SUBBAMMAL P Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) The assessee made a gift of certain jewels belonging to her, to her granddaughter, on April 10, 1982. The value of the jewels was Rs.3,41,000/-. The assessee however filed return under S.13 of the Gift Tax Act, 1958 (the Act) declaring a taxable value of Rs.2,65,000/- claiming "deduction" of the amount of the gift tax payable, in the computation of the taxable value of the gift. Her case was that after delivering the ornaments to the granddaughter, she had addressed a letter to the donee informing her that the gift was subject to the condition that she should undertake to pay the gift tax due, as the donor had no money with her. The donee assented and agreed to pay the gift tax. The amount was therefore deductible. But the Gift Tax Officer did not accept the plea and completed the assessment on a taxable value of Rs.3,36,000/- with a gift tax liability of Rs.65,500/-. The Commissioner (Appeals) however held that because of the exchange of contemporaneous correspondence between the donor and the donee, the liability of the donee to pay the gift tax, was part of the scheme of the gift itself, that it did not arise outside it, the gift was coupled with the liability to pay gift tax, and hence the taxable amount was the value of the jewels reduced by the amount of the gift tax. The Tribunal did not accept this view, and refused to deduct the amount of gift tax from the value of the taxable gift. The assessee has thereupon filed this application to compel reference of certain questions of law, under S.26(3) of the Act, the Tribunal having refused to make reference thereof.

(2.) After having heard counsel, we are of the opinion that no referrable question of law arises in this case. The liability to pay gift tax arises only after the gift is made. The liability is on the donor under S.29 of the Act, but it may be recovered from the donee, when it cannot be recovered from the donor. The gift tax payable in respect of a gift comprising immovable property is a first charge on that property (vide S.30 of the Act), with protection for a bona fide purchaser for valuable consideration without notice of the charge. The gift in this case being only of jewels, no charge is fastened on it under S.30. The gift was not one made with any condition attached to it, except that the donee subsequently agreed to pay the gift tax. It was not an onerous or a conditional gift. All that was arranged was that the donee shall pay the gift tax, but the gift itself was not conditional to the payment being effected, nor was it defeasible if the condition was not satisfied. The gift became complete and absolute when the ornaments were delivered to the donee, the granddaughter on April 10, 1982. In the circumstances the taxable value of the gift was the market value of the gifted jewels on the date of the gift.

(3.) What the assessee claimed was deduction of the amount of the gift tax in the computation of the taxable value. But none of the provisions of the Act provides for any such deduction. What was apparently claimed was that this liability for gift tax undertaken by the donee should be taken into account in reckoning the taxable value of the gift.