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2001 DIGILAW 616 (KER)

Commissioner of Gift Tax v. M. C. George

2001-11-01

C.N.RAMACHANDRAN NAIR, P.K.BALASUBRAMANYAN

body2001
Judgment :- P.K. Balasubramanyan, J. The assessee is a Christian hailing from the erstwhile Travancore area of the State of Kerala. The assessee, before the States Reorganisation Act was extended, was governed by the Travancore Christian Succession Act. The assessee married away his daughter on 9.9.1985. While marrying away his daughter, the assessee gifted to his daughter a sum of Rs. 85,001/-. The assessee did not file any return under the Gift Tax Act for the assessment year 1986-87 in respect of the gift made to his daughter at the time of her marriage. A notice under S.16(1) of the Gift Tax Act was hence issued to the assessee. In response to that notice, the assessee filed a nil return. At the hearing, the assessee explained that the payment of Rs. 85,001/- to his daughter at the time of marriage did not constitute a gift since he was under an obligation to maintain his daughter. According to the assessee, his obligation to maintain his daughter included the obligation of getting his daughter married in an appropriate manner and he was only discharging his obligation as a father when he gifted the sum of Rs. 85,001/- to the daughter at the time of her marriage, according to the assessee, therefore, it was not a gift as defined under the Gift Tax Act, 1958 and it was really a transfer of money by him to his daughter in consideration of the discharge of his obligation as a Christian father. The assessing officer rejected the contention of the assessee. The officer stated that a Christian father is obliged to bring up his daughter properly and marry her away in a decent manner. But a lumpsum payment made to the daughter at the time of her marriage will definitely constitute gift which can be subjected to tax under the Gift Tax Act. When a father married away his daughter, it was not necessary that he should also make a gift of the lumpsum. Thus the gift tax officer completed the assessment after providing for exemptions under S.5 of the Act and determining that the taxable gift was Rs. 75,000/-. The assessee went up in appeal before the Deputy Commissioner of Income Tax (Appeals). Thus the gift tax officer completed the assessment after providing for exemptions under S.5 of the Act and determining that the taxable gift was Rs. 75,000/-. The assessee went up in appeal before the Deputy Commissioner of Income Tax (Appeals). The Deputy Commissioner of Income Tax held that the decision of the Andhra Pradesh High Court in Commissioner of Gift Tax v. Bandi Subba Rao, 167 ITR 66 which related to a gift made by a Hindu father to his daughter, could not be applied to a case of a gift by a Christian father to his daughter at the time of her marriage and that the gift was exigible to tax under the Gift Tax Act subject to deductions provided for under Ss.5(1)(vii) and 5(2) of the Act. Thus the appeal was dismissed. The assessee went up in appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal upheld the plea of the assessee that a Christian father was bound to maintain his daughter and the maintenance included getting the daughter married to a suitable person. After referring to the decision of the Andhra Pradesh High Court relied on by the assessee, the Tribunal referred to a decision of this Court in Scariah Varghese v. Marykutty,1991 (2) KLT 71 and the decision of the Travancore Cochin High Court in Cheriya Varkey v. Ouseph Thresia, AIR 1955 TC 255 and took the view that even a Christian father was under a legal obligation to maintain his daughter and the discharge of such an obligation at the time of the marriage of the father did not amount to making a gift exigible to gift tax. According to the Tribunal there was no distinction between a Hindu father and a Christian father in this respect. Thus the order of assessment was set aside by the Tribunal. According to the Tribunal there was no distinction between a Hindu father and a Christian father in this respect. Thus the order of assessment was set aside by the Tribunal. At the instance of the Revenue, the following question has been referred to us under S.26(1) of the Gift Tax Act: "Whether, on the facts and in the circumstances of the case and also in the light of the observation of the Kerala High Court in its Full Bench decision reported in 86 ITR 516 "there is no legal obligation on the part of the Christian father to maintain or educate his minor children" the Tribunal is right in law and fact in holding, i) Christian father is under a legal obligation to maintain his daughter? ii) maintenance of a daughter includes getting her married? iii) a reasonable amount paid at the time of marriage cannot be considered as gift liable to gift-tax? iv) Rs. 85,001/- paid by the