Commissioner of Gift-tax, Tamil Nadu-II, Madras vs S. Viji

Fakkir Mohammed, J.—The reference has been made by the Income Tax Appellate Tribunal, Madras, under s. 26(1) of the G.T. Act,

1958, in relation to the assessment for the year 1973-74 on the following question :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to the rebate

u/s 18 of the Gift-tax Act, 1958, on the entire amount of gift-tax paid in advance for the assessment year 1973-74 ?

The assessee had made the following gifts on March 24, 1973, March 28, 1973, and March 28, 1973, respectively amounting in all to Rs.

5,28,738.

Date of gift Particulars of gift Amount of gifts

Rs.

24-3-1973 Cash Gifts 4,000

28-3-1973 4500 shares in T. V. Sundaram

Iyengar and Sons Limited 4,90,000

28-3-1973 240 shares in Southern Road-

ways Limited 34,238

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5,28,738

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The assessee had paid advance gift-tax of Rs. 1,11,071 and April 6, 1973, on his own calculations of the share value of items 2 and 3 of the gift

at Rs. 5,24,238, less Rs. 5,000 being exemption (as it was then) excluding item 1 of the gift, viz., cash gift of Rs. 4,000. According to the basis

adopted by the assessee, the computation of advance tax was in order and in accordance with the rates specified in the schedule to the Gift-tax

Act.

At the time of making the gift-tax assessments, the GTO made a revaluation certain items of the gifts by varying the rate per share from Rs. 108

to Rs. 133.63 for 4,500 shares. According to the revaluation adopted by the GTO the total value of the gift including the cash gift of Rs. 4,000

was arrived at Rs. 6,37,869. After deducting the basis exemption of Rs. 5,000 the assessable value was arrived at Rs. 6,32,869 and the gift tax

payable thereon was at Rs. 1,46,361. The GTO granted a rebate at 10% on the advance gift-tax, namely, Rs. 1,11,071 and thus arrived at the

balance of gift-tax payable at Rs. 24,902 by adding the rebate amount of Rs. 10,388 with advance gift-tax amount of Rs. 1,11,071.

Later on, the GTO brought to the notice of the Commissioner an alleged error in granting the rebate. The Commissioner called upon the

assessee to show cause why the earlier order of the GTO granting a rebate should not be revised. The assessee opposed the stand of the

Commissioner by quoting an earlier order of the Tribunal on an identical point in an allied case. The Commissioner appears to have observed that

he was helpless in the matter, even though he was in assessee''s favour in view of the earlier decision of the Tribunal, since the Department had not

accepted the same. Consequently, the earlier assessment order of the GTO was set aside and the GTO was directed by the Commissioner to

reject the claim for rebate of 10% on Rs. 1,11,071 since the advance tax paid was less than gift-tax, viz., Rs. 1,13,621.40 as calculated by the

GTO. Thus, the revised computation of the gift-tax was arrived at Rs. 1,13,621.40.

The assessee went on appeal before the Tribunal claiming that he was entitled to 10% rebate on the advance gift-tax paid in terms of s. 18 of

the G.T. Act as calculated by the assessee and as the cash gift of Rs. 4,000 made on March 24, 1973, was below the taxable minimum the same

requires to be excluded in computing the assessable amount, relying upon the order of the Tribunal in G.T.A. No. 32/1972-73, dated May 5,

1975. On the side of the Department, the order of the Commissioner alone appears to have been relied on before the Tribunal. The Tribunal has

upheld the computation of tax as claimed by the assessee and also the contention the assessee that the cash gift of Rs. 4,000 had to be separately

computed since it was below the taxable minimum and cannot be included in the assessable turnover. Therefore the Revenue has sought the above

reference.

The unamended section 18 of the Gift-tax Act reads 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 u/s 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 tan one taxable gift in the course of 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.

A plain reading of the above section will only indicate that for the purpose of claiming rebate the assessee has to pay advance tax on the gifts

calculated at the rates specified in the Schedule. The calculation of the GTO is not contemplated and it is not the work of the GTO to calculate the

amount of advance tax under s. 18. It is only after the return is submitted and if any suppressed gifts are disclosed to the GTO in the course of the

assessment proceedings, the duty of the GTO to verify the calculations made by the assessee in his return will arise. There is absolutely no

provision at all in s. 18 or anywhere in the Act, debarring the assessee from claiming the rebate in case the calculation of the assessee and the

assessable amount are found to be not accurate. It is only by way of incentive to the assesses that rebate has been granted by Parliament, since the

Revenue stands benefited by receiving the tax well in advance. Such an incentive or benefit cannot be defeated by reversing or modifying the

calculation of the assessee, as it will be easy for the GTO to do so in all case of assessments.

In an identical case, viz., T.C. No. 184 of 1976, dated 12-10-1979, Commissioner of Gift-tax Vs. T.S. Krishna (by legal representatives), , a

Division Bench of this court has discussed the identical question and decided the question in favour of the assessee. In that case the question was

reframed as follows (p. 103) :

Whether, on the facts and in the circumstances of the case, the assessee is entitled to the rebate u/s 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 ?

In the above case also a similar shortfall in the payment of advance tax was urged on the side of the Revenue, consequent on the difference in

valuation between the one adopted by the assessee and the one adopted by the GTO at the time of the assessment. Therefore, the Tribunal is quite

correct in having rejected the contention of the Revenue and upholding the claim of the assessee for rebate. We do not find any error in the

decision of the Tribunal on this question.

Thus, the only point urged on the side of the Revenue that because the valuation adopted by the assessee is varied by the Assessing Officer

and the assessee had made a wrong calculation by excluding the cash gift of Rs. 4,000 for the purpose of computing the advance tax, the assessee

is not entitled to claim rebate and it stands to be rejected in limine in the face of the aforesaid discussion. What has been given by the statute by the

right hand cannot be taken away by the Revenue with the left hand by adopting a varied calculation made by the assessee for the purpose of

computing the advance tax.

We are of the view that such an attitude of the Revenue is not in consonance with the intention of the provisions of the Act. Therefore, we

agree with the view expressed by the Tribunal. We answer the question in the affirmative and in favour of the assessee. In the circumstances of the

case, there will be no order as to costs.