1. Gift of land to three minor daughters to meet maintenance obligation under Hindu law. (Para 1 , 2 )
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2000 Supreme(SC) 1827
SUPREME COURT OF INDIA
D.P.Mohapatra : S.N.Phukan : S.P.Bharucha
Commissioner Of Gift Tax
Versus
B.S.Apparao
Case No. : 1981 of 1995
Date of Decision : 11/16/00
A transfer of property made to satisfy a statutory legal obligation to maintain a child (including education and marriage expenses) does not constitute a "gift" under the Gift-tax Act and is therefore not taxable.
Headnote:(A) Gift-tax Act - Section 5(l)(vii) - Hindu Adoptions and Maintenance Act, 1956 - Sections 3(b) and 20 - Transfer of property to minor daughters for maintenance - Whether such transfer constitutes a taxable gift - If a transfer of property is made specifically to satisfy a legal obligation to maintain children, including provisions for education, livelihood, and marriage expenses as mandated by law, such transfer cannot be regarded as a "gift" within the meaning of the Gift-tax Act. (Para 5)
Facts of the case:
The assessee transferred land worth one lakh rupees each to his three minor daughters. The transfer deeds expressly stated that the properties were provided to fulfill the assessee's legal obligation to look after the daughters' education, livelihood, marriage, and other expenses. The Revenue argued that the transfers were taxable gifts, except for a limited exemption amount allowed for relatives dependent for support on the occasion of marriage.
Findings of Court:
The court affirmed the decisions of the Tribunal and the High Court, concluding that a transfer executed to meet a legal obligation cannot be classified as a gift.
Issues: Whether the settlement of lands made by the assessee to his three minor daughters, intended to satisfy legal obligations of maintenance, fell within the meaning of a taxable gift under the Gift-tax Act.
Ratio Decidendi: Under the Hindu Adoptions and Maintenance Act, 1956, a father is legally bound to maintain his daughter, and the definition of maintenance includes food, clothing, residence, education, medical treatment, and marriage expenses for an unmarried daughter. Because the transfer of property was made in satisfaction of this existing legal obligation, it does not qualify as a voluntary gift and is therefore not subject to gift-tax. (Paras 4, 5)
Result: Civil appeal dismissed.
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Table of Contents
2. Revenue argued gift taxable except for Rs. 10,000 exemption; assessee contended transfer to meet legal obligation not a gift. (Para 3 , 4 )
3. Transfer to meet obligation under law cannot be regarded as a taxable gift under the Gift-tax Act. (Para 5 )
4. A transfer to satisfy a legal obligation of maintenance does not constitute a gift under the Gift-tax Act. (Para 5 )
5. Civil appeal dismissed with no order as to costs. (Para 6 , 7 )
6. Does a transfer of property to fulfill a legal obligation of maintenance constitute a taxable gift under the Gift-tax Act?
No, a transfer to meet a legal obligation under law, such as a Hindu father's duty to maintain his daughter, is not a gift under the Act. (Para 4 , 5 )
S.P.BHARUCHA, J.
(1) THE Revenue questions the correctness of the decision of a Division Bench of the High Court at Hyderabad to answer in the negative and in favour of the assessee the following question :
"WHETHER on the facts and in the circumstances of the case, the settlement of lands made by the assessee to his three minor daughters fell within the meaning of taxable gift under the Gift-tax Act?"
(2) THE assessment year with which we are concerned is 1970-71. During the course of the year, that is, on 26/03/1970, the assessee gifted in favour of his three minor daughters, aged five, three and one respectively, land worth Rupees one lakh each. The gift deeds, one of which is produced before us and which, it would appear, was before the authorities and the Tribunal, states that the gifts were made because it was the assessees bounden duty according to the law to look after the daughters education, livelihood, marriage and other expenses. Before the Gift-tax Officer the assessees plea that this was not a gift but a transfer of property to meet his obligation under law met with no success. However, the Appellate Assistant Commissioner, the Tribunal and the High Court accepted the assessees contention.
(3) LEARNED counsel for the Revenue drew our attention to the provisions of Section 5(l)(vii) of the Gift-tax Act. By reason thereof, gift-tax is not chargeable in respect of gifts made by any person "to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of Rupees ten thousand in value in respect of the marriage of each such relative". [That is how the provision read at that time; the limit is now Rupees one hundred thousand.] It was submitted by learned counsel that, therefore, the gift was exempt only in respect of the sum of Rupees ten thousand for each daughter and that the balance was exigible to gift-tax.
(4) ON the other hand, reliance was placed upon Section 20 of the Hindu Adoptions and Maintenance Act, 1956. By reason of Section 20 thereof, a Hindu is bound during his lifetime to maintain his daughter and his obligation extends to the extent that she cannot maintain herself out of her own earnings or other property. "Maintenance" is defined under Section 3(b) of this Act to include provision for food, clothing, residence, education and medical attendance and treatment; in the case of an unmarried daughter, it extends also to reasonable expenses incidental to her marriage. Attention is drawn to the fact that the gift deed expressly provides that the gift is made in satisfaction of the assessees obligation under law to maintain his daughters.
(5) WE think, in the circumstances, that the view taken by the Tribunal and the High Court deserves to be affirmed. The transfer to meet the obligation under law cannot be regarded as a gift within the meaning of the Gift-tax Act.
(6) ACCORDINGLY, the civil appeal is dismissed.
(7) NO order as to costs.
