Tc/1061/2004 Of M/S K.meenakumari 5/2 v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS Coram The Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Mr.Justice M.JAICHANDREN Tax Case (Appeal) No.1061 of 2004 K.Meenakumari The Income Tax OfficerCity Ward VII (14)Chennai-34 ...Appellant -vs- ...Respondent Tax Case (Appeal) filed under Section 260 A of the Income TaxAct, 1961 against the order of the Income Tax Appellate TribunalMadras Bench, dated 25.08.2004 in BTA No.4/Mds/2001. against the Order of the Commissioner of Income Tax (Appeals) dated9.8.99 in GT/Appeal No.1/99-2000, for the assessment Year 1989-90against the Order of the Income Tax Department dated 22.3.99, inP.A.N/G.I.R.No.752043 - City Ward VII(14) Chennai -34 for theassessment Year dated 1.4.1989 to 31.3.1990. For appellant : Mr.C.V.Rajan for M/s.Subbaraya AiyarFor respondent : Mr.J.Naresh KumarJ U D G M E N T (The Judgment of the Court was made by M.JAICHANDREN,J.) The assessee has filed the present appeal against the order ofthe Income Tax Appellate Tribunal, Chennai Bench – 'D', dated25.08.2004, made in G.T.A.No.4/Mds/2001, raising the followingsubstantial question of law:- " Whether on facts and in the circumstancesof the case, the Tribunal was right in holdingthat the property was transferred out of love andaffection and hence there is an element of giftinvolved while the petition for divorce was filedon the same date of settlement and the same was https://hcservices.ecourts.gov.in/hcservices/ pending before the Court?" 2. The appellant had been assessed to Income Tax, by the IncomeTax 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 theappellant had made a gift of an immovable property, namely, a vacantland, measuring an extent of two grounds and 376 sq.ft., situated inPuliyur Village, at present known as Anna Nagar, Kodambakkam. Thesaid property had been settled in favour of B.Jayachandran, thehusband of the appellant, by a deed executed on 19.12.1988, and thesettlement was said to be out of love and affection. The market valueof the land was found to be Rs.4,74,450/-. The survey operation hadindicated that the assessee had also transferred a motor car infavour of B.Jayachandran, during the same year. In response to thenotice issued to the assessee, she had filed a return of gift, on17.1.1997, showing the gift as 'Nil'. She had submitted before theGift Tax Officer that the gift document had been executed, on19.12.1988, settling the property. It had also been submitted that itwas not a gift, as it was only by way of a settlement, made whilesettling the dispute that had existed between the assessee and herhusband B.Jayachandran, and that a divorce had also taken placebetween them. In support of the said claim, an order of the PrincipalFamily Court, dated 29.6.1990, had been filed. The Gift Tax Officerhad valued the immovable property at Rs.4,74,450/- and had valued themotor car at Rs.50,000/- and determined the total gift atRs.4,94,450/-. Gift tax at Rs.1,48,335/- and interest thereon hadbeen levied at Rs.2,69,906/-, under Section 16(B) of the Gift TaxAct, 1958. As such, the total tax payable by the assessee wasRs.4,18,241/-. 3. Aggrieved by the said order, the assessee had filed an appealbefore the Commissioner of Income Tax (Appeals), Chennai, contendingthat the property in question did not belong to the assessee, as ithad been bought by her husband B.Jayachandran, in the name of theassessee. There was no love and affection subsisting between them, onthe date of the execution of the settlement deed, on 19.12.1988, asthe 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 theassessee, as well as the Department, the Commissioner of Income Tax(Appeals) had confirmed the order of assessment, by its order, dated9.8.1999. 5. Aggrieved by the said order, the assessee had filed an appealbefore the Income Tax Appellate Tribunal, Chennai Bench – 'D',challenging the levy of gift tax. In the meanwhile, the departmenthad initiated recovery proceedings and had also attached theproperties of the assessee. 6. On considering the submissions made on behalf of theappellant, as well as the respondent, the Tribunal had come to theconclusion that the property had been transferred by the assessee toher husband out of love and affection and that the marriage wassubsisting at the time of the transfer of the property, as thedivorce had taken place, only on 29.6.1990. While the reason for thetransfer of the property had been mentioned as a gesture of love andaffection, it cannot be presumed that it was due to any other reason. 