G. Krishnamurthy, Vice President -
(1.) THIS appeal has come for consideration before this Special Bench, owing to a conflict of views on the interpretation to be placed upon Section 18A of the Gift-tax Act, 1958 ('the Act')- One Bench of the Appellate Tribunal, Hyderabad Bench 'A', in the case of GTO v. Mukta Raghaviah in GT Appeal No. 12 (Hyd.) of 1977-78, had taken the view that the words 'instrument of gift' used in Section 18A, meant each single gift made in an assessment year. But, another Division Bench, which came to hear this appeal involving the same point, was prima facie of the opinion that the expression 'instrument of gift' could include plurality of instrument also. Owing to this conflict in the interpretation of this expression' instrument of gift' appearing in Section 18A, a reference was made to the President of the Appellate Tribunal, for constituting a larger Bench to resolve this conflict. Hence, the present appeal before this Special Bench.
(2.) The assessee. an individual, who possessed certain agricultural lands, made four gifts on 24-10-1977 to his daughters. The aggregate value of the four gifts came to Rs. 49,500. He paid Rs. 1,485 by way of stamp duty on all these four gifts. He claimed deduction for the stamp duty paid from the gift-tax levied, by invoking the provisions of Section ISA. The GTO did not allow the assessee's claim on the ground that for the rebate to be allowed under Section 18A, the gift-tax payable in respect of each gift must exceed Rs. 1,000, and since in these cases, the individual gift-tax did not exceed Rs. 1,000, the assessee was not entitled to the rebate. It was his view that the aggregate gift is of no consequence for granting the rebate contemplated under Section ISA. He, thus, levied gift-tax of Rs. 3,450 and demanded it from the assessee without allowing the rebate claimed for.
The AAC, on appeal, confirmed the view of the GTO.
(3.) IN the present appeal filed before us, various contentions were raised on behalf of the assessee. The first major contention advanced was based upon Section 13(2) of the General Clauses Act, which provided :
IN all Central Acts and Regulations, unless there is anything repugnant in the subject or context,-
(2) words in the singular shall include the plural, and vice versa,
was that the expression 'instrument of gift' used in Section ISA should include the plural also. So interpreted, the gift-tax payable in respect of all the gifts made in a year must be aggregated and if that aggregate sum of gift-tax payable exceeds Rs. 1,000, rebate of Rs. 1,000 must be allowed and it would be wrong and against the intent of Section ISA to say that the rebate is available only in respect of each gift. INterpreting the expression 'instrument of gift' to mean, in respect of each gift, would be ignoring the effect of Section 13 of the General Clauses Act. The second argument conceived of, as a supporting argument for the above view, was based upon a decision of the Bombay High Court in the case of A. Phiroj & Co. v. CIT  59 ITR 645, where the Bombay High Court, interpreting the word 'instrument' as used in Section 26A of the INdian INcome-tax Act, 1922, held that the instrument of partnership could be a single document, or could be spelt out by several documents, all existing in the relevant account year, which would together form an, instrument of partnership. Based upon this ruling of the Bombay High Court, it was pointed out that all the instruments of gifts must be construed as one single gift, which will have the effect of taking the aggregate amount of gift-tax payable in a year for the purpose of allowing rebate, and not each and every single instrument of gift. Support for this view was also sought to be taken from an earlier decision of the Bombay High Court in the case of Chhotalal Devchand v. CIT  34 ITR 351 for the same view that an instrument of partnership could be constituted by one or several documents. Then by taking us through the order passed by the Hyderabad Bench in the case of Mukta Raghaviah (supra), it was submitted that the Bench, which decided the matter, did not fairly appreciate the meaning of the expression 'instrument of gift'. The Bench, the learned advocate submitted, was not correct in confining the meaning of the expression 'instrument of gift 'to each instrument of gift. According to him, the expression 'instrument of gift' read in the light of Section 13 of the General Clauses Act, should mean 'instruments of gift' in which case the aggregate amount of gift-tax payable should alone be considered and not the gift-tax payable on each of the gifts. He pointed out that since the meaning assigned to the expression 'instrument of gift' had been erroneous, that view requires reconsideration. IN this context, he referred us to a decision of the Supreme Court in the case of K.P. Varghese v. ITO  131 ITR 597, for the view that if in construing a statute, any absurdity or mischief results, that construction which would avoid absurdity or mischief must be preferred rather than the literal interpretation which would produce a manifestly absurd and unjust result. The Supreme Court pointed out in this case that the Court may, in given circumstances, even modify the language used by the Legislature or even do some violence to it, so as to achieve the obvious intention of the Legislature and produce a rational construction. Pressing these observations into service, the learned counsel for the assessee stressed that since the object of enacting Section ISA was to give a rebate of tax on gifts made, the interpretation must be liberal so as to include the 'instrument of gift' as referring to 'instruments of gift' so that if the total gifts made in the year are taken, the total gift-tax payable is ascertained and if it happened to exceed Rs. 1,000, which is the minimum prescribed under Section 18A, contemplated rebate could be granted. While on this point he also invited our attention to the decision of the Calcutta High Court in B.B. Sarkar v. CIT  132 ITR 150 where the Calcutta High Court observed :
The expression used in a statute should ordinarily be understood in the sense in which it is best harmonious with the object of the statute and which effectuates the object of the Legislature .... (p. 151)
Relying upon these observations, the learned counsel's argument proceeded that harmonious construction which would effectuate the object of the Legislature alone must be given, which, according to him, would lead to the only conclusion that the total gift-tax payable in. a year must be ascertained for the purpose of allowing the rebate under Section 18A, which could be done only by taking all the gifts made in a year rather than confining it to each gift and then ascertain whether the gift-tax payable in respect of each of such gifts exceeded Rs. 1,000.;