Kondaiah, J. -
(1.) THIS is a reference by the Income-tax Appellate Tribunal, Hyderabad, under Section 26(1) of the Gift-tax Act (hereinafter called "the Act") at the instance of the assessee for the opinion of this court on the following question :
"Whether, on the facts and in the circumstances of the case, and in terras of the settlement deed dated 24th August, 1963, there was a tenable gift of Rs. 17,757 in favour of the assessee's sons ?
(2.) THE material facts are: During the previous year relevant to the assessment year 1964-65 the assessee, an individual, had executed a deed of settlement on 24th August, 1963, whereby he settled certain lands obtained by him in the family partition between him and his son. THE assessee himself was the first beneficiary till his lifetime and thereafter his wife was to enjoy the settled properties till her lifetime without any power of alienation and finally they should go to his son with absolute rights. THE value of the lands gifted by the assessee was shown as Rs. 42,935 which was not in dispute. THE Gift-tax Officer had deducted Rs. 12,453 towards the life interest of the assessee in those lands and determined the value of the reversionary interest of his wife at Rs. 30,482, which is within the permissible exemption provided to a spouse under Section 5(1)(viii) of the Act. As in his opinion there was a gift in favour of the assessee's son which was liable to tax, its value was determined at Rs. 17,757 after deducting Rs. 12,725 representing the value of the life interest of the assessee's wife.
The contention of the assessee that the value of Rs. 17,757 of the gifted property was not liable to tax as the donee was not entitled to the possession and enjoyment of his interest in the year of assessment was rejected by the Gift-tax Officer, who subjected that gift to tax. On appeal the Appellate Assistant Commissioner upheld the contention of the assessee and allowed the appeal. Aggrieved by that decision, the Gift-tax Officer preferred an appeal to the Income-tax Appellate Tribunal which reversed the finding of the Appellate Assistant Commissioner and restored the assessment order. Hence at the instance of the assessee, this reference has been made.
Sri K. B. Krishnamurthy, the learned counsel for the assessee, contended that the transfer of interest in the settled property in so far as the son is concerned does not amount to "gift" within the meaning of the Act, as there was no right to the donee to enjoy the same till the lifetime of the father and mother, the beneficiaries. He relied upon the decision of the Bombay High Court in Commissioner of Gift-tax v. G. G. Morarji in support of his plea. This claim of the assessee is resisted by Sri P. Ramarao, the learned standing counsel for income-tax department, contending, inter alia, that the transfer of the property in favour of the son is a gift within the meaning of Section 2(xii) and the same has been rightly taxed in the instant case.
(3.) IN order to appreciate the respective contentions, it is necessary to refer to the definition of "gift" in the Act. Section 2(xii) which defines "gift" reads thus: "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under Section 4". The expression "transfer of property" is defined under Section 2(xxiv) thus :
"Transfer of property "means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes-
(a) the creation of a trust in property ;
(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property ;
(c) the exercise of a power of appointment of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and
(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person."
We may notice the definition of "gift" under the Transfer of Property Act by Section 122 which is as follows :
"122. 'Gift' is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee."