Commissioner of Gift Tax vs Muthukumaraswamy Mudaliar

G. Ramanujam, J.—The common question that has been referred in those 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?

The assessee in the first case gifted an extent of five grounds in Mount Road, Madras, to one V. Kandaswamy and the assessee in the other case

has gifted five grounds and 392 sq. feet of land at 36-D. Mount Road, to one Sri C. Srinivasan. In the documents of the 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 GTO in

relation to the above two assessees 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 assessment, the assessee contended that the properties gifted had no

right of way from the 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 GTO, however, rejected the contention and valued the properties on the basis of the value adopted in the wealth-tax

assessment, i.e., the property which is the subject-matter of gift in Tax Case No. 438 of 1978 was assessed at Rs. 50,000 per ground and the

property which is the subject-matter of gift in Tax Case No. 60 of 1978 at Rs. 60,000 per ground.

The orders made by the GTO were challenged in appeal before the AAC. 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

oases of sales were also cited, after considering which the AAO reduced the value per ground to the value at Rs. 45,000 per ground in the case of

the assessee in Tax Case No. 438 of 1978 and at Rs. 40,000 per ground in the case of the assessee in relief granted by the AAC went before the

Tribunal. The Tribunal adopted a uniform value at 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 those references.

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 that 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 land without any approach to the Mount Road, the certificate from the approved valuer valuing the land

gifted at Rs. 40,000 per ground and the liability to pay gift-tax having been fastened by the donors to the decree, 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 at 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 having any approach to the Mount Road and the certificate of the approved valuer valuing the lands at

Rs. 40,000 per ground as a 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-deed, 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 or charge 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 u/s 29 of the Gift-tax Act, 1958 or by the donees in cases where the whereabouts of the donors may not be found, the

gifted property may be proceeded with 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. The result is that the Tribunal has to refix 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. The counsel''s fee Rs. 500, one set.