COMMISSIONER OF GIFT TAX Vs. VALLURU VENKATESWARA RAO

JUDGEMENT

(1.) AT the instance of the Commissioner of Gift-tax, Andhra Pradesh-II, the Income-tax Appellate Tribunal has submitted under Section 26(1) of the G.T. Act of 1958, hereinafter called the Act, the statement of case for the opinion of this court on the following question of law :

(2.) WE may briefly refer to the material facts that gave rise to the aforesaid question of law. Sri Valluru Venkateswara Rao, who is the karta of a HUF, the assessee herein, made a gift of immovable property of 2 acres 95 cents of dry land worth about a lakh of rupees by a registered deed dated March 26, 1970, in favour of his wife, Smt. Valluru Chandravati, towards her maintenance. For the assessment year 1970-71, the assessee filed a gift-tax return on November 28, 1970, declaring the gifted property and claimed exemption of the same on the ground that it was transferred in favour of his wife towards her maintenance according to the Hindu law. In the partition that took place between the karta and his minor son represented by his mother and guardian on March 20, 1970, it was contemplated to give property worth about a lakh of rupees by way of settlement to his wife. The partition deed does not indicate these facts specifically. The GTO did not agree with the plea of the assessee that the settlement of the aforesaid immovable property to the wife by the karta of the family amounted to a family arrangement at the time of the partition. Therefore, the plea that the transaction was exempt from gift-tax was rejected on the ground that it was an after-thought. The GTO refused the claim of the assessee to allow the exemption to the extent of Rs. 50,000 under Section 5(lXviii) of the Act on the ground that the assessee was a HUF and the exemption envisaged under Section 5(1)(viii) was permissible only to individuals. He, therefore, completed the assessment bringing the entire amount of gift to tax. The contention of the assessee before the AAC that it was not a taxable gift as the transfer of property was made to the wife of the karta in lieu of her maintenance expenses was rejected. But, however, it was held that the assessee was entitled to the exemption of a sum of Rs. 50,000 under Section 5(1)(viii) of the Act. Aggrieved by the decision of the A AC on the principal question, the assessee preferred a second appeal to the Income-tax Appellate Tribunal. The Appellate Tribunal allowed the appeal holding that the property was given to the wife of the karta in lieu of her maintenance expenses and, therefore, no gift was involved in this transaction. Hence this reference.

(3.) THE essential ingredients of a gift are : (1) voluntary nature, and (2) absence of consideration. THE gift no doubt must be in respect of the existing movable or immovable property. THE consideration also must be in relation to money or money's worth. Where the transaction does not involve any transfer made voluntarily and without consideration in money or money's worth, it cannot be termed to be a gift. Not only the transaction must be voluntary but it should also be without consideration in money or money's worth. In the absence of any one of these ingredients, the transaction cannot be termed to be a " gift " within the meaning of Section 2(xii) of the Act.