M A ISMAIL Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) Pursuant to the direction given by this Court on an application under S.26(3) of the Gift Tax Act, 1958, (in short 'the Act') the following questions have been referred by the Income Tax Appellate Tribunal, Cochin Bench, (hereinafter referred to as the 'Tribunal') for opinion.

(2.) Facts as presented by the parties are essentially as follows: M.A. Ismail (hereinafter referred to as the assessee) along with his brother Dr. Abdulla, was carrying on business on a particular basis as exhibitors of cinematographic films, under the name and style of 'Zeenath Theatre' since 1965. For that purpose the firm occupied a portion of the land belonging to their father and constructed a theatre, and equipped it with projector and other necessary equipments. Subsequently in the year 1969 their father gifted the entire property to the assessee and his brother. Value of the entire property of 68 cents of land was shown in the document at Rs. 60,000/- Dr. Abdulla expired and thereafter his wife and minor children were admitted to the partnership. Subsequently, the property was partitioned among the assessee and legal heirs of Dr. Abdulla. Assessee was allotted 38 cents of land, on which the theatre already constructed by the firm stood. Assessee transferred the said 38 cents of land to the firm showing its value at Rs. 75,000/- on such transfer of land tax was levied on the ground that there was an element of capital gain, and a sum of Rs. 15,938/- was subjected to Capital Gains Tax. The Appellate Assistant Commissioner set aside the assessment so far as levy of Capital Gains. In the meantime, the Gift Tax Officer initiated proceedings on the ground that there was an element of gift. In response to the notice, the assessee filed a 'nil' return of gift. Subsequently the partnership was dissolved on 15.4.1981. At that time all the assets and liabilities were valued. So far as the value of the land and building thereon is concerned, it was stated at Rs. 7,75,000/-. Value of the land on which the super structure was built, was agreed upon at Rs. 3,00,000/-. After deducting Rs. 75,000/- towards the assessee's share in the property, and allowing exemption under S.5(2) of the Act, the taxable gift was arrived at Rs. 2,20,000/-, and tax was levied.

(3.) The matter was carried in appeal before the Commissioner of Gift Tax (Appeals) (hereinafter referred to as the Appellate Authority), who, by his order dated 13.2.1989 upheld the assessment. A second appeal was preferred before the Tribunal, which also did not give any relief to the assessee. Application filed under S.26(1) was also rejected. Assessee moved this Court under S.26(3) of the Act for its opinion on the questions referred to above.