VADULLA VENKATA RAO Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THIS is a reference by the Income-tax Appellate Tribunal, Hyderabad, under Section 26(1) of the Gift-tax Act (hereinafter called "the Act") at the instance of the assessee for the opinion of this court on the following question :

(2.) THE material facts are: During the previous year relevant to the assessment year 1964-65 the assessee, an individual, had executed a deed of settlement on 24th August, 1963, whereby he settled certain lands obtained by him in the family partition between him and his son. THE assessee himself was the first beneficiary till his lifetime and thereafter his wife was to enjoy the settled properties till her lifetime without any power of alienation and finally they should go to his son with absolute rights. THE value of the lands gifted by the assessee was shown as Rs. 42,935 which was not in dispute. THE Gift-tax Officer had deducted Rs. 12,453 towards the life interest of the assessee in those lands and determined the value of the reversionary interest of his wife at Rs. 30,482, which is within the permissible exemption provided to a spouse under Section 5(1)(viii) of the Act. As in his opinion there was a gift in favour of the assessee's son which was liable to tax, its value was determined at Rs. 17,757 after deducting Rs. 12,725 representing the value of the life interest of the assessee's wife.

(3.) IN order to appreciate the respective contentions, it is necessary to refer to the definition of "gift" in the Act. Section 2(xii) which defines "gift" reads thus: "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under Section 4". The expression "transfer of property" is defined under Section 2(xxiv) thus :