1969 (8) TMI 9 - HC - Income Tax

Gift Tax Act 1958 - whether ITAT was competent to entertain and decide any objection to the Gift-tax Act 1958 being ultra vires or unconstitutional in regard to certain provisions contained in it - Held no

Summary

Issues:
1. Competency of the Income-tax Appellate Tribunal to entertain objections to the Gift-tax Act's constitutionality.
2. Constitutionality of the Gift-tax Act in imposing tax on gifts of land and building.

Analysis:

The High Court of Rajasthan addressed the issue of the Income-tax Appellate Tribunal's competence to entertain objections to the constitutionality of the Gift-tax Act. The Tribunal had referred two questions to the court under section 26(1) of the Act. The first question was whether the Tribunal had the authority to decide objections regarding the Act being ultra vires or unconstitutional. The second question pertained to the Act's constitutionality in imposing tax on gifts of land and building. The case involved an assessee who gifted a bungalow to his wife and sons, which was taxed by the Gift-tax Officer. The assessee raised the argument that taxing gifts of land and buildings fell under the State List of the Constitution. The Tribunal, after examining the constitutional validity, concluded that the provisions taxing gifts of immovable property were beyond the powers of Parliament.

The court considered precedents set by the Supreme Court, emphasizing that taxing authorities are not concerned with the validity of taxing provisions. The Tribunal's authority to delve into the Act's constitutionality was challenged, with the argument that it was constituted under the Indian Income-tax Act, not the Gift-tax Act. Definitions under the Act clarified the roles of Appellate Tribunal, Appellate Assistant Commissioner, and Gift-tax Officer. The court highlighted that while officers under the Income-tax Act could perform Gift-tax functions, the Gift-tax Officer and Appellate Assistant Commissioners were creations of the Gift-tax Act.

Regarding the scope of appeals, the court noted that objections to the vires of the Act could not be entertained by the Gift-tax Officer or the Appellate Assistant Commissioner. Consequently, the assessee could not raise such objections before the Tribunal. Referring to Supreme Court decisions, the court emphasized that if objections to the Act's vires could not be raised at lower levels, they could not be raised before the Tribunal either. Therefore, the Tribunal lacked the authority to refer questions on the Act's constitutionality to the court.

In conclusion, the court answered the first question negatively, indicating that the Tribunal did not have the jurisdiction to entertain objections to the Gift-tax Act's constitutionality. Consequently, the court did not address the second question. No costs were awarded in this matter.