RAM MURTI MALHOTRA Vs. GIFT-TAX OFFICER.

JUDGEMENT

(1.) PER Shri Prakash Narain, Accountant Member - A complicated, though an interesting question of law and interpretation of document arises in this case. The assessee is an HUF whose karta is Shri Ram Murti Malhotra besides Shri Malhotra, the family consisted of his wife Smt. Motia Rani Malhotra, their Major Sons, Shri Satya Pal Malhotra, Shri Naresh Chandra Malhotra, Shri Subhash Chandra Malhotra, Mahesh Chandra Malhotra and two minors master Rakesh Chandra Malhotra and Kumari Sareeta Malhotra. The HUF filed a return of Gift -tax for the assessment year 1977 -78 showing the value of gift at Rs. 50,000. It was, however, claimed as exempt under Sec. 5(1) of the Gift -tax Act, 1958 (the Act). It was subsequently clarified that the exemption was claimed under clause (viii) of Sec. 5(1). According to this clause of Sec. 5(1), Gift -tax shall not be charged in respect of gifts made by any person to his or her spouse, subject to a maximum of Rs. 50,000 in the aggregate in one or more previous year. It was the claim of the assessee that since the gift was made by Shri Ram Murti Malhotra to his wife, Smt. Motia Rani Malhotra, it was exempt from tax under the above section.

(2.) THE GOT examined the matter. He went through the gift deed itself and held that in this case the gift was made by the karta Shri Ram Murti Malhotra for and on behalf of the assessee -HUF, though with the concurrence of other members of the family and coparceners and, therefore, it did not earn exemption under Sec. 5(1)(viii). On behalf of the assessee reliance was placed on the decision of the Andhra Pradesh High Court in Jana Veera Bhadrayya v/s. : [1966]59ITR176(AP) . The GOT, on the other hand, relied on a later decision of the Punjab and Haryana High Court in CGT v/s. Harbhajan Singh and Sons, [1979] 119 ITR 542. He finally held that the sum of Rs. 50,000 was liable to tax. After allowing the statutory deduction of Rs. 5,000, he subjected the balance of Rs. 45,000 to the above tax.

(3.) THE assessee appealed to the AAC. It was contended before him that the ownership of the funds was not necessary for making the gift and the karta could dispose of the property of the family by any manner he liked. Before him, the counsel for the assessee relied on a decision of the Madras High Court in CGT v/s. : [1981]128ITR598(Mad) . The AAC finally held that the gift had been made by Shri Malhotra in the capacity of the karta of the family to the lady and, therefore, the latter was not entitled to exemption under Sec. 5(1)(viii).