COMMISSIONER OF GIFT TAX Vs. D NAGRIRATHINAM

JUDGEMENT

(1.) This is a reference under the Gift Tax Act, 1958, and in pursuance of the direction of this Court, the Income-tax Appellate Tribunal has stated a case and referred the following questions of law for our consideration:-

(2.) The assessee is an individual and the assessment year with which we are concerned is 1988-89. The assessee is the owner of a half share in the building known as 'SRM Lodge' at E.V.N. Street, Erode which consisted of ground floor and first floor. She also owned a residential house at No.13, Pumping Station Road, Erode and a building at No.29, Pumping Station Road, Erode. The assessee's husband became an insolvent and the assessee along with her son carried on the business and acquired certain properties jointly with her son. On 9.5.1984, the assessee instituted a suit before the Subordinate Judge's Court, Erode against her son for division of the property known as SRM Lodge, Erode and the Suit ended in a compromise and a compromise decree was passed on 7.8.1984 and under terms of the compromise, the assessee was entitled to the shops in the ground floor and she was to discharge the loan of Rs.98,000/- and the son of the assessee was entitled to life interest in the lodge building situate in the first floor of the property, 'SRM Lodge' and after him, the same should go to his male children. On 16.4.1987 the assessee executed a deed of partition, at the intervention of panchayatdars, with a view to settle the dispute with her son and under the deed of partition, the assessee was allotted the property at Door No.29, Pumping Station Road, Erode absolutely. She was also granted the life interest both in the shops in the ground floor and the lodge in the first floor of the building, 'SRM Lodge' which should go to her son absolutely after her death. Under the deed of partition, the son of the assessee was allotted the property at No.13, Pumping Station Road, Erode. On 1.8.1987 the assessee along with her son executed a deed of lease in respect of the properties; (i) No.29, Pumping Station Road, Erode, (ii) Ground Floor in SRM Lodge, and (iii) No.13, Pumping Station Road, Erode in favour of the assessee's husband and her two daughters for a sum of Rs.16,000/- per annum for a period of eight years.

(3.) The Gift-tax Officer was of the view that by the partition deed dated 16.4.1987, the property at No.13, Pumping Station Road, Erode absolutely belonging to the assessee was allotted to the assessee's son which involved a gift of Rs.1,50,000/- being the value of the property. He also held that the lease amount fixed was much lower than the rent which was received during the earlier assessment years and brought the transaction to gift-tax under section 4(1)(a) of the Gift-tax Act. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) against the order of assessment made under the Gift-tax Act. The assessee pleaded that there was a family arrangement. The Commissioner of Income-tax (Appeals) held that there was no reference to the family arrangement in the deed of partition and the allotment of property in favour of the assessee's son could only be termed as a gift. He also held that the lease amount fixed was less than the market rent and in this view of the matter, he confirmed the order of the Gift-tax Officer.