COMMISSIONER OF GIFT TAX Vs. MARAPPA GOUNDER K

JUDGEMENT

(1.) UNDER section 26(3) of the Gift-tax Act, 1958 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following question of law has been referred for the opinion of this court :

(2.) THE assessee, an individual, was originally assessed to gift-tax on November 30, 1972, in respect of certain lands settled on his grandson by means of a settlement deed. While examining the accounts for the assessment year 1972-73, the Gift-tax Officer noticed that a sum of Rs. 55,633.10 was forgone by the assessee in favour of this son and in the view that that amounted to a gift which had escaped assessment in the original assessment made earlier, action under section 16(1) of the Act was initiated. THE assessee raised the objections that there was no abandonment of any debt due to the assessee and that there was on gift either. However, the Gift-tax Officer found that advances had been made by the assessee to his son as loans and debited to the folio of his son land calculation interest also on the loans so advanced, the advances made as well as the interest were both brought to tax under the Act. On appeal to the Appellate Assistant Commissioner, she took the view that a sum of Rs. 6,000 could be said be represent the obligatory expenses on the part of the assessee towards maintenance and education of his son and that the further expenditure incurred by the assessee for preparing his son to occupy the position he did, could be deemed gifts as and from the dates when the expenses were incurred and not from a future date when the amounts expended were ultimately written off. In that view, the Gift-tax Officer was directed t modify his order accordingly. On further appeal by the Revenue and the preferring of a cross-objection by the assessee, the Tribunal upheld the order of the Appellate Assistant Commissioner holding that the expenses incurred by the assessee in relation to his son were liable to be treated as gifts in the years in which they had been incurred and that it is not possible to accept the contention that there was an outstanding loan which came to be written off only on February 5, 1972, and so holding, the appeal by the Revenue and the cross-objection by the assessee were both dismissed and that is how the question of law referred to at the outset has come up before this court for its opinion.