Dwarka Prasad, J. - (1.) THIS reference has been made to this court by the Income-tax Appellate Tribunal, Delhi Bench " C ", under Section 26(1) of the G.T. Act, 1958, at the instance of the Commissioner of Gift-tax, Rajas-than, Jaipur. The circumstances which had given rise to this reference may be briefly stated : In the year 1952 the marriage of Princess Pratap Kumari, d/o Shri Tej Singh, former ruler of the State of Alwar (who is hereinafter called " the assessee ") was settled with Shri Digvijay Singh, son of Shri Pratap Singh, the former ruler of Wankaner in Gujarat. On June 15, 1952, an agreement was entered into between the two royal families of Alwar and Wankaner, according to which the assessee agreed to pay a sum of Rs. 10 lakhs to the royal house of Wankaner, out of which a sum of Rs. 7 lakhs was to be paid at the time of the tilak ceremony, while the remaining amount of Rs. 3 lakhs was to be paid at the time of marriage. The assessee paid a sum of Rs. 7 lakhs to Shri Pratap Singh in September, 1952, and the remaining Rs. 3 lakhs were paid at the time of marriage of Princess Pratap Kumari with Shri Digvijay Singh in April, 1955. It appears that the marriage was unsuccessful with the result that Princess Pratap Kumari had to leave her husband's house after a short period in April, 1956. Her husband's family paid a maintenance allowance of Rs. 600 per month to the Princess from April, 1956, up to October 15, 1958. But then an agreement was entered into between Shri Digvijay Singh and Princess Pratap Kumari, as also Shri Pratap Singh and the assessee, by which it was agreed between the parties that a sum of Rs. 4 lakhs be paid to Princess Pratap Kumari as a lump sum amount in consideration of her right of maintenance. The amount of Rs. 4 lakhs towards the lump sum payment of maintenance allowance was paid by the Wankaner family to Princess Pratap Kumari by cheque for Rs. 3 lakhs dated October 15, 195.8, and a pay order dated 14th October, 1958, for Rs. one lakh. It is also not in dispute that Princess Pratap Kumari was also further paid a sum of Rs. one lakh by the Wakaner family in lieu of chundry and Padla jewellery.
(2.) HOWEVER, it appears that the question of refund of the amount of Rs. 10 lakhs paid at the time of the tilak ceremony and marriage was still simmering between the parties and after a lapse of about 11/2 years, another agreement was executed for the purpose of full and final settlement of all, claims and counter-claims between the parties and in order to avoid all future disputes. The relevant portion of the agreement dated 24th February, 1960, which was entered into by the assessee, his daughter, Princess Pratap Kumari, her husband, Digvijay Singh, and the latter's father, Shri Pratap Singh, are as under : " That the first party paid a sum of Rs. ten lakhs to the third party as tilak money (rupees seven lakhs having been paid on or about 15-9-1952 and rupees three lakhs on or about 21st April, 1955), for the marriage of the second party with the fourth party which was solemnized on or about 20-4-1955. But as the marriage did not prove to be a happy one, a deed of agreement was executed by the parties to this deed on the 15th October, 1958, under which a sum of Rs. 4 lakhs was paid by way of maintenance of all kinds, whatsoever, to the second party for her lifetime and a further sum of Rs. one lakh was paid in lieu of the chundry and padla jewellery to the second party by the third and fourth parties ; now it is hereby agreed- (i) That in supersession of the said deed of agreement dated the 15th October, 1958, the third and the fourth parties will pay to the first and second parties a sum of Rs. ten lakhs which will stand as the return of tilak money and in full and final satisfaction of all claims of the first and second parties of whatsoever kind including maintenance, if any, of the second party for the whole of her life and expenses incurred by the first party or the second party for and in connection with the marriage. And it is further agreed that if in any event and under any circumstances whatsoever the second party puts forward any claim for maintenance of any kind whatsoever and at any time whatsoever and on any account and under any circumstances whatsoever the first party shall be liable to pay such maintenance to the second party in full satisfaction of her claim, which she may otherwise have as against the third party and/or the fourth party and the full amount of her maintenance or claim of any kind whatsoever shall be paid by the first party from out of the money paid by the third party and the fourth parties to the first and second parties under this deed. In case the first party fails to satisfy the claim for maintenance or any other claim which the second party may make against the fourth party and the fourth party has to meet such claim then the fourth party shall be entitled to recover the same from the first party. (ii) That the said sum of Rs. ten lakhs shall be paid by the third and fourth parties in the manner