1967 (6) TMI 5 - HC - Income Tax

Gift Tax Act 1958 - amounts relinquished in favour of the sons by the assessee - it amount to gifts within the meaning of section 4(c) of the GT Act are also gifts within the definition of section 5(j) of the Expenditure-tax Act - therefore, items are exempt from expenditure-tax

Summary

Issues:
1. Whether the assessee is entitled to exemption of the expenditure under section 5(j) of the Expenditure-tax Act for the assessment years 1960-61 and 1961-62.

Analysis:
The case involved the assessee and his two sons who were owners of a building called "Bellevue Palace." The assessee incurred expenditure for repairs on behalf of all three owners, resulting in amounts that were considered gifts to his sons. The dispute arose when the Expenditure-tax Officer disallowed the exemption claim under section 5(j) of the Expenditure-tax Act, stating that the property was under the occupation of the assessee. The Appellate Assistant Commissioner agreed with the Officer, considering the expenditure as personal in nature. However, the Tribunal disagreed, noting that most of the expenditure was for the upkeep of the jointly owned property.

Regarding the contention that the amounts represented gifts to the sons, the Tribunal did not accept it, emphasizing that being assessed for gift-tax did not automatically exempt the expenditure from the Expenditure-tax Act. The Tribunal also rejected the argument that the expenditure was incurred for the benefit of the sons. The High Court delved into the definition of "gift" under the Transfer of Property Act and the Gift-tax Act, emphasizing that a gift under the general law would also be a gift under the Gift-tax Act. The Court analyzed the provisions of the Expenditure-tax Act and concluded that gifts charged under the Gift-tax Act would also be considered gifts under the Expenditure-tax Act.

The Court further examined the legislative intent behind the exemption under section 5(j) of the Expenditure-tax Act, highlighting that the exemption applied not only to specific gifts defined under the Transfer of Property Act but also to gifts under the Gift-tax Act. The Court emphasized that the exemption covered both the gift itself and the expenditure incurred in making the gift. Ultimately, the Court ruled in favor of the assessee, holding that the amounts relinquished to the sons were gifts within the meaning of the Gift-tax Act and thus exempt from expenditure-tax under section 5(j) of the Expenditure-tax Act.

In conclusion, the Court answered the question in the affirmative, ruling in favor of the assessee and awarding costs.