TMI Blog1987 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... rship books was thrown into the common stock of the joint family on October 20, 1971, so that after the individual property was impressed with the character of the joint family property, it became the property of the family consisting of the assessee, his wife and his son. For the assessment year 1973-74, the question arose whether the assessee's impressing his individual property of the value of Rs. 1,71,373 with the character of joint family property constituted a gift either wholly or partly for purposes of the Gift-tax Act. Noticing the provisions contained in section 4(2) of the Gift-tax Act, which came into force from April 1, 1972, through the Finance (No. 2) Act of 1971, the Revenue was of the opinion, that a transaction of gift was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total sum of Rs. 1,14,248 which represented 2/3rds of the sum impressed with the character of joint family property. Against the aforesaid assessment, the assessee carried the matter in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, confirming the order of the Gift-tax Officer, dismissed the appeal. The assessee carried the matter in second appeal to the. Tribunal. Before the Tribunal, two contentions were raised. Firstly, it was contended that there was no liability to pay gift-tax inasmuch as the gift in the present case was made long prior to April 1, 1972, when the amendment to section 4(2) of the Gift-tax Act came into force. The second contention was that in relation to the gift in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act had come into force only on April 1, 1972, and the gifts prior to that date fall outside the ambit of levy under the Gift-tax Act. This contention, in our opinion, is plainly untenable. For the assessment year 1973-74, the previous year commenced on October 20, 1971, and ended on November 5, 1972. Therefore, the date of the gift, namely, October 20, 1971, fell within the previous year relevant to the assessment year 1973-74. There can be no dispute about the fact that the provisions of section 4(2) of the Gift-tax Act have come into force with effect from the beginning of the assessment year 1972-73. Consequently, the act of the assessee in converting his individual property into that of joint family property on October 20, 1971, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Srirama Rao to the decision of the Supreme Court in CIT v. Shah Sadiq Sons L1987] 166 ITR 102. The following observations are pertinent (p. 107): " This court in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262, observed that it was well-settled that the Income-tax Act as it stands amended on the first day of April of any financial year must apply to the assessment of that year. Any amendments in that Act which came into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment was actually made after the amendments came into force. There, the Kerala Surcharge on Taxes Act, 1957, having come into force on September 1, 1957, being the date appointed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision does not in any way advance the assessee's case. In the circumstances, we hold that the Appellate Tribunal was right in rejecting the assessee's contention that no gift-tax liability arises for the assessment year 1973-74. The question referred to this court at the instance of the assessee is, therefore, answered in the affirmative, i.e., in favour of the Revenue and against the assessee. As regards the second question referred at the instance of the Department, we consider that the Tribunal was justified in granting exemption under section 5(1)(viii) of the Act. Section 4(2) of the Gift-tax Act is merely declaratory of what is a deemed gift in circumstances where an individual impresses his individual property with the character of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's wife, then the logical consequence of such a gift is that it earns exemption under section 5(1)(viii) of the Gift-tax Act it is not possible to say that while there is, for the purpose of gift-tax, a gift in favour of the assessee's wife, that statement should be limited only to the ascertainment of the assessee's wife's share and the further consequence flowing out of such a gift should not be given effect to. In our opinion, the acquiescence of the fact that the transaction involved transfer of Rs. 57,124 to the wife upon partition which has to be deemed to be gift under section 4(2) of the Act has the necessary consequence of exemption conferred by section 5(i)(viii) of the Act. In our opinion, the Tribunal was right in granting e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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