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2017 (3) TMI 744 - HC - Income TaxComputation of capital gains - whether was an asset coming within the purview of Sec. 49(1)(ii) as it was acquired on the release executed by the previous life interest holder which amounted to a gift,therefore, the cost of the acquisition of asset would be deemed to be the cost of the original settlor? - Held that:- The relinquishment/surrender in the instant case does not constitute a Gift in the absence of a transfer by Neville Wadia to the assessee nor does it come under Section 4(1)(c), (d) or (e) of the Gift Tax Act. We are unable to agree with the submissions of the Revenue as Neville Wadia the releasor was not absolutely entitled to the property nor has he caused the same to be vested in himself jointly with any other person. He has also not caused any appropriation to be made from and within the said property. Moreover, the effect of clause 4(1)(d) of the Gift Tax Act will be deemed to be gift made in favour of the other person by the person who caused the property to be so vested upon appropriation and the Tribunal was not correct in concluding that the assessee had acquired a capital asset by way of gift. The Tribunal's decision to restore the matter to the file of the Assessing Officer is not justifiable as it seems to have been influenced by deeming provision in the definition of a Gift under the Gift Tax Act. In Neville Wadia (1972 (9) TMI 20 - BOMBAY High Court ), the revenue contended that the operative words in the release of deed constituted transfer of life interest by the assessee in favour of his daughter and son. The contention was negatived by this Court. This Court held that whatever came to the daughter and son of the assessee in that case (the son being the assessee in the present reference) was a result of provisions made in their favour as beneficiaries under the original deed of settlement dated 30th January, 1947 and that by use of the words in the operative clause did not create any interest in favour of the daughter and the son of the assessee and the operative portion of the deed gave Neville Wadia complete release and discharged the trustees from all obligations against them and it was impossible to construe the deed to hold that it was deed of transfer of the life estate of the assessee in favour of his daughter and son. The Court found that the Revenue's contention was entirely unsustainable having regard to the language of the deed. In this case the person who caused appropriation by executing the release is Neville Wadia and it is not the case of the Revenue that Neville Wadia has been held liable to be taxed in relation to the release in favour of his children. As far as clause 4(1)(d) of the Gift Tax Act is concerned the same has no application at all. At best 4(1)(c) of the Gift Tax Act would be of some relevance and we find no reason, given the decision of our Court in Neville Wadia (supra), to hold that there has been a “transfer” or “gift” in favour of the present assessee of any Capital asset, even assuming that the definition of “Gift” under the Gift Tax Act can be pressed into service by the Revenue. - Decided in favour of the assessee.
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