COMMISSIONER OF GIFT TAX Vs. P GOPINATHAN

JUDGEMENT

(1.) THE original petition is filed under s. 26(3) of the GT Act, 1958. The Revenue is the petitioner. Respondent is the legal heir of late P. Narayani Ammal. She was assessed in the status of HUF from the asst. yr. 1964-65 onwards. A partition was effected among the members of the family on 31st March, 1972. The family consisted of five members, viz., Narayani Ammal, her son, her daughter and two grand daughters. The properties were divided into five equal shares, the value of each comes to Rs. 80,885. The share of Narayani Ammal valued at Rs. 80,885 was relinquished in favour of the other four shares. Gift-tax proceedings were initiated against her in respect of the relinquishment. She filed a nil return to the notice under s. 16 of the Act and contended that no gift was made but only a partition. That contention was rejected and the GTO held that there was a gift within the meaning of s. 2(xii) of the GT Act and he levied gift-tax on Narayani Ammal's share of property gifted in favour of the others. The GTO further held that the document constituted a deemed gift within the meaning of s. 4(1)(c) of the GT Act. The GTO computed the value at one- fifth of the fair market price, viz., Rs. 1,24,000. The assessment was confirmed in appeal. The assessee carried the matter to the Tribunal. The claim of the assessee was allowed and it was held that no gift was involved. According to the Tribunal, the document evidences a partition by metes and bounds whereunder no separate share was allotted to the assessee. The gift-tax assessment was, therefore, found to be unjustified.

(2.) AGGRIEVED by that order the Revenue wanted a reference to this Court on four questions of law. The Tribunal dismissed the application. Hence, the original petitioner under s. 26(3) of the GT Act for a direction to the Tribunal, Cochin Bench to state the case and refer the following questions of law for a decision of this Court :

(3.) LEARNED counsel for the Revenue urges that there had been a division among the shares by the partition deed and the relinquishment takes place since then. The question whether a gift has been created or whether a deemed gift has to be inferred depends upon the interpretation of the partition deed and as such a question of law arises, according to counsel. The partition deed is not available before the Court but an extract showing some of the clauses has been produced. Pointed attention is drawn by the counsel to cls. (8) and (9). By cl. (8) the total value of the properties was estimated at Rs. 4,04,425. It is further recited that the executants of the document had agreed to divide the properties into five equal shares. The value of each share was estimated at Rs. 80,885. It was thereafter by cl. (9) that the first executant Narayani Ammal relinquished her share valued at Rs. 80,885 in favour of executant Nos. 2 to 5. Relying on these two clauses learned counsel for the Revenue strenuously contends that there has been a severance of status among the sharers. The subsequent clause by which the rights were relinquished in favour of the other executants amounts to a deemed gift according to counsel. On the other hand, it is the contention of learned counsel for the respondent that the intention to separate and the desire to relinquish are expressed in the same document and that no gift coming within s. 4 of the GT Act is contemplated. Counsel also relies on the decision of the Supreme Court reported in CGT vs. N.S. Getti Chettiar 1972 CTR (SC) 349 : (1971) 82 ITR 599 (SC). The Supreme Court held that the partition did not effect any transfer as generally understood in law and did not, therefore, fall within the definition of "gift"in s. 2(xii) of the GT Act. It was further held that partition cannot be considered to be a disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property within the meaning of these words in s. 2(xxiv) of the Act. It was also held that the partition was not a transaction entered into by the assessee 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 and, therefore, s. 2(xxiv)(d) did not apply. The Supreme Court held that in that case there was no gift by the assessee on which he was liable to pay gift-tax. The Supreme Court did not decide the question what would be the position in law if there was first a division of status in an HUF and it was followed up by a division by metes and bounds in which one of the coparceners took properties worth less than what he would be entitled to under the law. Learned counsel for the Revenue placed considerable stress on this observation of the Supreme Court leaving open the question about the position in law if there was first a division of status followed by a division by metes and bounds. That according to the counsel is the position here. By cl. (8) there has been a division in status which was followed by a division by metes and bounds among executants 2 to 5, the first executant having relinquished her rights in favour of others, argues counsel. But all the recitals in the document are to be read and understood together or as a whole in order to ascertain the intention of the parties and the nature of the transaction.