Commissioner of Gift Tax vs Princess Harshad Kumari

T.D. Sugla, J.—The only question of law referred to this court by the Tribunal in this case is :

"Whether, on the facts and in the circumstances of the case gift to the tune of Rs. 50.000 out of the gift made by the assessee on March 20 1971, to Shri Rahul Kumar Sharma is exempt in terms of section 5(1)(viii) of the Gift-tax Act, 1958 ?"

The assessee, Princess Harshad Kumari, gifted Rs. 1,00,000 to her husband. Narhari Singh, in the previous year relevant to the assessment year 1961-62. She claimed and was allowed exemption in respect thereof u/s 5(1)(viii) of the Gift-tax Act, a few years thereafter, she had to take a divorce from her first husband. She contracted a second marriage with one Rahul Kumar Sharma on December 18, 1970. Some time thereafter, i.e., on March 20, 1971, she gifted another sum of Rs. 1,00,000 to her second husband. The exemption limit u/s 5(1)(viii) at the material time was Rs. 50,000. Therefore, she claimed that her gift to her second husband to the extent to Rs. 50,000 was exempt u/s 5(1)(vii).

The Gift-tax Officer and the Appellate Assistant Commissioner rejected the claim on the ground that the maximum amount of exemption u/s 5(1)(viii) was Rs. 1.00,000 in the earlier years and Rs. 50,000 after the amendment irrespective of whether the gift was on one occasion or several occasions and whether it was made to one and the same spouse or different spouses. The Income Tax Appellate Tribunal, however, allowed the assessee''s second appeal. The Tribunal took the view that the expression "spouse'' in clause (viii), where there are more wives than one, meaning all the wives together", meant and referred to a case in which more than one wife existed simultaneously. Where an assessee contracted a second marriage after divorcing the first spouse. The Tribunal held that it was possible for a spouse to make another gift to her new spouse to the extent of the limit provided in section 5(1)(iii) at the material time.

Shri Jetley, learned counsel for the Department, contended that the interpretation placed by the Tribunal on the provisions of section 5(1)(viii) was not correct. It was discriminatory inasmuch as while gifts made to more than one wife would be aggregated, gifts made to more than one husband would not be aggregated. According to him. What is applicable in the case of wives was equally applicable in the case of the husbands.

The submission is without any merit, Section 5(1)(viii) of the Gift-tax Act reads thus :

"5. (1) Gift-tax shall not be charged under this Act in respect of gifts made by any person - ...

(viii) to his or her spouse, subject to a maximum of rupees fifty thousand in value in the aggregate in one or more previous years the expression ''spouse'' in this clause, where there are more wives than one meaning all the wives together."

The first part refers to gifts made by any person to his or her spouse subject to a maximum of Rs. 50,000 in value in the aggregate in one or more previous years. This admittedly refers to a case in which gifts are made to one and the same spouse. The second part, namely, the expression "spouse" in this clause, where there are more wives than one existing the wives together, also, in our opinion, refers to a different situation. The situation contemplated is where there are more wives than one existing simultaneously, and the gifts are made to one or more of them at a time when the relationship with all the done-wives subsists as husband and wife.

It may not be out of place to mention here that the Gift-tax Act does not apply merely to Hindus. It applies to all castes and communities India including Muslims. A Muslim can have more than one wife at one and the same time. There can also be a Hindu who is having more than one wife from before 1956, i.e., from before the passing of the Hindu Marriage Act. It is for this reason that the Legislature advisedly provided that the expression "spouse" in section 5(1)(viii) would cover all the wives together where there are more wives than one in existence and gifts are made by the husband to such of them with whom his relations as husband and wife subsisted while making each and every gift. Advisedly, there is no corresponding provision for husband as under no law in our country can a wife have more than one husband at a time. The situation obtaining herein is materially different. The assessee had divorced her first husband.

She contracted a second marriage and made a gift of Rs. 1,00,000 to the second husband when, admittedly, the relationship of husband and wife with the first husband had ceased. The interpretation placed on the clause by the Tribunal is not discriminatory as contended by Shri Jetley for the Revenue. Just as the gift to a second husband by the wife after the divorce from the first husband qualifies for fresh exemption u/s 5(1)(viii). A gift to a second wife by the husband after divorce from the first wife may also qualify for fresh exemption. Accordingly, the question is answered in the affirmative and in favour of the assessee. No order as to costs.