Commissioner of Gift-tax Vs. G. Lakshmana Sarma - Court Judgment

K.S. Paripoornan, J.

1. The Revenue is the petitioner. The respondent was assessed to gift-tax for the year 1978-79. The respondent had filed the gift-tax return on July 28, 1978, declaring the value of taxable gift in respect of 72.1 cents of land at Rs. 38,260. It was noticed that the respondent had transferred at cost his shares in Kanthimathy Plantations Ltd. to some of his relatives. The Gift-tax Officer held that the transfer was otherwise than for adequate consideration and assessed it to gift-tax, determining the value of the gift at Rs. 2,77,200. The plea of the assessee (respondent) that the shares were purchased on behalf of the persons to whom the shares were transferred and the shares were transferred in their names when the latter obtained funds and recouped the assessee and so there was no element of gift was rejected. The assessment order was confirmed in appeal by the Commissioner of Gift-tax (Appeals). In second appeal, the Appellate Tribunal held that the shares were purchased by the assessee at the request of the relatives and were held in his name till the amount was repaid to the assessee by his near relations--father, mother and brother. They were only sundry debtors till the amounts are repaid and when the assessee transferred the shares to the real owners, there was no question of transfer for consideration. It was, therefore, held that no question of assessing the gift under Section 4(1)(a) or 4(1)(b) of the Gift-tax Act arises. The appeal filed by the assessee was allowed. The Revenue filed an application under Section 26(1) of the Gift-tax Act to refer certain questions of law (four of them), which, in its view, arose out of the appellate order dated September 29, 1986, passed by the Tribunal. The said application was rejected by the Appellate Tribunal. Thereupon, the Revenue has filed this original petition praying for a direction to the Tribunal to refer the following four questions of law formulated in paragraph 7 of the original petition for the decision of this court, The questions of law formulated are as follows :

'(1) Whether, on the facts and in the circumstances of the case, was the Tribunal justified in law in finding that the assessee was only a benamidar between the date of purchase and the date of transfer and that the assessee was only apparent owner of the shares but the real owner of the shares were the assessee's father, mother and brother ?

(2) Whether, on the facts and in the circumstances of the case, was the Tribunal right in law in holding that when the shares are transferred from the apparent owner to the real owner, there is no question of transfer for consideration whether inadequate or not and the question of applying Section 4(1)(a) or Section 4(1)(b) or for that matter even Section 4(1) will not apply ?

(3) Whether, on the facts and in the circumstances of the case, was the Tribunal right in holding that since the assessee had shown in his wealth-tax return for the assessment year 1977-78, the shares in question as his own shares, it cannot be held as a militating factor against the assessee and it is only a misconception of law ?

(4) Whether, on the facts and in the circumstances of the case, was the Tribunal right in holding that the assessee advanced money to his relations at their request and purchased the shares in question and held the shares in his name till the amount was repaid to the assessee and the assessee's father, mother and brother are really sundry debtors to the assessee up to the dates when the amounts were repaid by them and the assessee transferred the shares in their name ?'

2. We heard counsel for the Revenue as also counsel for the respondent-assessee. The Appellate Tribunal accepted the plea of the assessee that the shares in question were purchased by the assessee on behalf of his father, mother and brother, in his name, since they did not have sufficient funds for the purchase, and when the amount was paid to the assessee, the shares were transferred to them in September 1977. In the opinion of the Appellate Tribunal, the assessee was only an apparent owner of the shares, but the real owners were the assessee's father, mother and brother and when the shares were transferred from the apparent owner to the real owner, there was no question of transfer for consideration, whether inadequate or not, and the question of applying Section 4(1)(a) or 4(1)(b) or for that matter even Section 4(1) does not arise. The Revenue pressed before the Appellate Tribunal the admission of the assessee contained in his wealth-tax return for the year 1977-78 to the effect that the shares in question were treated as the assessee's own shares. After adverting to the said contention, the Appellate Tribunal held that it was so shown by the assessee in the returns of wealth-tax for the assessment years 1977-78 due to a misconception of law. Counsel for the Revenue vehemently contended that this is only a surmise or conjecture, not based on any material. It was further submitted that the Appellate Tribunal had no material before it to hold that the assessee was only a benamidar between the date of purchase and the date of transfer of the shares and the assessee is only an apparent owner of the shares, but the real owners of the shares were the assessee's father, mother and brother. The complaint by counsel for the Revenue was that the Appellate Tribunal simply accepted the submissions made by the assessee and the findings are not based on any material. On the other hand, counsel for the assessee read before us the order of the Tribunal and sought to support the conclusion of the Tribunal.

3. On hearing the rival contentions of the parties, we are of the view, that questions Nos. 1 and 3 formulated in paragraph 7 of the original petition (extracted hereinabove) do arise out of the appellate order of the Tribunal, dated September 29, 1986. No material was placed before us to show on what basis the Appellate Tribunal stated that the assessee had shown in his wealth-tax return for the assessment year 1976-77, the shares in question as his shares due to a misconception of the law. The matter requires a more detailed analysis. Similarly, we were not invited to any definite or positive material which would go to show that the assessee was only a benamidar between the date of purchase and the date of transfer of the shares, and the assessee is only an apparent owner of the shares, but the real owners of the shares were the assessee's father, mother and brother. This question depends as to how far, and to what extent, the admission made by the assessee in his wealth-tax return for the assessment year 1977-78 is disproved, or explained, or offset by any material available on record.

4. In view of the above, we direct the Income-tax Appellate Tribunal to refer questions Nos. 1 and 3 (extracted hereinabove) for the decision of this court along with the statement of the case. This shall be so done within three months from the date of receipt of a copy of this judgment. The original petition is disposed of as above.