COMMISSIONER OF INCOME TAX Vs. MUTHUMANICKAM V A

JUDGEMENT

(1.) THE assessee is this case is an individual. For the assessment year 1970-71, he filed a return on October 28, 1970, declaring two gift deeds, one in favour of his wife and another in favour of his daughter and valuing them at Rs. 19,925. Subsequently, on October 10, 1972, he filed a revised return with which a statement was enclosed, where in the assessee stated that he had executed two other settlements, one dated February 21, 1970, in respect of agricultural land worth Rs. 81,000 in favour of his brother's daughter, Pramodhini, aged 8 years and another dated March 4, 1970, in respect of agricultural land worth Rs. 76,000 in favour of his brother's daughter, Anuradha, aged 4 years, but they were inoperative as the donees were not prepared to accept the gifts and, consequently, there were no taxable gifts in respect of these two documents. It was also pointed out by the assessee in that statement that even though these two settlements were registered on March 30, 1970, two deeds of revocation came to be executed and registered later cancelling the earlier settlements.

(2.) THE GTO, however, did not accept the assessee's claim. He was of the view that the two settlements were validly drawn up instruments and were in force until revoked, and that the settlement deeds were registered were on March 30, 1970, though the deeds of revocation came to be drawn up on April 5, 1970, which indicated that the settlements were intended to be given effect to notwithstanding the deeds of revocation. According to the GTO, the title to the agricultural lands gifted in favour of the assessee's brother's daughters had passed to the donees, even according to the recitals in the revocation deeds. THE assessee also put forward a case before the GTO that the settlement deeds executed in favour of Pramodhini and Anuradha were in contravention of the provisions of the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, hereinafter referred to as the Land Reforms Act, and, therefore, the settlements cannot be taken to be taxable gifts. THE GTO, however, rejected the said contention of the assessee on the ground that the provisions contained in the Land Reforms Act cannot affect the levy of gift-tax. In this view, he brought to tax the two items of gifts made by the assessee in favour of Pramodhini and Anuradha and determined the total taxable gift to be Rs. 1,79,000. THE assessee took the matter in appeal to the AAC contending that the minor donees cannot be deemed to be the owners of the properties in question for the short period of six days between the registration of the settlement deeds and the execution of the deeds of revocation on April 5,1970. THE AAC agreed with the assessee and held that reading both the settlement deeds as well as the revocation deeds together, it should be taken that there should be no operative gifts which could be brought to tax. He, therefore, directed the deletion of the two amounts Rs. 81,000 and Rs. 76,000 from the total amount of the taxable gift.

(3.) ON the first question, the GTO held that notwithstanding want of gift-tax as the definition of the word "gift" in the G.T. Act does not contemplate the consent being obtained from the donees to make the gift an effective one. The AAC took a different view and he held that want of consent on the part of the donees coupled with the fact that they have taken steps to have the gift deeds revoked within a few days, would indicate that the property never passed to the donees under the gift deeds and that, therefore, there was no valid and effective gift in favour of the donees which could be brought under the G.T. Act. The Tribunal has also held that though consent is not contemplated by the definition of "gift" in s. 2(xii) of the G.T. Act, the other definitions in the Act, particularly the one dealing with donee, would indicate that consent or acceptance of Kerala High Court In CGT v. Kesavan Nair [1974] 96 ITR 365. The Tribunal has distinguished the cases relied on by the Revenue in Prince Azam Jah Bahadur v. CIT [1968] 67 ITR 757 (AP) and Vadulla Venkata Rao v. CGT . Having regard to its view on the first question, the Tribunal has has not gone into the question as to whether even if the documents are to be taken to be valid gifts, they will be hit by the provisions of the Land Reforms Act. ON that question, the AAC has held that in view of s. 22 of the Land Reforms Act, the documents have to be taken as void. Though the same two contentions that were urged before the Tribunal had been urged before us, we are of the view that even if the contention of the Revenue that notwithstanding the acceptance and consent of the donees,the settlements can be taken to be valid and effective is accepted, the second question will definitely arise as to whether the settlements are hit by the provisions of the Land Reforms Act. Therefore, we proceed to deal with the second question before we deal with the first question.