VALLI ALAGAPPAN Vs. COMMISSIONER OF GIF TAX

JUDGEMENT

(1.) SMT . Valli Alagappan, Chennai (assessee), by letter dt. 12th April, 1982, addressed to M/s M&L Investments (P) Ltd., Chennai, informed her willingness to transfer jewellery or funds or property representing the same owned by her of an approximate value of Rs. 7.50 lakhs in favour of the said company subject to the terms and conditions, viz., (i) she shall have the right to revoke the transfer after the expiry of 74 (seventy four) months from the date of transfer; (ii) if the transfer is not revoked within three months after the expiry of the said period of 74 months for any reason whatsoever, the power of revocation will lapse; and (iii) during the said period of 74 months the transfer shall be irrevocable and she shall have no right, title or interest whatsoever in or upon the said property transferred and the company shall own, enjoy the property as absolute owner and deal with the property in any manner it likes. The letter also stipulated that the transferee shall be bound to return the property after the revocation of transfer and the transferee is also given the power to change or alter or remake the property or ornaments made weight by weight. The assessee relinquished all her rights and benefits that may be considered as accruing to her during the period of 74 months. The transferee company accepted to receive the property and conveyed its acceptance to the terms and conditions by making an endorsement on the letter dt. 12th April, 1982.

(2.) THE above transfer gave rise to interesting questions under the GT Act, and the first question that arose was whether there was a gift by the transfer of property in favour of the company by the assessee and second question that arose was how the value of the transferred property should be evaluated; and if it is incapable of evaluation whether the transfer is chargeable to gift tax. The GTO held that it was a gift as the transfer had been made voluntarily and without consideration with an intent to diminish directly or indirectly the value of the transferor's property and to increase the value of the property of the company to the extent of the value of the property transferred.

(3.) WE find that the question referred to us is not happily framed as the Tribunal has not considered the question whether the transfer would amount to a taxable gift within the meaning of S. 6(2) of the GT Act. As a matter of fact, the Tribunal has remitted the matter to consider the applicability of s. 6(2) of the GT Act r/w r. 11 of the GT Rules, and we reframe the question as under :