JAGANMOHAN REDDY C.J. - The Income-tax Tribunal has referred the follwing question for our consideration and opinion, viz. :
'Whether, on the factts and in the circumstances of the case, the assessee is entitled to exemption of the expenditure of Rs. 10,317 for 1960-61 assessment and Rs. 21,118 for 1961-62 assessment under section 5(j) of the Expenditure-tax Act.'
The assessee and his two sons are owners in equal shares of a building called 'Bellevue Palace' in Punjagutta, in respect of which the assessee year 1960-61 and Rs. 31,782 for the assessment year 1961-62. These amounts were spent on behalf of all the three of them, so that the 2/3rds share of both his sons for the year 1960-61 amounted to Rs. 10,317 and Rs. 21,118 for 1961-62. The assessee evidently relinguished his rights to recover those amounts from his sons and voluntarily filed a gift tax return under the Gift-tax Act and had himself assessed thereto and paid the tax. For the years 1960-61 and 1961-62, the assessee claimed exemption from expenditure tax for the amounts said to have been gifted by him, under section 5(j) of the Expenditure-tax Act. Section 5(j) of the Expenditure-tax Act, before its amendment was as follows :
'5. No expenditure-tax shall be payable under this Act in respect of any such expenditure as is referred to in the following clauses, and such expenditure shall not be included in the taxable expenditure of an assessee ..
(j) any expenditure incurred by the assessee by way of or in respect of, any gift, donation, or settlement on trust or otherwise for the benefit of any other person.'
The Expenditure-tax Officer disallowed the claim on the ground that the expenditure was to be considered if at all only under section 4(e) of the Act and that no exemption can be granted, as the property was under occupation of the assessee. The Appellate Assistant Commissioner, on appeal observed that the expenditure incurred was of a personal nature, such as repairs to refrigerators, repairs to water taps, cost of radio, salary to gardeners, safidars, etc., that the claim for treating 2/3rds of the expenditure under section 5(j) as gift to the two sons is not clearly admissible, and that the Expenditure-tax Officer was correct in rejecting the appellants claims.
On appeal, the Tribunal did not agree with the Appellate Assistant Commissioner that all the items of expenditure were of a personal nature. It held :
'No doubt some of the items included are clearly of a personal nature, but most of the other items would appear to have been incurred only for the upkeep and maintenance of the property jointly owned.'
Two contentions were raised before the Tribunal, vis., (1) that the amounts in question represented gifts by the assessee to his sons; and (2) that in any case the assessee had incurred the expenditure for the benefit of other persons, viz., the sons. Regarding the first contention, it was urged before the Tribunal that the assessee had already been assessed to gift-tax on these amounts. The Tribunal, however, did not accept this contention, firstly, because that fact was not conclusive, as it was obviously to the benefit of the assessee to be assessed to gift-tax as the rate of such tax was very low compared to the expenditure-tax, and, secondly, the liability to gift-tax was determined by the definition of 'gift' as given in the Gift-tax Act, whereas for the purpose of the Expenditure-tax Act, there was no such definition and the word 'gif' had to have the same meaning as under the Transfer of Property Act, the ingredients of which were clearly absent in this case. The second contention was also negatived by the Tribunal.
It may be stated, at the very outset, that for the purpose of determining whether gift, which has been subjected to tax under the Gift-tax Act, is exempt under the Expenditure-tax Act, it is immaterial whether the rates under the Gift-tax Act were less than the rates under the Expenditure-tax Act. These considerations cannot be taken into account in interpreting a taxing statute. If such considerations are to prevail, it may also be contended by the assessees advocate that because gift-tax has already been paid, the legislature will not countenance double taxation and, therefore, would not have intended to assess it under the Expenditure-tax Act. The crucial question which we are called upon to determine is whether the word 'gift' used in section 5(j) of the Expenditure-tax Act is a gift as understood under the general law, or, will it also take in gifts as defined under the Gift-tax Act.
