Madras H.C : The property was transferred out of love and affection and hence there is an element of gift involved while the petition for divorce was filed on the same date of settlement and the same was pending before the Court

High Court Of Madras

K. Meenakumari vs. ITO, City Ward VII(14), Chennai-34

Assessment Year : 1989-90

Section : 2(XII)

Mrs. Chitra Venkataraman And M. Jaichandren, JJ.

Tax Case (Appeal) No. 1061 Of 2004

July 13, 2011

JUDGMENT

M. Jaichandren, J. – The assessee has filed the present appeal against the order of the Income-tax Appellate Tribunal, Chennai Bench ‘D’, dated 25-8-2004, made in GTA No. 4/Mds/2001, raising the following substantial question of law :—

“Whether on facts and in the circumstances of the case, the Tribunal was right in holding that the property was transferred out of love and affection and hence there is an element of gift involved while the petition for divorce was filed on the same date of settlement and the same was pending before the Court?”

2. The appellant had been assessed to Income-tax, by the Income-tax Officer, City Ward IV(2), Chennai. For the assessment year 1989-90, a notice, under section 16 of the Gift Tax Act, 1958, was issued, on 18-12-1996, on the basis of a survey report. It was found that the appellant had made a gift of an immovable property, namely, a vacant land, measuring an extent of two grounds and 376 sq.ft., situated in Puliyur Village, at present known as Anna Nagar, Kodambakkam. The said property had been settled in favour of B. Jayachandran, the husband of the appellant, by a deed executed on 19-12-1988, and the settlement was said to be out of love and affection. The market value of the land was found to be Rs. 4,74,450. The survey operation had indicated that the assessee had also transferred a motor car in favour of B. Jayachandran, during the same year. In response to the notice issued to the assessee, she had filed a return of gift, on 17-1-1997, showing the gift as ‘Nil’. She had submitted before the Gift Tax Officer that the gift document had been executed, on 19-12-1988, settling the property. It had also been submitted that it was not a gift, as it was only by way of a settlement, made while settling the dispute that had existed between the assessee and her husband B. Jayachandran, and that a divorce had also taken place between them. In support of the said claim, an order of the Principal Family Court, dated 29-6-1990, had been filed. The Gift Tax Officer had valued the immovable property at Rs. 4,74,450 and had valued the motor car at Rs. 50,000 and determined the total gift at Rs. 4,94,450. Gift tax at Rs. 1,48,335 and interest thereon had been levied at Rs. 2,69,906, under section 16(B) of the Gift Tax Act, 1958. As such, the total tax payable by the assessee was Rs. 4,18,241.

3. Aggrieved by the said order, the assessee had filed an appeal before the Commissioner of Income-tax (Appeals), Chennai, contending that the property in question did not belong to the assessee, as it had been bought by her husband B. Jayachandran, in the name of the assessee. There was no love and affection subsisting between them, on the date of the execution of the settlement deed, on 19-12-1988, as the appellant had on the same day filed a petition for divorce. Therefore, the transaction would not constitute a valid gift.

4. Considering the rival contentions raised on behalf of the assessee, as well as the Department, the Commissioner of Income-tax (Appeals) had confirmed the order of assessment, by its order, dated 9-8-1999.

5. Aggrieved by the said order, the assessee had filed an appeal before the Income-tax Appellate Tribunal, Chennai Bench ‘D’, challenging the levy of gift tax. In the meanwhile, the department had initiated recovery proceedings and had also attached the properties of the assessee.

6. On considering the submissions made on behalf of the appellant, as well as the respondent, the Tribunal had come to the conclusion that the property had been transferred by the assessee to her husband out of love and affection and that the marriage was subsisting at the time of the transfer of the property, as the divorce had taken place, only on 29-6-1990. While the reason for the transfer of the property had been mentioned as a gesture of love and affection, it cannot be presumed that it was due to any other reason.

7. It had also been found that the contention of the assessee that the property had been acquired out of the money provided by her husband had not been substantiated by sufficient evidence before the authorities below. No details of the amounts of the money provided by her husband had been given.

8. From the evidence available on record, the Tribunal had decided that the property had been settled by the assessee, in favour of her husband, on 19-12-1988, out of natural love and affection and that there was an element of gift in the transaction between the assessee and her husband. Therefore, the Tribunal had held that there was no infirmity in the order passed by the Commissioner of Income-tax (Appeals). Accordingly, the appeal filed by the assessee had been dismissed.

9. Aggrieved by the said order, the assessee had filed the present tax case appeal before this Court stating that the order of the Tribunal is contrary to the law and the facts and circumstances of the case. The Tribunal ought to have held that the transaction between the assessee and her husband cannot be termed as a gift, when a divorce petition had been filed before the concerned Family Court and an order had also been passed, subsequently.

10. The main contention of the learned counsel on behalf of the assessee is that the assessee and her husband had been living separately since, 19-9-1985, whereas, the settlement of property was made, only on 19-12-1988. He had also submitted that a divorce had taken place, on 29-6-1990, dissolving the marriage between the assessee and her husband B. Jayachandran. There was no collusion or fraud or undue influence exerted on the party, in obtaining the decree of divorce. He had further contended that there was no love and affection between the assessee and her husband and therefore, the transfer of property cannot be termed as a “gift”. Accordingly, it could not be assessed for the purpose of payment of Gift Tax.

11. The learned counsel appearing on behalf of the revenue supported the order of the Tribunal.

12. Considering the contentions raised on behalf of the assessee, as well as by the revenue, and on perusal of the records, we do not find sufficient cause or reason to set aside the order of the Tribunal. The contentions raised on behalf of the assessee that there was no love and affection between the assessee and her husband, when the property in question had been settled in favour of her husband, cannot be countenanced, as it is noted that the marriage between the assessee and her husband was subsisting at the time of the transfer of the property, by way of a ‘Deed of Gift Settlement’, dated 19-12-1988.

13. Similarly, regarding the gift of a motor vehicle, the order of the Assessing Officer, estimating its value at Rs. 50,000 and determining the taxable gift at Rs. 4,94,450, cannot be disputed, in the absence of sufficient evidence.

14. It is noted that the Tribunal had found, on facts, that the transactions were genuine in nature and that it had arisen from the subsistence of the relationship of husband and wife between the assessee and B. Jayachandran. The Tribunal had further pointed that the assessee had not produced any materials to show that the property purchased in the year, 1968, was out of the funds of her husband. Thus, in the absence of any such materials, the Tribunal, had rightly held that the transaction in question attracted gift tax. In the light of the factual findings, we do not find any justifiable grounds to accept the case of the assessee. It is no doubt true that the Tribunal had referred to section 281A(1A) of the Income-tax Act, 1961, to hold that the assessee should have informed the revenue that the property in question was held by her as a benami of her husband. It is a matter of relevance to note herein that the said provision had been repealed by the Benami Transactions (Prohibition) Act, 1988, with effect from 19-5-1988. As such, the question as to whether the assessee had held the property, as a benami of her husband, cannot be decided with reference to the said provision.

15. As already pointed out, it could be clearly held that the transfer of the property in question had been made by the assessee, in favour of her husband, only out of love and affection as it is not shown to have been acquired out of the money provided by her husband. As such, we do not find justifiable grounds to interfere with the order of the Tribunal. Accordingly, the tax case appeal stands dismissed. No costs. Connected T.C.M.P. No. 680 of 2004 is closed.

[Citation : 339 ITR 580]

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