1. This is a reference under Section 26(1) of the G.T. Act, 1958. The following question has been referred at the instance of the Commissioner of Gift-tax.
' Whether, on the facts and in the circumstances of the case, the assessee is not entitled to the rebate under Section 18 of the Gift-tax Act, 1958, on the entire amount of advance gift-tax paid by him for the assessment year 1970-71 ?'
2. The assessee made gifts in the course of the accounting year 1969-70, aggregating to Rs. 2,04,557. The gifts fell on two dates, viz., March 25, 1970, and March 26, 1970. The gifts made on March 25, 1970, amount to Rs. 1,50,000 and they arc by way of cash. The balance of the gifts made on March 26, 1970, represent (a) shares held by the assessee in companies, (b) payment of insurance premium by the assessee for a policy taken under the Married Women's Property Act, and (c) a small quantity of gold valued at Rs. 260. The GTO in making the assessment made two additions to the amounts of gift totalling Rs. 2,770 in respect of shares held by the assessee in three companies, which were transferred to the donees. He, therefore, calculated the total gift at Rs. 2,07,327 and after allowing the statutory exemption of Rs. 10,000, arrived at a sum of Rs. 1,97,330 as taxable gift, on. which he levied gift-tax. He noticed that the assessee had made an advance payment of tax under Section 18 of the Act in a sum of Rs. 24,900. He worked out the rebate due to the assessee under Section 18 of the Act as being Rs. 1,525. After deducting this rebate, he determined the refund due to the assessee at Rs. 959. In his view, the tax due on the second gift was short by a sum of Rs. 11 and, hence, it was not eligible for rebate. The second gift referred to is the group of gifts made on March 26, 1970.
3. The assessee appealed to the AAC, who held that the only reasonable way of construing Section 18 of the Act would be to take it to mean that credit should he given for 10% of whatsoever sura had been paid in advance to the extent that the said sum did not exceed the tax determined in theassessment. He, therefore, directed that rebate should be granted to the assesses under Section 18 of the Act as claimed by him.
4. The GTO appealed against the order of the AAC to the Tribunal and in the view of the Tribunal there was no shortfall as the assessee had paid more than what it was liable under the law to pay. In this view, the order of the AAC was upheld. The Commissioner has brought this matter under reference with reference to the question extracted already.
5. Section 18 of the Act, as in force in the relevant year, ran as follows:
' If a person making a taxable gift pays into the treasury within fifteen days of his making the gift the amount of tax due on the gift calculated at the rates specified in the Schedule, he shall, at the time of assessment under Section 15, be given credit, in addition to the amount so paid, for an amount equal to 10% of the amount so paid.
Explanation.--If a person makes more than one taxable gift in the course of a previous year, the amount of tax due on any one of such gifts shall be the difference between the total amount of tax due on the aggregate value of all taxable gifts so far made, including the taxable gift in respect of which tax has to be paid, calculated at the rates specified in the Schedule and the total amount of tax on the aggregate value of all the gifts made during that year excluding the taxable gift in respect of which tax has to be paid. '
6. The main para, of Section 18 enabled an assessee to pay within 15 days of his making the gift the amount of tax due on the gift calculated at the rates specified in the Schedule. If he did so, then, he has to be given credit for an amount equal to 10% of the amount of tax so paid. The Explanation contemplates a case where more than one taxable gift is made by an assessee in the accounting year. In such a case, the gifts have to be aggregated. In other words, the assessee would have to pay the tax due in respect of each gift within a period of 15 days of making the gift. As far as the first gift is concerned, the assessee would be entitled to exclude the minimum amount not liable to gift tax and that was Rs. 10.000 in the relevant year. The later gifts would all have to be taken as they are, because the exemption limit has already been crossed. When the second gift was made, the taxable part of the first gift would have to be added, to the amount gifted on the second occasion and so on subsequently and tax paid accordingly. The Schedule prescribes a graduated rate of tax depending on the quantum of the aggregate gifts. It is this Schedule that we have to apply at the time when the assessee intends to take advantage of the provisions of Section 18.
