2009 (2) TMI 406 - HC - Income Tax

Gift Tax- In this case father in law give the ornaments to his daughter in law. he submitted that transfer of ornaments was neither voluntary nor without consideration. Thus it is not gift and not liable to tax. Held that- in the light of the views taken by the Madhya Pradesh High Court is correct and the gift was made to the younger daughter in law of the assessee which had not been included in the category of taxable value. it was a voluntary transfer by the assessee to another person which would definitely fall within the definition of gift as provided u/s 2(xii) of the Gift tax Act 1958. Accordingly reference in favour of the Revenue and against the assessee.

Summary

Issues:
- Interpretation of whether the transfer of gold ornaments to daughter-in-law at the time of marriage constitutes a gift under the Gift-tax Act, 1958.

Analysis:
1. The reference made under section 26(1) of the Gift-tax Act, 1958 sought the court's opinion on whether the transfer of 29 tolas of gold by late Shri Roshanlal Goyal to his daughter-in-law at the time of marriage constituted a taxable gift. The Gift-tax Officer deemed the value of the ornaments taxable, leading to appeals culminating at the Income-tax Appellate Tribunal, Jaipur.

2. The Tribunal held that the transfer of gold ornaments to the daughter-in-law was a social and moral obligation, not constituting a taxable gift. The petitioner's counsel argued that previous High Court judgments established such transfers as gifts and not taxable. Reference was made to a Madhya Pradesh High Court judgment emphasizing that such transfers are voluntary and fall within the definition of 'gift' under the Gift-tax Act.

3. The court concurred with the Madhya Pradesh High Court's reasoning, asserting that a father-in-law or family karta has no moral obligation to gift gold ornaments to the daughter-in-law as a settlement of property. The absence of a binding custom further supported the view that such transfers are voluntary gifts. Notably, the court highlighted that the elder daughter-in-law's gifted ornaments were taxed, contrasting with the younger daughter-in-law's untaxed gift in the present assessment year.

4. Ultimately, the court favored the Revenue, aligning with the Madhya Pradesh High Court's stance that such transfers do not constitute taxable gifts under the Gift-tax Act, 1958. The judgment emphasized the voluntary nature of such transfers, devoid of moral or social obligations, thereby answering the reference in favor of the Revenue and against the assessee.