SHAHA PERAJCHAND NOWPAJI Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal made this reference under section 26(1) of the Gift-tax Act. The assessment year involved is 1973-74 for which the relevant previous year commenced from 20/10/1971, and ended on 5/11/1972. The assessee was a partner in a partnership firm in his individual capacity. It appears that a sum of Rs. 1,71,373 standing to the credit of his account in the partnership books was thrown into the common stock of the joint family on 20/10/1971, so that after the individual property was impressed with the character of the joint family property, it became the property of the family consisting of the assessee, his wife and his son. For the assessment year 1973-74, the question arose whether the assessees impressing his individual property of the value of Rs. 1,71,373 with the character of joint family property constituted a gift either wholly or partly for purposes of the Gift-tax Act. Noticing the provisions contained in section 4(2) of the Gift-tax Act, which came into force from 1/04/1972, through the Finance (No. 2) Act of 1971, the Revenue was of the opinion, that a transaction of gift was involved. Accordingly, proceedings were initiated and an assessment was made under the Gift-tax Act for the year 1973-74. Having regard to the provisions contained in section 4(2) of the Gift-tax Act, the Gift-tax Officer determined the value of the gift at Rs. 1,14,248. The sum of Rs. 1,71,373 thrown into the common stock of the joint family, when partitioned, fell to the share of the assessee, his wife and his son in three equal shares. It is stated that the assessee migrated from Marwar and that he is governed by the Benares/Mithila School so that in a partition between a father and son, the wife gets an equal share in the coparcenary property. Accepting the aforesaid claim, the Gift-tax Officer held that each one of the three members of the joint family would be entitled to a sum of Rs. 57,124 constituting one-third of the total value of the gift. Excluding the 1/3rd portion attributable to the assessee who made the gift, the balance amount of Rs. 1,14,248 was deemed to be a gift by the assessee during the previous year relevant to the assessment year 1973-74 and assessed as such.

(2.) Before the Gift-tax Officer, the assessee claimed that in so far as the gift to the wife is concerned, he is entitled to claim exemption under section 5(1) (viii) of the Act so that Rs. 50,000 has to be exempted against the sum of Rs. 57,124 falling to the share of the assessees wife. The Gift-tax Officer declined to accept the assessees contention. The result was that gift-tax was levied on the total sum of Rs. 1,14,248 which represented 2/3rds of the sum impressed with the character of joint family property.

(3.) Against the aforesaid assessment, the assessee carried the matter in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, confirming the order of the Gift-tax Officer, dismissed the appeal.