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A.P. Jaiswal Vs. Gift-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)11ITD703(Delhi)
AppellantA.P. Jaiswal
RespondentGift-tax Officer
Excerpt:
.....by the calcutta high court on the expression 'adequate consideration'. section 2(xii) defines a gift as meaning the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4 of the act deemed to be a gift under that section. the word 'voluntarily' here means 'willingly without compulsion', unfettered by influence or intercession, misrepresentation or coercion, force or fraud. we have already seen that the said transfer of shares was without consideration in money or money's worth, since it was made for the marriage between the assessee and miss gayatri malhotra. therefore, the transfer in question was treatable as.....
Judgment:
1. The interesting question involved in this appeal, filed by the assessee, is whether the transfer of 50,000 equity shares of Rs. 10 each of Jagatjit Industries Ltd. made by the assessee to Miss Gayatri Malhotra on 18-7-1980 was treatable as a gift within the meaning of Section 2(xii) of the Gift-tax Act, 1958 ('the Act').

2. For the assessment year 1981-82 in question, originally, the assessee filed a return on 27-1-1981, declaring a gift of Rs. 5,87,500.

Later on, he filed a revised return declaring a nil gift. However, the GTO treated the transfer as a gift and assessed the assessee accordingly.

3. In appeal, the learned Commissioner (Appeals) held that there was no adequate consideration measurable in terms of money's worth. He did not accept the contention raised on behalf of the assessee that there was a marriage agreement or ante-nuptial agreement and that the transfer of shares was by way of consideration of the promise by the lady to marry the assessee.

4. The assessee, being aggrieved, has come up in appeal before us. Shri K. Annadhanam, the learned counsel for the assessee, submitted that the transfer of shares made by virtue of pre-nuptial agreement was not a gift as it was outside the ambit of the Act. On the other hand, Shri S.K. Bansal, the learned departmental representative, strongly relied upon the order of the Commissioner (Appeals). He also referred to the following decisions : Tulsidas Kilachand v. CIT[l96l] 42 ITR 1 (SC), Potti Veerayya Sresty v. CIT [1972] 85 ITR 194 (AP), CWT v. Khan Saheb Dost Mohd. Alladin [1973] 91 ITR 179 (AP) and CIT v. Vivian Bose [1979] 118 ITR 989 (Bom.).

5. We have considered the rival submissions as also the decisions referred to above. By means of the deed dated 18-7-1980 of settlement, the assessee, in consideration of Miss Gayatri Malhotra agreeing to become his life companion and to marry him under the Hindu Marriage Custom, transferred 50,000 shares of Jagatjit Industries Ltd. of the face value of Rs. 10 each (their market value being Rs. 5,87,500 at the rate of Rs. 11.75 per share). The said amount was stated in that deed to constitute the total settlement and payment for consideration for the marriage between the two parties. It was also stated that Miss Gayatri Malhotra would have all the legal and moral rights and privileges of a Hindu wife after the marriage is solemnised. The marriage was solemnised after the said settlement on 28-1-1981. The said settlement was, undoubtedly, in the nature of a pre-nuptial agreement. Marriage, according to the Hindu law, is a holy union for the performance of religious duties. It is treated as a 'sanskar' or as a sacrament. It is not a contract. In the case of Tulsidas Kilachand (supra), it was held by the Supreme Court that though natural love and affection or even a promise to marry may be good consideration for a contract, but it cannot be regarded as an adequate consideration. So far as the meaning of the expression 'adequate consideration' is concerned, it was held by the Andhra Pradesh High Court in the case of Potti Veerayya Sresty (supra) that the consideration that supports the transfer should be one, the value of which can be measured in terms of money or money's worth. To the same effect, meaning has been assigned to the expression 'adequate consideration' by the Andhra Pradesh High Court in the case of Khan Saheb Dost Mohd. Alladin (supra). No decision was pointed out on behalf of the assessee before us of any High Court, where a different meaning may have been assigned to the expression 'adequate consideration'. A mere promise to marry, though it may be good consideration to support the validity of a contract, cannot, therefore, be regarded as one for adequate consideration. Simply because the shares were transferred having regard to the obligations of the assessee under the pre-nuptial agreement, it is not possible for us to take the view that the said shares were transferred for adequate consideration as understood in law. In the case of Tulsidas Kilachand (supra), reference was made by the Supreme Court to the case of P.J.P.Thomas v. CIT [1962] 44 1TR 897 (Cal.). In that case, the Calcutta High Court held that where a person transfers some property to a woman 'in consideration of the forthcoming marriage' between them, and the marriage takes place, the income accruing to the wife from the property after the marriage can be included in the husband's income under the provisions of Section 16(3)(a)(iii) of the Indian Income-tax Act, 1922 ('the 1922 Act'). In that case, it was also held that since it was not possible to determine the adequacy of such consideration marriage could not be regarded as adequate consideration within the meaning of Section 16(3)(a)(iii). No doubt that decision was reversed by the Supreme Court in appeal vide Philip John Plasket Thomas v. CIT [1963] 49 ITR 97 but on another point. The Supreme Court declined to express any opinion upon the interpretation put by the Calcutta High Court on the expression 'adequate consideration'. Section 2(xii) defines a gift as meaning the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in Section 4 of the Act deemed to be a gift under that section. The word 'voluntarily' here means 'willingly without compulsion', unfettered by influence or intercession, misrepresentation or coercion, force or fraud. We have already seen that the said transfer of shares was without consideration in money or money's worth, since it was made for the marriage between the assessee and Miss Gayatri Malhotra. Therefore, the transfer in question was treatable as a gift within the meaning of Section 2(xii). An ante-nuptial agreement or settlement made in consideration of marriage may be enforceable at law on the ground that marriage is a sufficient consideration for the settlement. But, such consideration is neither money nor money's worth and, consequently, such a settlement would be liable to gift-tax. In this view of the matter, therefore, the learned Commissioner (Appeals) was justified in upholding the taxation of the transfer in question on the basis of a gift. We uphold his order. 6. The appeal filed by the assessee, accordingly, fails and is dismissed.


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