DURGAIAH N Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THIS is a reference under s. 26(1) of the GT Act (hereinafter referred to as "the Act"), by the Tribunal, Hyderabad Bench, for the opinion of this Court on the following question :

(2.) FOR a proper appreciation of the scope of the reference, it is necessary to refer to the material facts that gave rise to the question : One N. Durgaiah of Secunderabad (hereinafter referred to as "the assessee") executed a registered deed of settlement on March 26, 1962, conveying the schedule mentioned immovable properties to his five sons and two daughters out of whom one of the sons was a minor in whose favour item No. 2, a house worth Rs. 64,800, was settled. The assessee, who was called upon to file a gift-tax return in respect of the value of the properties settled by him on March 26, 1962, had filed a nil return contending, inter alia, that the provisions of the Act levying tax on gifts relating to agricultural lands and buildings were unconstitutional and ultra vires and the transaction was in the nature of a family arrangement which does not amount to a taxable gift under the Act. The GTO, rejecting the contentions raised on behalf of the assessee, assessed the net value of the gifts for the asst. yr. 1962-63 at Rs. 1,20,780 and raised a demand for the payment of gift-tax of Rs. 6,662.40. On appeal to the AAC, the assessee in addition to the pleas raised by him before the GTO, contended that the gift made to Sri N. Prakash, who was a minor son at the time of the settlement, should be exempt under the provisions of s. 5(1)(xii) of the Act as it was intended for his education. The appellate authority was of the view that the transaction was a gift and the recitals in the document do not disclose the intention of the donor to provide for the education of his minor son, Prakash, and there was no other evidence to support such a plea. Hence the appeal was dismissed. On further appeal to the Tribunal, the assessee reiterated his contentions but without success. Hence the reference at his instance.

(3.) WE shall now turn to the contention of Sri Ramachandra Rao that the transaction in question is a family arrangement not exigible to tax under the Act, In order to appreciate this contention of the learned counsel, it is necessary to refer to what is meant by family arrangement. What amounts to family arrangement has been considered in several decisions. Suffice it to refer to a recent decision of the Supreme Court in Pulliah vs. Narasimham AIR 1966 SC 1836, wherein the learned judge, Subba Rao J. (as he then was), who spoke for the Court, after reviewing the entire case law on the subject, has summed up the legal position succinctly thus :