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TMI Blog2013 (8) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act as there was no contract, expressed or implied between the respondent and its sister concerns for charging of interest on the loans/advances lying with them, thus limiting the applicability of the provisions of section 4(1)(c) of the Gift Tax Act regarding charging of deemed gift to only those cases which are covered by expressed or implied contract between the two parties.? Brief facts of the case are that for the Assessment Year under consideration, the assessees have filed the loss return and had shown 'nil' taxable gifts, but the Assessing Officer on scrutiny, under Section 15 (3)/16 of the Gift Tax Act observed that the transferred interest free amount in favour of the sister concern by the assessees constitute taxable gift, so he made the addition of Rs.1.7 crores and Rs.89,52,969/- respectively as gift respectively. However, the said additions were deleted by the First Appellate Authority as well as by the Tribunal vide its impugned orders. The assessees are Registered Firm and Company respectively under the relevant Act. In both the appeals facts and circumstances are identical except the date and amount. So, both the appeals are disposed of by a common judgment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that Section 4 (1) (c) of the Gift Tax Act provides the 'abandonment' which reads as under:- S. 4.(1) (c) For the purposes of this Act, where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the Assessing Officer to have been bona fide shall be deemed to be a gift made by the person responsible for the release discharge, surrender, forfeiture or abandonment; The assessees-company advanced money to its sister concerns which is against the very basis of its business activities. Being financial company, interest might have charged. So, the provisions of the Gift Tax Act are attracted. He further submits that in the case of Sir Padampat Singhania and others versus Commissioner of Gift-Tax [1988 Vol. 172 293] Allahabad, it was observed that:- "Keeping in view the legislative background and the provisions of Section 4 (1) (C), it is clear that only such transactions of release, surrender, etc. are caught within the mischief of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut on specific query by the Bench, he admits that in the case of Srivastava (supra), the issue was relating to the shares at their face value which were allotted by the companies concerned pursuant to rights issue. In the instant case, the share and rights issue are not involved. It is also a submission of the learned Counsel that even if one seeks to invoke the fiction that is created in section 4 (1) (c), there can be no charge to gift tax. The said provision contemplates a situation where there is a release, discharge, surrender, forfeiture or abandonment of either a debt, contract or other actionable claim or interest in property. In the present case, there is no transaction of the nature referred to therein viz., release, discharge, surrender, forfeiture or abandonment and, therefore, on this ground alone Section 4 (1) (c) is not attracted. A release is a discharge of an existing obligation or right to action by a person in whom the obligation or right is vested to the person against whom it exists. A release therefore is the giving up or an abandoning of a claim or right to the person against whom the claim exists. A surrender on the other hand is of a nature directly opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his submissions, he has relied on the ratio laid down in the following cases:- (i) Commissioner, Income-tax, Kanpur versus Dr.R.S. Gupta [165 ITR 36 SC]; (ii) Kesoram Industries and Cotton Mills Ltd. versus Commission of Wealth Tax (Central), Calcutta [59 ITR 767 SC]; (iii) Jwala Prasad Radha Krishna versus Commissioner of Income-tax [198 ITR 415 Alld.]; (iv) Highways Construction Co. Pvt. Ltd. v. Commissioner, Income-Tax [199 ITR 702 Gauhati]; (v) India Finance and Construction Co. Pvt. Ltd. v. B.N. Panda, Deputy Commissioner of Income Tax and another [200 ITR 710 Bombay]; (vi) Commissioner, Gift-tax versus Sardar Wazir Singh [99 ITR 104 Alld.]; (vii) Sir Padampat Singhania and others versus Commissioner Gift-tax [172 ITR 292 Alld]; (viii) Commissioner of Gift-tax versus P. Gopinathan [204 IT 324 Kerla]; (ix) Commissioner of Gift-tax, Kanpur versus Padampat Singhania [117 ITR 323 Alld.]; (x) Commissioner of Gift-tax versus Abraham Kochuthomman [98 ITR 394 Kerla]; and (xi) Commissioner of Gift-tax versus Gautam Sarabhai Ltd. [263 ITR 602 Gujrat] We have heard both the parties at length and gone through the voluminous written submissions and case laws. Originally, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e examined this aspect. Undoubtedly, the assessees are the financial concerns and their main object is to earn interest. Why the interest was not earned from a few selected sister concerns. This aspect has to be examined. The justice need not to be done, but it appears that it has been done. For this gracious act, on the part of the assessees, the balance sheet shows that it is suffered with a heavy loss in the assessment year under consideration and also past assessment years. How these loans were treated by the department in the years when it were advanced and also in the subsequent assessment years. This aspect has not been examined by the Tribunal. How the sister concerns used the said interest free advances, whether the same was given for the business purposes or in the individual benefit of partners/directors. It may be mentioned that the each assessment order is a separate assessment order as per the ratio laid down in the case of CIT vs. Brij Lal, 84 ITR 273 (SC) as well as in the case of J.K. Oil Mills vs. CIT, 105 ITR 53 (All). Above mentioned aspects need to be examined by the Tribunal being a final fact finding authority as per the ratio laid down in the case of Kaml ..... X X X X Extracts X X X X X X X X Extracts X X X X
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