Judgment:
1. The assessee is in appeal because the Commissioner (Appeals) has confirmed the levy of gift-tax in respect of certain transfer of jewellery by the assessee to his daughter-in-law on the occasion of his son's marriage.
2. The GTO's order shows that the assessee has relied upon the decision of the Andhra Pradesh High Court in the case of CGT v. Ch.
Chandrasekhara Reddy [1976] 105 ITR 849. That was a case of gift of land by the father to his daughter. The GTO had disallowed the exemption to the assessee under Section 5(I)(vii) which was confirmed by the AAC. The Tribunal, however, held that since it was the obligation of the Hindu father to get his daughter married in a manner befitting his status the transaction was not liable to tax. The High Court restored the matter to the Tribunal to give a finding on the question whether the transfer was incidental to marriage and whether any such custom existed in the family of the community of the assessee.
The GTO has distinguished that decision on the ground that the High Court had in that case, held that the transfer was to discharge the obligation of the father in respect of the daughter while in the present case the son of the assessee had an independent taxable income.
Presumably, the GTO means that since the son had independent taxable income it was not the obligation of the assessee father to make a gift to the daughter-in-law. The second reason why the GTO has rejected the assessee's claim is that the decision is not accepted by the Department and a Special Leave Petition has been granted against the said decision of the Andhra Pradesh High Court. Before the Commissioner the assessee had relied upon the decision of the Calcutta High Court in the case of CGT v. Basant Kumar Aditya Vikram Birla [1982] 137 ITR 72 and also the Board's Circular No. 419 dated 1-6-1985 according to which the said decision has been accepted in principle by the Department. He also relied on the decision in the case of CGT v. Dr. (Mrs.) Neelambal Ramaswamy [1986] Taxation 80(3) 55 (Mad.). The learned Commissioner has distinguished the said decision of the Calcutta High Court on practically the same ground as the GTO that the Calcutta High Court was concerned with the gift by the HUF to the unmarried daughter which is not the case here. The learned Commissioner has stated that gift to daughter-in-law may be customary in nature but that is not an obligation. He has also stated that the decision of the Madras High Court on which reliance was placed by the assessee was a case of gift on the occasion of marriage of the relative who was dependent upon the assessee which was not the case here.
3. Before the Tribunal, the assessee's advocate contended that the assessee who was the father-in-law of the donee was not under a social obligation to make the gift. He submitted that this was the custom of the community and a customary obligation was as much an obligation as any legal or moral obligation. The learned Advocate submitted that if the father-in-law did not do it he would suffer in reputation and be subject to adverse opinion of members of his community. He argued that in view of this obligation the transfer could not be said to be voluntary and that therefore, there was no taxable gift as provided in Section 2(xii) of the Gift-tax Act. The learned Departmental Representative on the other hand submitted that in the present case when the gift was by the father-in-law the decision of the Calcutta High Court was not applicable. He also submitted that since the son has an independent income, the father-in-law was under no obligation for the maintenance of the daughter-in-law and so even the exemption under Section 5(1)(vii) was not available to the assessee.
4. In the present case, it is not in dispute that the social custom of giving gift to the daughter-in-law by the father-in-law exists in the community to which the assessee belongs or that any part thereof was excessive, looking to the status of the assessee. When that is so it should follow that there was a customary and social obligation on the father-in-law to make the gift and consequently, the transfer cannot be said to be voluntary. In this connection, it is to be noted that the Hon'ble Calcutta High Court in the above case has spoken not only of the legal obligation but also of the moral obligation and if a moral obligation is sufficient to take the transaction out of the scope of the definition of gift in the Act we see no reason why social and customary obligations also cannot do the same. We, therefore, hold that the transfer was not a gift under the Gift-tax Act. The appeal is allowed.