SANATKUMAR JAYANTILAL Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'C' has referred the following question for the opinion of this Court under s. 26(1) of the GT Act, 1958 (hereinafter referred to as 'the said Act').

(2.) THE GTO, after making the necessary enquiry pursuant to the notice issued under s. 15(2) of the Act, held that these gifts cannot be treated to have been made for the education of the children, since no gift deed was executed and the children were all throughout staying with their parents, which showed that a sum of Rs. 1 lac for each child gifted by the HUF, was excessive. It was further held that the gifts were made by the HUF and not by the Karta Sanatkumar in his individual capacity and therefore, HUF not being a person within the meaning of s. 5(1)(xii) capable of having children of its own, these gifts were not exempt under that clause. Relying upon the decision of the Punjab and Haryana High Court in the case of CGT vs. Harbhajan Singh and Sons (1979) 119 ITR 542 : TC 35R.342, wherein the Court had held that the provisions of s. 5(1)(viii) of the Act were not attracted to the transaction of gift made by HUF to the spouse of the Karta, the GTO held that the analogy was applicable even in the case of children of Karta and therefore, the provisions of s. 5(1)(xii) cannot be applied to the gifts made by the assessee -HUF. The GTO held that gifts made by the HUF were therefore, liable to gift -tax under the said Act.

(3.) IN the present case, the two gifts in question were made by the HUF through Sanatkumar, who was the Karta of the HUF. The gifts were not made by Sanatkumar in his individual capacity. Therefore, the question that directly arises in context of the exemption to such gifts made for the purposes of education under s. 5(1)(xii) is, whether such a gift made by the HUF in favour of the daughters of the Karta would merit exemption under the said clause. The Tribunal has found that the gifts in question were reasonable and that the fact that no gift deed was executed, would not alter the situation. The Tribunal noted that the intention to make the gift for education purposes was spelt out from the evidence on record. We, therefore, proceed to consider whether such gifts made by the HUF can be exempted from gift -tax under s. 5(1)(xii) of the Act.