SATISH CHANDRA,J - (1.) BOTH appeals have been filed by the department under Section 26-A of the Gift Tax Act, 1958, against the consolidated order and judgment dated 28.02.2005 passed by the Income Tax Appellate Tribunal, Lucknow in G.T.A.Nos.11 & 15/Alld/1998, for the assessment year 1990-91.
(2.) ON 19.09.2005, a coordinate Bench of this Hon'ble Court has admitted both the appeals on the following substantial questions of law:- (i)Whether the Hon'ble Tribunal has erred in law in holding that there was no deemed gift within the meaning of section 4(1)(c) of the Gift Tax Act in respect of the interest amount of Rs.1.70 crores surrendered/ abandoned by the respondent in favour of its sister concerns? (ii)Whether the Hon'ble Tribunal was justified in law in holding that there was no deemed gift within the meaning of section 4(1)(c) of the Gift Tax Act as there was no contract, expressed or implied between the respondent and its sister concerns for charging of interest on the loans/advances lying with them, thus limiting the applicability of the provisions of section 4(1)(c) of the Gift Tax Act regarding charging of deemed gift to only those cases which are covered by expressed or implied contract between the two parties.? Brief facts of the case are that for the Assessment Year under consideration, the assessees have filed the loss return and had shown 'nil' taxable gifts, but the Assessing Officer on scrutiny, under Section 15 (3)/16 of the Gift Tax Act observed that the transferred interest free amount in favour of the sister concern by the assessees constitute taxable gift, so he made the addition of Rs.1.7 crores and Rs.89,52,969/- respectively as gift respectively. However, the said additions were deleted by the First Appellate Authority as well as by the Tribunal vide its impugned orders.
(3.) THE assessees are Registered Firm and Company respectively under the relevant Act. In both the appeals facts and circumstances are identical except the date and amount. So, both the appeals are disposed of by a common judgment for the shake of brevity. With this background, Sri D. D. Chopra, learned Counsel for the Department submits that the assessee is a partnership firm which came into existence on 1.1.1982 comprising of seven partners. It had multifarious business activities as per the partnership deed. It had floated various schemes for encouraging the habit of savings amongst the public. In the past, the assessee-firm had taken over the business of M/s Sahara Savings and Finance Pvt. Ltd., Gorakhpur; and M/s. Sahara Investment India Ltd., Gorakhpur. The assesse-firm had collected the funds from the public through various outlets. In fact, there is an accumulation of funds by the firm through various schemes and their modus of investment within the concerns of its group, controlled by the partners or directors and shareholders. The transactions are interest free. The firm has also advanced the loans to its subscribers on a discount basis. The firm is in fact getting more from the subscribers than it is paying to them as observed by the Assessing Officer.;