accepts the unsubstantiated averments of the assessee and proceeds on the basis as if she had actually taken sanyas. Confidence in assessee may be desirable but it cannot justify such a blind faith, without bothering to verify even the elementary facts. As to what should CIT(A) have done in such a situation, I can do no better than to quote from Mr. N. Vittal's 'D Rangaswamy Memorial Lecture' as below: "... Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to death of the person making it and it does not create any right of the person in whose favour will is made. Once a person dies, he leaves the world forever, but a sanyasi can always come to the normal worldly life. Death is irreversible, sanyas is not. Therefore, it is only natural death which is relevant for the purposes of 'will' and not the civil death. The case before us fails on all these tests. Therefore, even if sanyas is to be taken as a civil death and even if PJS had actually taken sanyas, the transfers in question cannot be said to be under 'will'. It is altogether a different matter that neither is it a case of sanyas or civil death, nor does the exemption under section 5 come to play in the cases of sanyas or civil death. 17. The expression 'in contemplation of death' is also not defined in the Gift Tax Act but clause (d) of Explanation to section 5 specifically states that this expression, for the purposes of Gift Tax Act, shall have the same meaning as assigned to it by section 191 of the Indian Succession Act. We have to, therefore, turn to section 191 for finding out relevant meaning of this expression. Section 191 of the Indian Succession Act provides as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payer is not relevant in this context. This exception, laid down by Liftman v. Barron 1952 (2) AIR 393, and followed by the Hon'ble Supreme Court in Mangalore Chemicals Fertilizers Ltd. v. DCCT 1992 Suppl. 1 SCC 21, and Novopan India Ltd. v. CCEC 1994 (73) ELT 769 SC, has been summed up in the words of Lord Lohen as that "in case of ambiguity, a taxing statute should be construed in favour of the tax payer does not apply to a provision giving tax payer relief in certain cases from a section clearly imposing liability". The exemptions can only be available when plainly authorized by the statute. 19. I am, therefore, unable to share my brother's perception that the declaration before us, and which is the foundation of assessee's claim of exemption under section 5(1)(x) and 5(1)(xi), is "a unilateral document on the line of a will or a document made in contemplation of death (in the present case a civil death)" and that "... by the virtue of clause (x) and clause (xi) of section 5 of the Gift Tax Act, the present transaction will amount to only an arrangement made in will or any arrangement made in contemplation of death". In my considered view, the conclusion arrived at by the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 2(xii) or exempt under section 5(1)(x) and/or 5(1)(xi) of the Gift Tax Act?" The learned Accountant Member has proposed the following question:- "Whether or not, on the facts and in the circumstances of the case, the assessee was entitled for exemption under section 5(1)(x) and/or 5(1)(xi) of the Gift Tax Act?" 2. The matter was fixed for hearing first on 21-4-2005 when on request of the assessee it was adjourned to 4-5-2005. It was again fixed and arguments of both the parties have been heard. 3. The facts of the case are that one Miss Priti Jaswantlal Shah is claimed to have renounced the world and became a 'Sadhvi' under Swetambar Jain Sect on 26-1-1991. Before the above date and on 14-1-1991 she issued the following declaration:- "I Priti Jaswantlal Shah, aged about 27 years, residing at 5/8, Avanti Apartments, Flank Road, Sion, Bombay-400 022, do hereby declare as follows: That I have decided to renounce the world and became a sadhavi under the Swetamber Jain Sect. This act presupposes that I shall not have any wordly attachments. 1. That I was a partner in the firm of M/s. Biochem Pharmaceutical Industries (Bombay), M/s. Toyochem Laboratories (Bombay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of movable properties through transfer in pursuance of her declaration dated 14-1-1991. He rejected the contention of the donee (through whom assessment was being made under section 21A of the Gift-tax Act) that on renouncing the world, Miss Priti J. Shah automatically lost all her properties and her brothers took over her assets as trustees of the person who had renounced the world. These brothers did not have any legal right in the said property. The GTO charged and applied provision of section 2(xii) of the Gift-tax Act and assessed value of assets gifted at Rs. 14,54,954. He allowed deduction of Rs. 20,000 under section 15(2) and this way took total value of gifted property at Rs. 14,34,950. 4. Being aggrieved by above assessment, one of the brothers Shri Shreyans J. Shah filed appeal and contended that provision of section 2(xii) of Gift-tax Act were not applicable in this case. The appellant's contentions are recorded by the learned CGT(A) in para 2.3 of his order. His findings are recorded in paras 2.4 and 2.5 of the order. These paras are reproduced below: "2.3. The appellant has objected to this action and has pointed out that: "Appellant sister Miss Priti Shah reno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to the contrary. As Miss Priti J. Shah had renounced the world, she had only made a declaration dated 14-1-1991 to avoid any legal complication, and just because she had made a formal declaration of renouncing the world and becoming a sadhvi and also renouncing the assets held by her in favour of her two brothers. It cannot be said that the provisions of section 2(xii) and section 4 of the G.T. Act are applicable and the assets so distributed are liable to Gift-tax, when the Hindu Law describes that a person enters into a religious order, its action is tantamount to civil death and this declaration can only be taken as a declaration made in contemplation of death and the Assessing Officer, is directed to delete the addition of Rs. 14,54,954 made under the Gift-tax Act and the appellant's ground is allowed." 5. The revenue being aggrieved brought the issue in appeal before the Income-tax Appellate Tribunal raising the following effective ground of appeal:- "1. On the facts and the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the retiring partner Miss Priti Shah's relinquishing her capitals, to the tune of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Accountant Member also held that there was no material available on record to show that Miss Priti J. Shah had actually taken 'sanyas'. For the reasons given by him, the learned Accountant Member held that provisions of clauses (x) and (xi) of subsection (1) of section 5 of the Gift-tax Act were not applicable to the facts of this case. He ultimately held, "I am of the view that the relief given by the CIT(A) is to be vacated and the order of the Assessing Officer is to be restored. I order so." The aforesaid difference of opinion has been brought before me. 8. I have heard both the parties. The learned counsel for the assessee argued that the Gift-tax Officer in his order had clearly accepted that Miss Preeti Shah renounced the world and took 'Sanyas' on 26-1-1991. Her wealth was divided between her two brothers in equal share on 31-1-1991. In the above background the learned Accountant Member was not justified and even doubted that Miss Preeti Shah became a 'Sanyasin' under the relevant Jain Sect on 26-1-1991. The learned counsel fairly conceded that clauses (x) and (xi) of sub-section (1) of section 5 of Gift-tax Act were not relied upon by the assessee. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liness Sri La-Sri Shanmugha Desika Gnanasambanda Paramacharya Swamigal v. CED [1985] 153 ITR 390. He also referred to the decision of Hon'ble Supreme Court in the case of Abdul Kareem Mohd. The learned DR accordingly supported the impugned order of the Assessing Officer. 10. I have given careful thought to the rival submissions of the parties. The controversy involved in this appeal is one, which is agitated by the revenue as per ground raised and reproduced in the earlier part of this order. I shall consider the proposed orders of the learned Members in the light of ground raised by the revenue. The short question therefore involved is, whether Miss Preeti J. Shah made a taxable gift of properties within meaning of section 2(xii) of the Gift-tax Act. The learned counsel for the assessee is right in contending that the assessment order of the GTO is based on the premises that Miss Priti J. Shah renounced the world and became a 'Sanyasin' under the Jain Sect. Therefore, above matter could not be agitated and reopened before the Income-tax Appellate Tribunal. Under the Hindu Law a person who renounces the world by becoming a perfect 'sanyasi' is taken to be civilly dead. There is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of a trust in property; (b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property; (c) the exercise of a power of appointment of property vested in any person, not the owner of the property, to 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." In the case before their Lordships the assessee in a partition of immovable properties took properties of lesser value than he was entitled to under the law. The question raised before their Lordships was whether in taking lesser share in the partition, gift was made by the assessee. Their Lordships held that no transfer of property was involved in the act which could be subjected to tax. Their Lordships had occasion to consider as to what is the true import of word "Transfer of property" in section 2(xxiv) of the Gift-tax Act. It was observed as under:- "This takes us to section 2(xxiv). The opening words of the provision refer to "tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered either as "disposition" or "conveyance" or "assignment" or "settlement" or "delivery" or "payment" or "alienation" within the meaning of those words in section 2(xxiv)." It is evident from above that definition of words "transfer of property" is very wide under section 2(xxiv) of the Gift-tax Act. Words like "disposition", "conveyance", "assignment", "settlement" or "alienation of property" are used in the definition. It has been contended on behalf of the assessee that the declaration dated 14th day of January, 1991 came into operation after Miss Preeti J. Shah renounced the world on 26-1-1991 and therefore, at best it could be treated as a 'will'. The transfer of property took place post-renunciation. Thus on the date Miss Preeti J. Shah renounced the world and could be treated as civilly dead there was no transfer and the case was not covered by clause (xii) of section 2 of the Gift-tax Act. 13. On careful consideration of declaration dated 14th January, 1991 I am unable to accept above contention. In my view aforesaid declaration came into effect on 14th January and thus she transferred her movable assets in bank, actionable claims and balances with different firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defeated her desired purpose to be a true 'Sanyasin' without any worldly attachments in shape of properties etc. On the facts and in the circumstances of the case, I reject the contention raised on behalf of the assessee. 15. The other contention of the assessee that declaration dated 14-1-1991 was a 'will' is also required to be rejected. Where crucial question arises whether the declaration in question is a gift or will, one has to see whether the document becames operative immediately or would take effect on the death of the declarant. On consideration of all the tennis of the declaration, it is clear that it is a transfer in praesent. At any rate it became operative and was requested to be given effect to before Miss Preeti J. Shah had renounced the world by adopting 'Sanyas'. It was not a document, which would come into effect after renunciation. I therefore, find it difficult to treat the declaration as a 'will'. 16. In my considered opinion, under the declaration she transferred through assignment and declaration all her movable property mentioned in the declaration to her two brothers in equal shares. She made a gift chargeable to tax under section 2(xii) of the Gift- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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