1. The common question that has been referred in these two cases by the Tribunal to this court for its opinion is as follows :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in taking the value of the land gifted in the assessee's case at Rs. 37,500 per ground ?'
2. The assessee in the first case gifted an extent of five grounds in Mount Road to one V. Kandaswamy and the assessee in the other case has gifted 5 grounds and 392 square feet of land at 36-B, Mount Road, Madras, to one C. Srinivasan. In the documents of gift, the properties gifted have been valued at Rs. 30,000 per ground. The gift deeds also provided that the gift tax payable will be borne by the donees. The Gift-tax Officer in relation to the above two assesees has valued the lands on Mount Road at Rs. 60,000 in one case and at Rs. 50,000 in another case. In the gift-tax proceedings, when the assessee's attention was drawn to the wealth-tax assessments, the assessees contended that the properties gifted had no right of way from Mount Road and, therefore, the value given in the wealth-tax proceedings for the lands on Mount Road, cannot be adopted for the lands gifted. The Gift-tax Officer, however, rejected the contention and valued the properties on the basis of the value adopted in the wealth-tax assessments, i.e., the property which is the subject matter of gift in T.C. No. 438 of 1978 was assessed at Rs. 50,000 per ground and the property which is the subject matter of gift in T.C. No. 60 of 1978, at Rs. 60,000 per ground.
3. The orders made by the Gift-tax Officer were challenged in appeal before the Appellate Assistant Commissioner. It was urged before him that the lands gifted had no opening on the Mount Road, but only a 12 feet lane called Smith Lane through which it was difficult even for a truck to move. Before him certain comparable cases of sales were also cited, after considering which the Appellate Assistant Commissioner reduced the value per ground to Rs. 45,000 in the case of the assessee in T.C. No. 438 of 1978 and to Rs. 40,000 per ground in the case of the assessee in T.C. No. 60 of 1978. Against the relief granted by the Appellate Assistant Commissioner, the assessee went before the Tribunal. The Tribunal adopted a uniform value of Rs. 37,500 per ground for the lands gifted in both the cases. Aggrieved by the decision of the Tribunal, the Revenue has come up before us in these references.
4. According to the learned counsel for the Revenue, the reasoning given by the Tribunal for reducing the value of the gifted property to Rs. 37,500 is not justified and the reasons given by the Tribunal for making such a reduction are not also germane or relevant. A perusal of the order of the Tribunal does not indicate clearly as to what were the reasons for the reduction in the value of the gifted properties. No doubt the Tribunal has given due regard to the location of the lands without any approach to the Mount Road, the certificate from the approved valuer valuing the lands gifted at Rs. 40,000 per ground and the liability to pay gift-tax having been fastened by the donors to the donees and fixed the value at Rs. 37,500 per ground. Thus, having regard to the totality of the circumstances, the Tribunal has reduced the value of the gifted property to Rs. 37,500 per ground, as against the value given in the certificate of the approved valuer at Rs. 40,000 per ground. Though the Tribunal may be right in taking into account the location of the site without any approach to Mount Road and the certificate of the approved valuer valuing the lands at Rs. 40,000 per ground as relevant criteria for determining the value of the gifted property; we are not inclined to agree with the Tribunal that the gift-tax liability which has been fastened on the donees under the gift deeds could at all be taken into account while fixing the value of the gifted properties. Even though the gift deeds have provided that the gift-tax is payable by the donees, the primary liability to pay the gift-tax is on the assessees, though by virtue of the gift arrangement, the liability has been fastened on the donees by the donors. It cannot be said that the properties have been gifted in these cases subject to existing liability such as a charge or mortgage which liability has to be deducted from the value of the gifted properties. But as in this case where the properties have been gifted straightaway, the fact that at a future point of time, the donees will have to pay gift-tax will not go to reduce the value of the gifted properties. It may be that for non-payment of gift-tax either by the donors who are primarily liable to pay the same under section 29 of the Gift-tax Act or by the donees in cases where the whereabouts of the donors may not be found, the gifted properties may be proceeded against for realising the gift-tax. But that does not mean that the value of the gift can be taken to be the market value less gift-tax, as has been assumed by the Tribunal in this case. Since the Tribunal, in our view, has taken an irrelevant consideration for fixing the value of the gift, we have to answer the question in the negative and in favour of the Revenue.
5. The result is the Tribunal has to re-fix the value of the gift after eschewing from consideration the liability fastened on the donees under the gift deeds to pay the gift-tax. The Revenue will be entitled to its costs from the assessees. Counsel's fee Rs. 500 one set.