Savita Devi v. Commissioner Of Gift-Tax — 1998 DIGILAW 440 (MP)

JUDGMENT A.K. Mathur, C.J. 1. This is a reference under Section 26(1) of the Gift-tax Act, 1958. The Tribunal has referred the following question of law for answer by this court : "Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that gift of gold to the daughter and daughter-in-law on the occasion of their marriage amounted to 'gift' within the meaning of Section 2(xii) of the Gift-tax Act, 1958 ?" 2. The brief facts which are necessary for disposal of this reference are that during the course of the wealth-tax assessment proceedings of the late Shri Damji Tulsidas, it was noticed by the Gift-tax Officer that 80 tolas of gold ornaments in the assessment year 1980-81 were reduced to 50 tolas in the assessment year 1981-82. It was revealed that in the assessment year 1981-82, the deceased assessee had given 15 tolas of gold to his daughter and another 15 tolas to daughter-in-law at the time of their marriages on December 12, 1980, and December 13, 1980, respectively. The said 30 tolas of gold was assessed to gift-tax by the Gift-tax Officer after allowing exemption of Rs. 10,000 under Section 5(1)(vii) of the Gift-tax Act. The Appellate Assistant Commissioner, on appeal by the assessee, set aside the order of assessment passed by the Gift-tax Officer holding that it could not be considered as a gift as defined in Section 2(xii) of the Gift-tax Act. Aggrieved by the order of the Appellate Assistant Commissioner, the Department approached the Tribunal in appeal. The assessee also filed an objection raising a technical objection as to the proper form in which the appeal should have been filed. 3. The matter was heard by the Tribunal and the Tribunal after considering the matter reversed the decision of the Appellate Assistant Commissioner and restored the assessment order passed by the Gift-tax Officer. Thereafter, a reference application was moved before the Tribunal and the Tribunal has accordingly made the abovementioned reference to this court for its answer. Nobody has appeared on behalf of the assessee despite the reference having been made at the instance of the assessee. However, we have heard Shri V. K. Tankha, learned counsel for the Revenue and perused the record. 4. The Gift-tax Officer did not dilate on the question of definition of "gift" and granted exemption of Rs. Nobody has appeared on behalf of the assessee despite the reference having been made at the instance of the assessee. However, we have heard Shri V. K. Tankha, learned counsel for the Revenue and perused the record. 4. The Gift-tax Officer did not dilate on the question of definition of "gift" and granted exemption of Rs. 10,000 under Section 5(1)(vii) of the Act which is the maximum permissible and accordingly, decided the matter. However, the Appellate Assistant Commissioner took a different view that the assessee is a Hindu and Gujarati by caste and daughter and son are members of the family, the expenses incurred on the occasion of the marriage in cash or kind is customary and a Hindu father or mother under the Hindu law and the Hindu Adoptions and Maintenance Act, 1956, is under an obligation to give some property on the occasion of the marriage (as the liability of a Hindu). He also took the view looking to the status of the individual, that 80 tolas of gold ornaments were declared in his wealth-tax return up to the assessment year 1980-81 and giving of 15 tolas of gold ornaments on the occasion of the marriage of the daughter and another 15 tolas on the occasion of the marriage of his son, to her daughter-in-law could not be considered as a gift as defined under Section 2(xii) of the Gift-tax Act. Hence, the Appellate Assistant Commissioner took the view that there was no gift so as to attract gift-tax liability and consequently cancelled the gift-tax assessment made by the Gift-tax Officer. In appeal, the Tribunal reversed the finding given by the Appellate Assistant Commissioner and restored the finding of the Gift-tax Officer holding that it is a gift and, therefore, exemption granted to the extent of Rs. 10,000 under Section 5(1)(vii) of the Act is admissible. 5. Shri V. K. Tankha, learned counsel for the Revenue, submitted that as per the definition of "gift" given in Section 2(xii) of the Gift-tax Act, "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration and in the present case, this transfer by a father to his daughter on her marriage is a transfer without consideration in the course of pious obligation under the Hindu law, therefore, it will not fall under the definition of "gift". However, so far as gift of 15 tolas of gold to the daughter-in-law is concerned, the same will fall within the definition of "gift" as it is a transfer without any moral or customary obligation and the assessee would not be entitled to exemption under Section 5(1)(vii) of the Act as the daughter-in-law is not related and dependant upon her father-in-law for support and maintenance prior to the marriage. Hence, the assessee would not be entitled to exemption of Rs, 10,000 under Section 5(1)(vii) of the Act as far as the gift made in favour of the daughter-in-law is concerned. 