1992 (8) TMI 96 - AT - Income Tax

Summary

Issues:
Levy of gift-tax on transfer of jewellery to daughter-in-law on the occasion of son's marriage.

Analysis:
The Appellate Tribunal ITAT Ahmedabad-C heard an appeal regarding the confirmation of gift-tax levy on the transfer of jewellery by the assessee to his daughter-in-law during his son's marriage. The GTO disallowed the exemption under section 5(1)(vii) based on a previous decision of the Andhra Pradesh High Court. The Tribunal in that case ruled that a father's obligation to marry off his daughter exempts such transactions from tax. However, the GTO distinguished this case by stating that since the son had independent taxable income, the father was not obligated to make the gift. The GTO also cited a Special Leave Petition against the Andhra Pradesh High Court decision. The assessee relied on the Calcutta High Court decision and a Board's Circular, but the Commissioner rejected these arguments, emphasizing that the gift to a daughter-in-law may be customary but not obligatory.

The assessee's advocate argued before the Tribunal that the custom of giving gifts to daughters-in-law was a social obligation, impacting the father-in-law's reputation within the community. The advocate contended that this obligation made the transfer non-voluntary, thus not constituting a taxable gift under the Gift-tax Act. The Departmental Representative countered by stating that the Calcutta High Court decision did not apply in this case, and since the son had independent income, the father-in-law had no obligation to maintain the daughter-in-law, making the exemption under section 5(1)(vii) unavailable.

The Tribunal found that the social custom of gifting to daughters-in-law in the community was undisputed, and there was no excessive part of the gift considering the assessee's status. The Tribunal held that the customary and social obligation on the father-in-law to make the gift rendered the transfer non-voluntary. Referring to the Calcutta High Court's decision, the Tribunal concluded that moral and social obligations could exempt a transaction from being classified as a gift under the Gift-tax Act. Therefore, the Tribunal allowed the appeal, ruling that the transfer was not a taxable gift.