Bombay H.C : Whether, on the facts and in the circumstances of the case, the claim of the applicant that the settlement dt. 30th March, 1960, executed the applicant in favour of his minor son, Bharat, in discharge of his legal obligation under s. 20 of the Hindu Adoptions and Maintenance Act, 1956, to maintain his son was not a gift under s. 2(xii) of the GT Act, 1958, was rightly rejected ?

Counsel Appeared

S.J. Mehta with I.M. Munim, for the Assessee : D.R. Dhanuka with S.V. Naik, for the Revenue

SUGLA, J.:

Three questions of law have been referred to this Court by the Tribunal in this reference at the instance of the assessee. The question read as under:

“(1) Whether, on the facts and in the circumstances of the case, the claim of the applicant that the settlement dt. 30th March, 1960, executed the applicant in favour of his minor son, Bharat, in discharge of his legal obligation under s. 20 of the Hindu Adoptions and Maintenance Act, 1956, to maintain his son was not a gift under s. 2(xii) of the GT Act, 1958, was rightly rejected ?

(2) Whether, on the facts and in the circumstances of the case, the claim of the applicant that the settlement executed by the applicant in favour of his son was a transfer for adequate consideration and, therefor, not a gift within the meaning of the GT Act, 1958, was rightly rejected ?

(3) Whether, on the facts and in the circumstances of the case, the claim of the applicant that the gift, if any, of 1,500 shares of Changdeo Sugar Mills Ltd. made under a settlement was exempt under s. 5(1)(xii) of the GT Act, 1958, was rightly rejected ?”

2. Shri Mehta, learned counsel for the assessee, has fairly admitted that the first two questions are covered by this Court’s decision in the assessee’s own cases—K.M. Sheth vs. CIT 1977 CTR (Bom) 314 : (1977) 107 ITR 45 (Bom) and CIT vs. K.M. Sheth (1986) 50 CTR (Bom) 210 : (1986) 160 ITR 814 (Bom). Accordingly, we answer the first two questions in the affirmative and in favour of the Revenue.

3. This takes us to the third question. The assessee had settled on trust 1,500 equity shares of Shree Changdeo Sugar Mills Ltd. by a deed of trust dt. 30th March, 1960, for the benefit of his minor son, Bharat, aged 2 years at the material time, to absolve himself of his legal obligation to provide food, clothing, residence, education, medical attendence and treatment and marriage expenses. It is submitted by Shri Mehta that s. 5(1)(xii) of the GT Act, 1958, which reads thus. “5. (1) Gift-tax shall not be charged under the Act in respect of gifts made by any person— (xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the GTO as being reasonable having regard to the circumstances of the case;” makes the gift exempt to the extent the property gifted is referable to the education of the children. In order to show that in the case of a gift made for the benefit of the children for a number of purposes, including education, the amount of gift can be bifurcated and the amount referable to their education can be held exempt, Shri Mehta has relied on the Patna High Court decision in the case of CGT vs. M.S. Rao (1976) 102 ITR 308 (Pat) : TC36R.327. Further, Shri Mehta stated that provision for education does not necessarily mean education for a particular year. It means and includes the expenditure on education as and when necessary.

It is true that s. 5(1)(xii) of the GT Act, 1958, quoted above exempts gift for the education of children to the extent it is proved to the satisfaction of the GTO as being reasonable having regard to the circumstances of the case. However, the case before us does not fall within the meaning and scope of this clause. In the first instance, the settlement in this case is not specifically for the education of the child. It is for a number of purposes such as food, clothing, residence, education, medical attendance and treatment and marriage expenses. Besides, it is difficult to conceive of any expenditure that would be incurred on a child of 2 years on education. Moreover, the word “education” as used in cl. (xii) does not mean education in the ordinary sense which a father is obliged to arrange for. It means higher or specialised education, whether in India or abroad. The circular of the Department on which Shri Mehta placed reliance by referring to Gulanikar’s Treatise on Law and Practice of GT & WT, 1984 edition, at page 3.114, clearly indicates that for exemption under s. 5(1)(xii), the provision has to be for higher education in India or abroad.

The exemption is thus available to the extent to which the gifts are proved to the satisfaction of the GTO as being reasonable having regard to the circumstances of the case. On the facts and material on record, it is not possible to agree with Shri Mehta that any portion of the gift is in fact for the education of the child. Accordingly, on the facts before us, we answer the third question of law also in the affirmative and in favour of the Revenue.

No order as to costs.

[Citation : 170 ITR 406]