6. Learned counsel invited our attention to a large number of decisions in which a view has been taken that whatever gift has been given by the father to his daughter in the marriage is not a gift in the sense defined under the Act but it is in discharge of pious obligation under the Hindu law. Therefore, such gifts would not fall strictly under the definition of "gift". Learned counsel invited our attention to the decision in the case of CGT v. Basant Kumar Aditya Vikram Birla [19821 137 ITR 72, a decision of the Calcutta High Court, where directly this question came up for consideration and their Lordships have taken the view that in discharge of such pious obligations, such gifts would not fall within the meaning of the definition of "gift". Their Lordships observed (headnote) : "The legal as well as moral obligation under the Hindu law of a Hindu undivided family to incur expenses on the occasion of the marriage of an unmarried daughter is recognised by the courts. A daughter has a right, as long as the family remained joint and had properties, to have her marriage expenses met out of the family fund. Hence, the legitimate marriage expenses of the daughter will have to be met out of the funds of the joint Hindu family and the amount spent cannot be described as a transfer or gift in terms of Section 2(xii) of the Gift-tax Act, 1958." 7. A similar view was taken by the Andhra Pradesh High Court in the case of CGT v. Ch. Chandrasehhara Reddy [1976] 105 ITR 849, by referring to the decision of their Lordships of the Supreme Court in the case of Kamla Devi v. Bachulal Gupta, AIR 1957 SC 434 . A similar view was taken by the Andhra Pradesh High Court in the case of CGT v. Ch. Chandrasehhara Reddy [1976] 105 ITR 849, by referring to the decision of their Lordships of the Supreme Court in the case of Kamla Devi v. Bachulal Gupta, AIR 1957 SC 434 . It was observed thus (headnote) : "A Hindu father, mother or other guardian has got a legal as well as a moral obligation to give his or her daughter in marriage to a suitable husband and is entitled to set apart a portion of the family property for the purpose of her marriage. In enacting Section 3(b)(ii) of the Hindu Adoptions and Maintenance Act, 1956, the Legislature did nothing more than codify the well settled principles of Hindu law and provide for payment of reasonable expenses incidental to the marriage. Hence, both under general Hindu law and the Hindu Adoptions and Maintenance Act, 1956, the father is under an obligation to give some property on the occasion of her marriage. If the conveyance is made to discharge the obligation of the father to provide for the maintenance of the daughter in the shape of reasonable expenses incidental to the marriage, it can be said to be a transfer for consideration and as such it will not be a 'gift' liable to gift-tax under the Gift-tax Act, 1958." 8. In another decision of the Andhra Pradesh High Court in the case of CGT v. Bandlamudi Subbaiah [1980] 123 ITR 509, where also the earlier decision was followed by their Lordships they took the view that settling an unmarried daughter to a marriage is a responsibility of the joint Hindu family and, therefore, the expenses which are being borne for discharging this obligation will not fall under the definition of "gift" as per Section 2(xii) of the Gift-tax Act. Following both the above decisions, in the case of CGT v. Bandi Subba Rao [1987] 167 ITR 66, the High Court of Andhra Pra-desh has gone a little further saying that when a father gives gift to his daughter it is a legal obligation and it is not even necessary that it should be given at the time of her marriage. If it is given after the marriage to the daughter, then it will amount to fulfilment of social and moral obligation and it will not fall under the definition of gift under Section 2(xii) of the Act. It was observed (headnote) : "A settlement or a gift made long after the marriage was in fulfilment of the pre-existing legal obligation of the father under the general Hindu law. Therefore, it ceased to be a voluntary act nor could it be labelled as without consideration. Therefore, it is neither an alienation nor a transfer attracting Section 2(xii) of the Gift-tax Act, but is a family settlement. Therefore, the assessee was not liable to pay gift-tax." 9. The Madras High Court in the case of CGT v. M. Radhakrishna Gade Rao [19831 143 ITR 260, has taken a similar view. It was observed that under the Hindu law, it is not only customary but also obligatory for joint family members to spend family funds for the marriage of an unmarried daughter. Therefore, it was held that the settlement of property in the instant case on the unmarried daughter could be said to be in discharge of the legal obligation of the Hindu undivided family and it could not be considered to be a gift as defined in Section 2(xii) of the Act. 10. In the case of CGT v. N. R. Agandeswara Iyer [1995] 214 ITR 360, the Madras High Court has reiterated the same principle and held that the settlement made by the father in discharging his liability on the occasion of the marriage of his daughter cannot be said to be a gift and it is not liable to gift-tax. 11. In view of the law laid down in the above cases, it may be seen that the definition of "gift" which has been provided in the Act under Section 2(xii) has