stated below :-- (a) That a sum of Rs. five lakhs paid to the second party under the two agreements dated 15-10-1958 shall be deemed to have been paid by the third and the fourth parties to the first party and the second party under this deed. (b) That out of the remaining sum of Rs. five lakhs, a sum of Rs. four lakhs is paid by the third party and the fourth party to the first party and second party by crossed cheque No. NDIX 374501 dated 24th Feb., 1960, on the Central Bank of India Ltd., New Delhi, drawn in favour of the first party by the third party, the receipt of which the first and second parties hereby acknowledge. (c) That the balance of Rs. one lakh shall be paid by the third and fourth parties to the first and the second parties not later than the 1st April, 1964, with interest at 6% from the date of this deed till the amount is actually paid. " On that very day, i.e., February 24, 1960, Pratap Singh, the father- in-law of Princess Pratap Kumari, gave a crossed cheque for Rs. four lakhs favouring the assessee on the Central Bank of India, New Delhi, and as soon as the cheque was received by the 'assessee, he endorsed the same in favour of his daughter, Princess Pratap Kumari. On March 15, 1962, the GTO issued a notice to the assessee under Section 16(1) of the G.T. Act (hereinafter called " the Act ") stating that on the basis of information received by him that the gift of Rs. four lakhs made by the assessee to his daughter, Princess Pratap Kumari, on February 24, 1960, had escaped assessment of gift-tax and calling upon the assessee to file a return. The assessee thereupon filed a return on April 2, 1972, and gave reasons showing the value of the gift as nil. The assessee also filed an affidavit before the GTO dated 14th February, 1965, the relevant portion of which runs as under : " The question of the moral or legal right of my son-in-law and/or his father to return the tilak money of Rs. 10 lakhs presented by me in consideration of my daughter's marriage, in view of the unfortunate and unforeseen sequel, was still simmering. In circumstances such as detailed above whatever the strict legal position might be, there could be no doubt that the tilak money presented by the bride's father was really intended for the benefit of his daughter to conduce to her happiness in the conjugal home. The husband and father-in-law of my daughter came to realise the force of these considerations, but they were not prepared to pay my daughter, whether as and for her maintenance during her lifetime or by way of disgorging the tilak money they had been paid in the hope and expectation of her having a normal marriage life, any sum larger than Rs. 10 lakhs on the whole. Therefore, a fresh agreement was drawn up on 24-2-1960 (a copy of which is marked Ex. C and annexed hereto), in pursuance of which a cheque for Rs. 4 lakhs was drawn in my favour by my daughter's father-in-law. I endorsed the cheque at once to my daughter. It was nobody's intention that I should have any beneficial interest in the sum secured by that cheque even for a fraction of a second. I was made a party to this agreement also for the express purpose of indemnifying my daughter's husband and father-in-law against any further claims that she might have made against them. I merely acted as a conduit pipe in receiving and passing on the cheque for Rs. 4 lakhs dated 24-2-1960 to my daughter. Perhaps the other parties were also desirous of affixing me with knowledge of this payment, in view of the indemnity clause, to show that they were performing their part of the bargain. I solemnly declare that it was never intended by me or by the other parties to the agreement that I should have any beneficial interest in the whole or any part of the sum of Rs. 4 lakhs secured by the cheque dated 24-2-1960. I could not and did not make a gift of that sum, for it was not mine to retain or to give. " Thus the case of the assessee was that he did not make any gift as he had no beneficial interest in the amount of the cheque for Rs. 4 lakhs and that no liability to pay tax under the G.T. Act was attracted. The GTO did not accept the contention of the assessee and held that the sum of Rs, 4 lakhs given by the assessee to his daughter by making an endorsement of the cheque dated February 24, 1960, constituted a gift and the said sum of Rs. 4 lakhs was chargeable to gift-tax. On appeal, the AAC of Gift-tax, Jaipur, affirmed the decision given by the GTO. However, on further appeal, the Income-tax Appellate Tribunal, Delhi Bench " C ", came to the conclusion that the cheque for Rs. 4 lakhs dated February 24, 1960, was drawn in favour of the assessee by Shri Pratap Singh of Wankaner for and on behalf of his (assessee's) daughter only and that the assessee had no beneficial interest in the whole or any part of the aforesaid sum of Rs. 4 lakhs. The Appellate Tribunal gave several reasons for coming to this conclusion and ultimately held that the transaction of making of the endoresement on the crossed cheque for Rs. 4 