COMMISSIONER OF GIFT TAX Vs. ALEIXO P VELHO

JUDGEMENT

(1.) THIS is a reference under S. 26(1) of the GT Act, 1958 (referred to hereinafter as "the said Act"), made at the instance of the CGT. The questions referred to us for determination in this reference are as follows :

(2.) THE facts giving rise to this reference are as follows : The respondents assessees to this reference are Shri Aleixo P. Velho and Smt. B. G. Velho, his wife, who have been taxed as a body of individuals. The relevant assessment year for the purpose of gift tax is 1964 65. Aleixo and his wife, Smt. B. C. Velho, married under the Portuguese Civil Code and as a body of individuals made a gift of immovable properties of Rs. 5,12,411 and of movable properties of Rs. 9,00,000 in the relevant previous year. The question which arose was whether in the gift tax assessment proceedings the entire gift was to be assessed in the hands of the body of individuals or whether it had to be separately assessed in equal shares in the hands of the two spouses constituting the body of individuals. Both the GTO and the AAC took the view that the gifts were made on behalf of the communion, that is, the body of individuals, and a single assessment had to be made on the said body of individuals in that status. Before the Tribunal, to whom an appeal was preferred by the assessee, it was contended that the two spouses, constituting the body of individuals under the Portuguese Civil Code, had each a distinct and separate share in the property of that body of individuals and that, in law, they were co tenants and not joint tenants thereof. This contention of the assessee was upheld by the Tribunal, and it is from that decision of the Tribunal that the present reference has been made.

(3.) IN our view, the controversy before us is practically covered by the decisions which we propose to deal with presently. In CGT vs. Smt. R. Valsala Amma 1972 CTR (SC) 241 : (1971) 82 ITR 828 (SC) : TC35R.709, the assessee and her sister received under the will of their mother, inter alia, a cinema theatre building with machinery and another building called "police quarters". Each one of them had a half share in the properties. They gifted these buildings to their brother by means of a single gift deed, and the question was whether the assessee and her sister should be assessed in respect of the gift as individuals or as an association or body of individuals. It was held that, in law, each one of them had half right in the properties which they gifted to their brother. They were holding the property and made the gift as tenants in common. Each one must be held to have made a gift of her share of the property, though the gift was made through one single document. It was further held that the said Act does not change the general law relating to the rights in property. It merely seeks to tax the gift of property owned by a person. In view of this decision, it is clear that the contention of Mr. Joshi, learned counsel for the Commissioner, that the gift must be treated as a single gift made by a body of individuals can be upheld only if it is found that the assessees husband and wife were joint tenants of the property gifted; and, on the other hand, if it is found that, in law, each one of them, as a tenant in common, had a half share in the properties which they gifted, the gift cannot be treated as a gift made by a body of individuals, but the husband and wife must be held to have made a gift only of their respective shares in the properties which were gifted.