been sought to be interpreted in the background of social customs in the country. The definition of "gift" has been by judicial decisions formulated to suit the social conditions obtaining in the country. The definition of "gift" has been by judicial decisions formulated to suit the social conditions obtaining in the country. In the present case, 15 tolas of gold given by the assessee to his daughter in the marriage cannot be treated to be a gift as it is in discharge of social and moral obligation and the definition of "gift" is to be interpreted in the manner that it will not cover the expenses incurred in discharge of social and moral obligation. Hence, this 15 tolas of gold cannot be treated to be a gift under Section 2(xii) of the Act. Therefore, the view taken by the Tribunal that it will amount to a gift is not correct. Since it is not a gift, therefore, it will not be subjected to any provisions of the Gift-tax Act. 12. So far as the gift made by the assessee to his daughter-in-law is concerned, it appears to be a gift because there is no moral obligation on the part of the father-in-law to part with any movable or immovable property. It may at best be a social obligation and cannot be treated as a moral obligation under the Hindu law to settle any movable and immovable property on the daughter-in-law. It is nothing but a voluntary transfer by the assessee to another person and it will definitely fall within the definition of "gift" as provided in Section 2(xii) of the Act. 13. The next question is that the property given to the daughter-in-law by the assessee being a gift, whether the assessee is entitled to exemption under Section 5(1)(vii) of the Act or not. Section 5(1)(vii) of the Act says that an assessee will be entitled to exemption if the gift is made to a relative, dependent upon him for support and maintenance, subject to a maximum of rupees ten thousand in value in respect of the marriage of each such relative. The daughter-in-law does not become a dependant relative for support and maintenance, as prior to marriage with the son of the assessee, there is no relation and the relationship materialises only after the marriage is solemnised. Before solemnisation of the marriage, there is no relation whatsoever with the so-called daughter-in-law. Therefore, strictly speaking, the daughter-in-law will not fall under the exemption clause because she is not a relative depending on the assessee for support and maintenance. Before solemnisation of the marriage, there is no relation whatsoever with the so-called daughter-in-law. Therefore, strictly speaking, the daughter-in-law will not fall under the exemption clause because she is not a relative depending on the assessee for support and maintenance. In fact, the marriage is solemnised by the father of the bride and that obligation is that of the father of the bride and not of the future father-in-law and, therefore, it is the father of the bride who has discharged a social and moral obligation. Hence, the assessee is not entitled to any exemption under Section 5(1)(vii) of the Act. 14. A similar view has been taken by this court in the case of Smt. Lalitabai Sobhagmal v. CGT[1986] 161 ITR 97, wherein it has been observed as under (page 99) : "In view of the finding of the Tribunal that Surekha was not related to or dependent on the assessee at the time of the gift" the provisions of Section 5(1)(vii) of the Act were rightly held to be not attracted. The Tribunal was, therefore, justified in holding that the assessee was not entitled to deduction of Rs. 10,000 under Section 5(1)(vii) of the Gift-tax Act, 1958." 15. In the case of CGT v. K. B. B. Subudhi [1993] 201 ITR 741, the Orissa High Court has also similarly held by interpreting the provisions of Section 5(1)(vii) as under (headnote) : "The relationship starts after the marriage is solemnised. Before solemnisation of the marriage, there is no relationship stricto sensu. Even though the word 'relative' is to be understood in a broader sense that cannot be said to include a prospective relative. Therefore, a gift to the daughter-in-law even subsequent to the marriage cannot be said to be a gift to a relative dependent for support and maintenance on the occasion of marriage . . ." 16. Even though the word 'relative' is to be understood in a broader sense that cannot be said to include a prospective relative. Therefore, a gift to the daughter-in-law even subsequent to the marriage cannot be said to be a gift to a relative dependent for support and maintenance on the occasion of marriage . . ." 16. In this view of the matter, we hold that so far as the first transaction is concerned, giving 15 tolas of gold to the daughter by the assessee cannot be a gift under Section 2(xii) of the Gift-tax Act and, therefore, there is no question of applicability of the provisions of the Gift-tax Act, However, so far as the second transaction of transfer of 15 tolas of gold by the assessee in favour of the daughter-in-law is concerned, it is a gift but the assessee will not be entitled to exemption under Section 5(1)(vii) of the Act as the daughter-in-law, prior to her marriage was neither related nor dependent upon the assessee for support or maintenance. 17. Reference is accordingly answered.