assessee to his daughter is not liable to gift-tax?" 2. After the Indian Succession Act was extended to the united State of Travancore Cochin, the assessee in this case is governed by the Indian Succession Act. Under the Travancore Christian Succession Act, a daughter was entitled to be paid Sthreedhanam at the time of her marriage and if she had not been paid Sthreedhanam, she was entitled to inherit a share in the property of the father, limited to the value of Rs. 5,000/-. But under the Indian Succession Act, she gets only a right of inherit the properties which her father dies possessed of. There is no case for the assessee here that the amount of Rs. 85,001/- transferred to his daughter was as Sthreedhanam as understood by the members of his community, nor has the assessee a case that the amount was expenses incurred for the marriage of his daughter. He has also no case that it was a payment in lieu of maintenance due to his daughter before her marriage. This was obviously an amount given by the assessee to his daughter in addition to the amount spent by him on the marriage of the daughter. In this situation, the question is whether the payment of this amount to the daughter could not be treated as a gift as defined in the Act, the consideration for which is only love and affection. 3. In this situation, the question is whether the payment of this amount to the daughter could not be treated as a gift as defined in the Act, the consideration for which is only love and affection. 3. In Chacko Daniel v. Daniel Joshua, AIR 1953 Travancore-Cochin 61, it was held by the Travancore Cochin High Court that there was no obligation on the part of a Christian father to maintain his minor child which could be enforced through a court of law. In Cheriya Varkey v. Ouseph Thresla, AIR 1955 Travancore Cochin 255, the Travancore Cochin High Court held that under the principles of justice, equity and good conscience, the obligation of a Christian husband to maintain his wife was not a mere moral obligation but is a legal obligation which could be enforced in law, although not by direct action by the wife. Therefore, according to the personal law of the Christians, in the Travancore-Cochin State, the husband has a legal obligation to maintain his wife. The wife is entitled to claim separate maintenance only if there is justifiable cause for her refusal to live with her husband. This decision shows that on the marriage of the Christian lady, the obligation to maintain her passes to the husband even if we assume that until then the Christian father had the legal obligation to maintain his daughter. 4. The question came to be considered in the context of S.64 of the Income Tax Act, 1961 by a Full Bench of this Court in Commissioner of Income Tax v. P.M. Paily Pillai 1972 KLT 24. The Full Bench consisting of Mr. Justice P. Govindan Nair (as he then was), Mr. Justice T.S. Krishnamoorthy Iyer and Mr. Justice M.U. Issac, after referring to the decision in Chakko Daniel v. Daniel Joshua, (AIR 1953 Travancore Cochin 61), the decision of the Calcutta High Court in V.J. Walter v. M.J. Walter, AIR 1928 Calcutta 600, of the Bombay High Court in Philomena Mendoza v. Dara Nusserwanji, AIR 1943 Bombay 338, a passage from Trevelayan's Law Relating to Minors, Simpson on the Law of Infants and Halsbury's Laws of England, stated that they were in respectful agreement with the view expressed in Chakko Daniel v. Daniel Joshua, AIR 1953 Travancore Cochin 61, to the effect that a Christian father has no obligation enforceable in a civil court, to maintain his minor child. Their Lordships held that the transfer of property by the father in favour of his child could only be in the nature of a gift for the reason that the child had not suffered any detriment. Their Lordships also specifically disapproved the decision in 5. Viswasom v. Commr. of Income Tax, Kerala, 50ITR 503, which took the view that there was a legal obligation on the part of a Christian father to support his minor son and discarded the view taken therein as erroneous. We think that the principle enunciated by the Full Bench in Commissioner of Income Tax v. Paily Pillai, 1972 KLT 24 (86 ITR 516) must necessarily govern the situation. Learned counsel for the assessee brought to our notice, the decision of a learned Single Judge of this Court in Scariah Varghese v. Marykutty,1991 (2) KLT 71. In that decision, after referring to the decision in Cheriya Varkey v. Ouseph Thresia, AIR 1955 Travancore Cochin 255, the learned Single Judge held that the position in India was different from the position obtaining in England and that even though there was no statutory provision mandating a Christian father or a Christian husband to maintain his children or his wife, there was in fact an obligation on the father to maintain his daughter and on the husband to maintain his wife. The learned judge