7. In the present case, the shortfall of Rs. 11 appears to have arisen by reason of the difference in valuation. The assessee had valued the shares of Rani Lakshmi Engineering Spinning and Weaving Mills at a particular figure. Similarly, he valued the shares of Bojaraj Textiles and Varadalakshmi Mills at a particular figure. The GTO disturbed these valuations and added a sum of Rs. 2,770, as, in his view, that would represent the correct market value of the shares. In the order of the GTO it has been pointed out that there has been a shortfall to the extent of Rs. 11. This shortfall would not have arisen if the assessee had been able to anticipate the actual working of the GTO. It would not ordinarily be possible for any assessee to anticipate what the assessing authority would do at the time when he takes up the assessment. So long as the valuation as made by the assessee is not found to be lacking in bona fides, the assessee would be in a position to pay the tax on the basis of his own valuation and would have to be given credit for 10% of the amount so paid as envisaged by Section 18. As pointed out by the AAC in paragraph 3 of his order ' shortly stated, the rebate under Section 18 is not a reward for skill in the technique of valuation nor for correct preciseness nor yet, for a successful exercise in the calculation of tax, but is only an inducement to the payment of gift-tax in advance '. Considered in this light, the asses-see's claim could not have been rejected by the GTO.
8. If the GTO is correct in his construction, then it would be easy to defeat the provisions of Section 18 by making an enhancement in the valuation of the properties gifted, and so long as that valuation is not disturbed by the appellate authorities, the assessee would not be in a position to get any benefit which Parliament has chosen to confer on an assessee, who tries to pay his tax as early as possible. If the present case is taken as an indication of what the GTO could do, then it was enough if there was a difference of Rs. 11 by way of calculation of tax so a's to disentitle an assessee from getting the benefits of the Act, This construction, which would result in stultifying the benefit conferred by the statute should be avoided. The provisions intended for the benefit of the assessees could not be nullified by such unreasonable construction. The construction that we seek to place on the provision does not involve any actual loss of revenue ; the assessee gets the benefit of a percentage of the tax paid and not for any tax which he was bound to pay and which was in arrears. In the present case, it may also be noticed that the assessee was careful enough to pay the entire tax which he was bound to pay on the basis of his bona fide valuation. In these circumstances, there is absolutely no merit in the contention of the Commissioner of Gift-tax that the assessee has lost the benefit conferred on him by Section 18 of the Act, merely because there was a shortfall of Rs. 11 in the calculation of tax made by the GTO.
9. We may, however, point out one error in the order of the Tribunal under consideration. In paragraph 6 of its order the Tribunal has pointed out that the gifts other than cash made on March 26, 1970, are really five separate gifts under law and that three of those gifts were not taxable because they were below the sum of Rs. 10,000. This observation of the Tribunal is erroneous. We have already pointed out that the gifts have to be aggregated and that the exemption would be available only once at the time of the first gift if it exceeds the minimum amount not taxable or at any subsequent point of time when this minimum is crossed. The Tribunal, is not, therefore, right, in proceeding as if each gift has to be above Rs, 10,000. The fact that the gifts did not exceed Rs. 10,000 on each of the three occasions considered by it has thus no significance. The contention taken by the assessee that he would be eligible for a minimum exemption of Rs. 10,000 on each occasion of the gift has already been discountenanced by this court in Indira Bai v. GTO : 44ITR66(Mad) . The question as framed does not appear to bring out the controversy between the parties. We would, therefore, reframe it as follows :
'Whether, on the facts and circumstances of the case, the assessee is entitled to the rebate under Section 18 of the Gift-tax Act because there has been a shortfall in the payment of tax on account of difference in valuation between the one adopted by the assessee and the one adopted by the Gift-tax Officer at the time of assessment ?'
10. The question, as reframed above, is answered in the affirmative and in favour of the assessee. The assessee will be entitled to costs. Counsel's fee Rs. 500.