lakhs by the assessee in favour of his daughter, Princess Pratap Kumari, did not constitute a gift under the G.T. Act, 1958, and as such no gift-tax was payable by the assessee in respect of the aforesaid transaction. An application was submitted by the Commissioner of Gift-tax, Rajasthan, Jaipur, requiring the Appellate Tribunal under Section 26(1) of the G.T. Act to draw up a statement of the case and refer a question of law arising out of its order dated March 16, 1967, to this court. The question which has been referred by the Appellate Tribunal to this court is as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the act of the assessee in endorsing the cheque for Rs. 4 lakhs dated February 24, 1960, in favour of his daughter, Princess Pratap Kumari, did not constitute a gift chargeable to gift-tax in the hands of the assessee under the Gift-tax Act, 1958 ? "
(3.) THE facts of the case are not in dispute. It is admitted that Rs. 10 lakhs were paid by the assessee to Shri Pratap Singh of Wankaner at the time of the tilak ceremony and marriage of his daughter, Princess Pratap Kumari, with Shri Digvijay Singh, son of Shri Pratap Singh of Wankaner. An agreement in respect of the aforesaid payment was executed in favour of the assessee and Shri Pratap Singh of Wankaner in June 15, 1952. It is also on record that the marriage took place in April 15, 1955, and besides the sum of Rs. 7 lakhs which were paid at the time of the tilak ceremony on September 15, 1952, the remaining amount of Rs. 3 lakhs was paid by the assessee to the Wankaner family at the time of marriage. It is also apparent on the record that the marriage did not prove to be a happy one and the spouses fell apart after some time and Princess Pratap Kumari returned to her father's house in April, 1956. An agreement was executed on October 15, 1958, for payment of Rs. 4 lakhs as lump sum amount in consideration of her right of maintenance and the said sum of Rs. 4 lakhs was paid to Princess Pratap Kumari by her father-in-law. THEreafter, in order to finally settle all the disputes between the parties in financial matters and in full satisfaction of the claims and the counter-claims between them, another agreement dated February 24, 1960, was executed, and simultaneously along with the execution of the aforesaid agreement a crossed cheque for Rs. 4 lakhs was handed over by Shri Pratap Singh of Wankaner to the assessee on February 24, 1960, which, in turn, was endorsed by the assessee in favour of his daughter, Princess Pratap Kumari on that very day. Mr. Mehta appearing for the revenue submitted that by making an endorsement on the cheque for Rs. 4 lakhs dated February 24, 1960, in favour of Princess Pratap Kumari the assessee had made a transfer of the aforesaid sura of Rs. 4 lakhs voluntarily, without any consideration, so as to corne within the definition of gift contained in Clause (xii) of Section 2 of the G.T. Act, and that the assessee was, therefore, liable to payment of tax on the aforesaid sum of Rs. 4 lakhs. In the alternative, it was argued by the learned counsel that even if it be held that, according to Clause (1)(b) of the agreement, the cheque for Rs. 4 lakhs was given by Shri Pratap Singh of Wankaner for the assessee and his daughter, though drawn in favour of the assessee, the fact of making endorsement of the cheque in favour of his daughter by the assessee clearly pointed out the intention of the assessee to abandon or relinquish his interest in the property, represented by the aforesaid cheque for Rs. 4 lakhs and, as such, the assessee was liable to make a payment of gift-tax, at least on half of the amount of the aforesaid cheque. On the other hand, Mr. Rastogi appearing for the assessee submitted that the Tribunal has recorded a finding of fact in its order dated March 16, 1967, while accepting the appeal of the assessee to the effect that the cheque for Rs. 4 lakhs drawn in. favour of the assessee was given for and on behalf of his daughter only and that the assessee had no beneficial interest in the whole or any part of the aforesaid sum of Rs. 4 lakhs, secured by cheque dated February 24, 1960, and that this court cannot go behind the aforesaid finding of fact arrived at by the Tribunal. It was submitted by the learned counsel that the assessee had unequivocally declared in his affidavit dated 14th February, 1965, submitted before the GTO that be had no beneficial interest in the amount of the cheque and that he was made a party to the agreement executed on that date merely for the purpose of indemnifying his daughter's husband and father-in-law against any claims that she might make in future against them and that he did not make any gift for the amount of Rs. 4 lakhs, as the same did not belong to him, which he could neither retain nor give to his daughter as a gift. Learned counsel contends that, as the amount of the aforesaid cheque belonged to Princess Pratap Kumari, no gift was made by the assessee and the assesssee was not liable for making payment of any gift-tax. ;