BANARSI LAL AGGARWAL Vs. COMMISSIONER OF GIFT-TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as "the Tribunal"), has referred the following question of law, along with the statement of the case to this court for its opinion : "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that there was no valid family settlement amongst members of the family and that the decree obtained from the civil court was collusive ? "

(2.) THE facts relevant to the question of law referred, are : Banarsi Lal Aggarwal, the assessee, was being assessed to wealth-tax in the status of an individual. He owned a property styled as Banarsi Lal Aggarwal Rice and General Mills, Kaithal, consisting of land, machinery and building. The mill was constructed in the year 1959-60. Ever since then, this property was shown as individual property in the wealth-tax return of the assessee up to the assessment year 1972-73. For the assessment year 1972-73, the value of 1/4th share in the net wealth return was shown by the assessee and the remaining 3/4ths share was said to have been given to his wife and four sons in a family settlement dated June 21, 1972, by way of a court decree in Civil Suit No. 1175 of 1972, passed by the Sub-Judge First Class, Kaithal. The case of the assessee was that as he could not arrange funds in the year 1959-60 for the construction of the said mill, his wife and four sons contributed funds aggregating to Rs. 73,891 towards the construction of the said property as under : (Rs.)

(3.) The Commissioner of Gift-tax (Appeals), before whom an appeal was filed by the assessee, confirmed the order of the Gift-tax Officer and held it to be a case of gift. The value adopted by the Gift-tax Officer was confirmed. The assessee filed a further appeal before the Tribunal. On behalf of the assessee, the primary contention raised before the Tribunal was that a family settlement had, in fact, taken place and, therefore, no gift-tax was chargeable. Alternately, the argument of the assessee was that even if it was taken to be a deemed gift, the gift being of an immovable property, the same required registration in view of the provisions contained in Section 123 of the Transfer of Property Act, 1882. As the gift deed had not been registered, it was no gift within the meaning of Section 2 (xii) of the Act. The Tribunal did not agree with the first submission of the assessee and rejected the claim of family settlement. It was also held that the civil court decree was not binding on the Income-tax Department as it had been obtained with a view to avoid payment of tax. The orders of the authorities below on this point were upheld. On the second point, the Tribunal took the view that in the absence of registration, the gift was not valid. On the basis of the finding recorded on the second point, the appeal was, ultimately, decided in favour of the assessee and against the Revenue. 5. On the finding recorded by the Tribunal on the second issue, i. e. , whether in the case of an immovable property, the gift deed is required to be registered or not, the Revenue did not seek a reference. The finding recorded by the Tribunal on this point has been accepted by the Department.