then referred to the ratio of the decision in Commissioner of Income Tax v. Paily Pillai,1972 KLT 24 and stated that, that decision should be understood in the special setting in which the principle was stated by the Full Bench and that the principle could not be pressed into service in a plain case where a father claims immunity from an obligation to pay any amount as maintenance to his child. We must notice here that we are not troubled by that different fact situation in these cases. Here, we, are dealing with the exigibility to tax under the Gift Tax Act, of the transfer of a fund by the father to his daughter at the time of her marriage and are concerned with the question whether it would satisfy the definition of a gift under the Gift Tax Act. In our view, there is no justification for us not to follow the ratio of the decision of the Full Bench in Commissioner of Income Tax v. Paily Pillai,1972 KLT 24, which has direct bearing. In our view, there is no justification for us not to follow the ratio of the decision of the Full Bench in Commissioner of Income Tax v. Paily Pillai,1972 KLT 24, which has direct bearing. We are also of the view that the learned single judge in Scariah Varghesev. Marykutty,1991(2) KLT 71 was not justified in distinguishing the decision of the Full Bench on the reason stated by him. 6. Even going by the principle of justice, equity and good conscience enunciated in the decision in AIR 1955 Travancore Cochin 255 and 1991 (2) KLT 71, the obligation of the Christian father to maintain his daughter obviously ceases when he has given her away in marriage. Once the marriage takes place, the obligation to maintain her is that of the husband as is clear from the decisions themselves. Therefore, on the date the gift was made by the father to the daughter in this case, he had no obligation, not only not enforceable through a civil court, but also on the general principle of justice, equity and good conscience to maintain his daughter or to provide for her future maintenance since that obligation had passed on to her husband. In that situation, the transfer of the sum of Rs. 85,001/- by the assessee father to the daughter could only be deemed to be a gift as defined in the Gift Tax Act. It may be noted that in the decision in Commissioner of Gift Tax v. Smt. B. Indira Devi, 238 ITR 846, this Court held that the obligation of the Hindu father also ceases when the daughter is given in marriage and a gift made to her after marriage was exigible to tax under the Gift Tax Act. 7. A reference to S.5(1)(vii) of the Act also shows that irrespective of the community to which a person belongs, a gift to any relative dependant upon the donor for support and maintenance, on the occasion of the marriage of the dependant relative, is exempt only to the extent of the amount limited by that provision. At the relevant time the exemption was only uptoRs.10,000/-. This provision for exemption itself indicates that a gift by a father to his daughter at the time of her marriage, irrespective of the religion or caste in excess of Rs. 10,000/- would be a gift exigible to tax under the Gift Tax Act. 8. At the relevant time the exemption was only uptoRs.10,000/-. This provision for exemption itself indicates that a gift by a father to his daughter at the time of her marriage, irrespective of the religion or caste in excess of Rs. 10,000/- would be a gift exigible to tax under the Gift Tax Act. 8. The decision of the Andhra Pradesh High Court relied on by the Tribunal which was subsequently approved by the Supreme Court in Commissioner of Gift Tax v. B.S. Apparao, in 248 ITR 103 related to a gift made by a Hindu father. Under the Hindu law, a father had a legal obligation to maintain and marry away his daughter and that legal obligation could be enforced by the daughter in an action through the civil court. The authorities referred to by us including the Full Bench of the Kerala High Court clearly state that there is no such corresponding right in a Christian daughter which could be enforced as against her father. The decision of the learned single judge in Scariah Varghese v. Marykutty,1992 (1991 (2) KLT 71, with respect, cannot be followed in the light of the clear pronouncement on the question by the Full Bench in the decision in Commissioner of Income Tax. v. Paily Pillai,1972 KLT 24. The decision of the Andhra Pradesh High Court approved by the Supreme Court is, therefore, clearly distinguishable and could not be applied to a gift by a Christian father to his daughter. The Tribunal, in our view, was therefore, in error in applying the principle of that decision to the facts of this case. In the light of what we have stated above, the question referred to us is to be answered in favour of the Revenue and against the assessee. We, therefore, answer the question in favour of the Revenue and against the assessee.