COMMISSIONER OF GIFT TAX Vs. JOTHI KUMAR N

JUDGEMENT

(1.) THE following question has been referred to this court at the instance of the Revenue as arising out of the order of the Income-tax Appellate Tribunal :

(2.) THE assessee is a Hindu undivided family. It filed a return of gift on January 16, 1975, showing the total value of the gifts at Rs. 11,115. Assessment was made accepting the said return on October 31, 1975. Later, it was found by the Commissioner that the return of gift at Rs. 11,115 did not include the value of the fixed deposits of Rs. 1,00,000 with one Gopalakrishna Mills and Rs. 60,000 with one Ramakrishna Mills which were transferred by the karta of the Hindu undivided family to his minor daughter, Padmini. On the basis that the assessment as made was prejudicial to the interests of the Revenue, he took recourse to the provisions of section 24(2) of the Gift-tax Act, hereinafter referred to as "the Act" and passed an order on October 26,1977, directing the Gift-tax Officer to include in the assessment a sum of Rs. 1,60,000 as gift liable to gift-tax.

(3.) THE learned counsel for the Revenue brings to our notice the decision of this court in M. S. M. Ratnaswami Nadar v. CIT [1975] 100 ITR 669 in support if his contention that unless the consideration is found to be a valuable and adequate consideration measurable in terms of money or money's worth, the transfer should be taken to be a gift. In that case, the assessee executed two settlements of certain properties in favour of his minor children and thereafter the income from these properties were utilised for the educational expenses of the minors. Separate accounts were maintained in respect of each property. THE assessee claimed that the settlements have been executed to discharge the obligation of the father to maintain his children and to educate them, according to his status, and, therefore, the transfer cannot be taken as a gift. This court held that the assessee was under an obligation to maintain his children and educate them, according to his status, that it was not within the province of the Income-tax Department to decide as to where and how the assessee had to educate his children, that what has been transferred is the property itself and for ever, though the liability to maintain is only as long as the son is a minor and unable to maintain himself, that by executing the document, the assessee is not relieved from his obligation if the property is lost or does not yield income, that at best the settlement amounts only to provision for maintenance and even without such a settlement, the assessee could have appropriated the income from the properties settled for the maintenance and education of his minor sons, that by adopting such a device, the assessee seeks to avoid liability to tax on his income which he spends for the discharge of his own legal obligations and that it is to prevent this device to reduce tax section 16(3)(a)(iv) has been enacted and that, therefore, the income from the said properties should be included in the income of the assessee.