JUDGMENT

K. JAGANNATHA SHETTY, J.:— This appeal by special leave is against the decision of the High Court of Kerala in Income-tax Reference No. 101 / 1974 and it raises an important issue concerning the requirements of a gift made "in contemplation of death" within the meaning of Section 5(1)(xi) of Gift Tax Act, 1958 (The Act). That reference was made under Section 26(1) of the Gift Tax Act, 1958 by the Income-tax Appellate Tribunal Cochin Bench. The Tribunal referred to the High Court two questions for its opinion, out of which we are concerned only with the first question which reads:

"Whether on the facts and circumstances of the case the tribunal was right in holding that the gift of movables valued at Rs. 67,578/- is not a gift made in contemplation of death within the meaning of Section 5(1)(xi) of Gift-Tax Act, 1958?"

The facts of the case as found by the Tribunal are simple and not unusual. Abdul Karim Mohammed a businessman in Cochin executed a document styled as "settlement will" gifting certain movables to the assessee respondent in the shape of business assets valued by the Gift-Tax Officer at Rs. 67,578/ The document was executed on 24 April, 1964 and at the time of execution, the donor was seriously ill. He died of the illness after about six weeks. In gift-tax assessment proceedings the assessee claimed exemption for this gift under Section 5(1)(xi) of the Act which provides that a gift shall not be charged under the Gift-Tax Act in respect of a gift made by any person in contemplation of death.

2. The Gift-Tax Officer rejected the claim of the assessee and brought the said amount to tax. But on appeal the Appellate Assistant Commissioner held to the contrary, He allowed the exemption sought for on the ground that the gift was in contemplation of death. He has relied upon the circumstances under which the gift was made and the events followed thereafter to reach his conclusion. He has described the facts and circumstances as follows: "Now I agree with Sri Karunakaran, that the absence of any reference in the deed of settlement to the illness from which the donor was suffering does not lead to the conclusion that there was no illness, or that the donor was not apprehensive of death resulting from the same. There is ample evidence to show that he was seriously ill at the time when he made the gift. He was aged about 72 at the time and he was also suffering from paralysis, diabetes, hernia etc. In fact, in view of the seriousness of the condition, he could not proceed to the Sub-Registrars office for registration of the document; on the other hand the sub-registrar was brought to his residence for the purpose of effecting the registration. In an affidavit filed by him before the Gift-Tax Officer on the 3rd August, 1969, the sub-registrar has affirmed that at the time of execution of the document the settlor was in sick bed and was unable to move out of the same. He has also stated that the settlor as well as his children showed anxiety and haste in the matter of registration on account of the serious nature of the illness. At that time, according to the sub-registrar the settlor was in his proper sense, but soon after the. execution of the deed, further complications set in and his power of speech and movements became impaired. Dr. V. B. Mohamed who was treating him has certified that on 4th June, 1964 the patient was unable to recognise the surroundings properly, and that his mental condition was impaired to a great degree. On 9th June, 1964 i.e. within about six weeks from the date of the settlement he died. In these circumstances, I am. satisfied that the donor, an aged gentleman who was seriously ill at the time of the settlement entertained no hope of recovery, and that it was in such a state of mind, that he made the settlement. Hence the gifts must be taken to have been made in contemplation of death."

3. The Gift-Tax Officer appealed to the Tribunal against the decision of the Appellate Assistant Commissioner