7. It had also been found that the contention of the assesseethat the property had been acquired out of the money provided by herhusband had not been substantiated by sufficient evidence before theauthorities below. No details of the amounts of the money provided byher husband had been given. 8. From the evidence available on record, the Tribunal haddecided that the property had been settled by the assessee, in favourof her husband, on 19.12.1988, out of natural love and affection andthat there was an element of gift in the transaction between theassessee and her husband. Therefore, the Tribunal had held that therewas no infirmity in the order passed by the Commissioner of IncomeTax (Appeals). Accordingly, the appeal filed by the assessee had beendismissed. 9. Aggrieved by the said order, the assessee had filed thepresent tax case appeal before this Court stating that the order ofthe Tribunal is contrary to the law and the facts and circumstancesof the case. The Tribunal ought to have held that the transactionbetween the assessee and her husband cannot be termed as a gift, whena divorce petition had been filed before the concerned Family Courtand an order had also been passed, subsequently. 10. The main contention of the learned counsel on behalf of theassessee is that the assessee and her husband had been livingseparately since, 19.09.1985, whereas, the settlement of property wasmade, only on 19.12.1988. He had also submitted that a divorce hadtaken place, on 29.06.1990, dissolving the marriage between theassessee and her husband B.Jayachandran. There was no collusion orfraud or undue influence exerted on the party, in obtaining thedecree of divorce. He had further contended that there was no loveand affection between the assessee and her husband and therefore, thetransfer of property cannot be termed as a "gift". Accordingly, itcould not be assessed for the purpose of payment of Gift Tax. 11. The learned counsel appearing on behalf of the Revenuesupported the order of the Tribunal. 12. Considering the contentions raised on behalf of theassessee, 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 11. The learned counsel appearing on behalf of the Revenuesupported the order of the Tribunal. 12. Considering the contentions raised on behalf of theassessee, 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 thatthere was no love and affection between the assessee and her husband,when the property in question had been settled in favour of herhusband, cannot be countenanced, as it is noted that the marriagebetween the assessee and her husband was subsisting at the time ofthe 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 orderof the Assessing Officer, estimating its value at Rs.50,000/- anddetermining the taxable gift at Rs.4,94,450/-, cannot be disputed, inthe absence of sufficient evidence. 14. It is noted that the Tribunal had found, on facts, that thetransactions were genuine in nature and that it had arisen from thesubsistence of the relationship of husband and wife between theassessee and B.Jayachandran. The Tribunal had further pointed thatthe assessee had not produced any materials to show that the propertypurchased in the year, 1968, was out of the funds of her husband.Thus, in the absence of any such materials, the Tribunal, had rightlyheld that the transaction in question attracted gift tax. In thelight of the factual findings, we do not find any justifiable groundsto accept the case of the assessee. It is no doubt true that theTribunal had referred to Section 281A(1A) of the Income Tax Act,1961, to hold that the assessee should have informed the Revenue thatthe 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 provisionhad been repealed by the Benami Transactions (Prohibition) Act, 1988,with effect from 19.5.1988. As such, the question as to whether theassessee had held the property, as a benami of her husband, cannot bedecided with reference to the said provision. 15. As already pointed out, it could be clearly held that thetransfer 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 notshown to have been acquired out of the money provided by her husband.As such, we do not find justifiable grounds to interfere with theorder of the Tribunal. Accordingly, the tax case appeal standsdismissed. No costs. Connected T.C.M.P.No.680 of 2004 is closed. To 1.The Income Tax Officer,City Ward VII (14),Chennai-34 2.The Commissioner of Income Tax (Appeals), Chennai 3.The Income Tax Appellate Tribunal Bench 'D', Chennai Bench 'D', Chennai 4.The Assistant Registrar Income Tax Appellate TribunalIIIrd Floorl, Rajaji Bhavan,Beassant Nagar, Chennai -90. 1 cc to Mr. R.V.Rajan Associates, Advocate, Sr.No.41462 1 cc to Mr. J.Naresh Kumar, Advocate, Sr.No.41501 RJ(CO)PMK.13.9.2011 Tax Case(Appeal)No.1061 of 2004