It cannot be disputed that a gift under the general law is nonetheless a gift under Gift-tax Act, which in its definition has not only included a gift so called, but also extended it to include other modes of disposition. A gift is defined under section 122 of the Transfer of Property Act as follows :
'Gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.'
Gift, for the purposes of the Gift-tax Act, is defined under section 2(xii) as under :
'Gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or moneys worth, and includes the transfer of any property deemed to be a gift under section 4.'
It will be observed that the condition that the transfer of movable or immovable property has to be accepted by or on behalf of the donee, in order to bring it within the definition of gift under the Transfer of Property Act, has been done away with under the Gift-tax Act. And so, even without its acceptance, the transfer by one person to another of any existin movable or immovable property made voluntarily and without consideration in money or moneys worth, would amount to a gift under the Gift-tax Act. So also, a transfer deemed to be a gift under section 4 of that Act, which, among others, includes for, the purposes of that Act, the following, viz.;
'Where there is a realease, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interes in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment.'
It may be stated that gifts under section 4 ordinarily would not come within the definition of gift under the Transfer of Property Act. Nonetheless, the statute has specifically deemded them to be gifts for the purposes of that Act. What we have to see is whether a gift coming within the definition of the Gift-tax Act and charged thereunder is a gift within the definion of section 5(j) of the Expenditure-tax Act. As we have said earlier, a gift under the Transfer of Property Act would nonetheless be a gift under the Gift-tax Act, so that it cannot be said that when the Expenditure-tax Act under section 5(ju) used the word 'gift' it is only confining to the Transfer of Property Act. It may be noted that section 5 of the Expenditure-tax Act deals with exemption from expenditure-tax. The reason for exempting such expenditure is either because it is incurred by way of capital expenditure, which naturally brings it within the purview of the Wealth-tax Act or because the expenditure was by way of certain disbursement which are exempted under the Income-tax Act or where it has attracted other tax, such as under the Gift-tax Act. If this was not so, then we would be imputing to the legislature an intention of exempting only specific gifts coming within the definition of the Transfer of Property Act. If that was the intention, the legislaure would have specifically stated so. That it was not the intention of the legislature to include in the exexption gifts coming under the Gift-tax Act is made evident by the addition of the proviso to section 5(j) in 1964, which reads :
'Provided that the assessee is either chargeable to gift-tax under the Gift-tax Act, 1958, in respect of such gift, donation or settlement, as the case may be, or except where such gift donation or settlement is not chargeable to gift-tax under sub-section (1) of section 5 of that Act has deposited to the credit of the Central Government before the completion of his assessment for the relevant assessment year under this Act, a sum of four per cent. of the moneys or the value of the property comprised in such gift or donation or settlement, as the case may be, by way or payment of expenditure-tax for the relevant assessment year, such payment being in addition to the amount of expenditure-tax with which he is otherwise chargeable under the provisions of this Act.'
The next question, therefore, is whether this exemption is only confined to the expenditure incurred in respect of the gift, donation, settlment or trust, i.e., the expenditure incurred on account of the conveyance or disposition of the gift, such as the stamp-duty, registration lawyers fees, etc., as contended by the learned advocate for the department. We think even this contention of the department is unwarranted, having regard to the words 'by way of', which indicated that the exemption is given to the expenditure incurred by the assessee by way of any gift and also in respect of any gift. The exemption is, therefore, both in respect of the gift itself as well as the expenditure incurred in making the gift. The two amounts which have been relinguished in favour of the sons by the assessee, which amounts were recoverable from them and which amount ot gifts within the meaning of section 4(c) of the Gift-tax Act, are also gifts within the definition of section 5(j) of the Expenditure-tax Act. In that view, those two items are exempt from expenditure-tax.
Our answer to the question, therefore, is in the affirmative and in favour of the assessee with costs. Advocates fee Res. 250.
Question answered in the affirmative.