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Commissioner of Gift-tax Vs. R.R. Sarma - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 109 of 1974 (Reference No. 2 of 1974)
Judge
Reported in[1978]111ITR70(Mad)
ActsGift Tax Act, 1958 - Sections 2
AppellantCommissioner of Gift-tax
RespondentR.R. Sarma
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateNone
Excerpt:
- - but, on appeal, the appellate tribunal accepted the assessee's contention that the insurance premia on his own policies would not amount to a gift to the wife and the question that has been referred for our opinion turns on the question whether the view taken by the tribunal that the assessee's contention is well-founded is correct or not......on the facts and in the circumstances of the case, it has been rightly held that the insurance premia paid by the assessee could not constitute gift ?'2. the assessee had taken two policies of insurance on his life, one for a lakh of rupees and the other for rs. 25,000. the amounts paid by way of insurance premia during the assessment years 1967-68, 1968-69 and1969-70, respectively, were rs. 12,102, rs. 7,287 and rs. 7,287. in deciding the amount on which gift-tax should be imposed for the three years, the assessing authority reached the figures of rs. 20,246, rs. 15,431 and rs. 10,431 for the three years by including in each of those years the insurance premia paid by the assessee which we mentioned earlier. though the assessee contested this inclusion before the appellate assistant.....
Judgment:

Govindan Nair, C.J.

1. The question referred by the Appellate Tribunal to this court for our opinion in relation to the assessment years 1967-68,1968-69 and 1969-70 reads as follows ;

'Whether, on the facts and in the circumstances of the case, it has been rightly held that the insurance premia paid by the assessee could not constitute gift ?'

2. The assessee had taken two policies of insurance on his life, one for a lakh of rupees and the other for Rs. 25,000. The amounts paid by way of insurance premia during the assessment years 1967-68, 1968-69 and1969-70, respectively, were Rs. 12,102, Rs. 7,287 and Rs. 7,287. In deciding the amount on which gift-tax should be imposed for the three years, the assessing authority reached the figures of Rs. 20,246, Rs. 15,431 and Rs. 10,431 for the three years by including in each of those years the insurance premia paid by the assessee which we mentioned earlier. Though the assessee contested this inclusion before the Appellate Assistant Commissioner, he did not succeed before him. But, on appeal, the Appellate Tribunal accepted the assessee's contention that the insurance premia on his own policies would not amount to a gift to the wife and the question that has been referred for our opinion turns on the question whether the view taken by the Tribunal that the assessee's contention is well-founded is correct or not.

3. We agree with the view taken by the Appellate Tribunal. Though the wife is the nominee under the policy and so the person entitled ultimately to receive the benefit of the policy in the event of death or on its maturity, the obligation to pay the insurance premia to the insurance company remained with the assessee and he was merely discharging that obligation as a result of the contract between him and the insurance company and by no stretch of imagination can the amounts paid in discharge of the obligation in a contract of insurance be said to be a gift made to the nominee of the insurance policy. No doubt, if the nomination was not cancelled, the wife would have become entitled to the benefits of the insurance policy on the happening of either of the events which we have mentioned above provided no alteration had been made regarding thenomination. But, that has nothing to do with the question as to whether the premia paid will amount to a gift or not. To constitute a gift, there must be an immediate transfer of property which was the subject-matter of the gift by the donor to the donee. No such thing happened in this case. We, therefore, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue. We direct the parties to bear their respective costs, since the assessee did not care to enter appearance before this court.


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