THE COMMISSIONER OF GIFT-TAX, KERALA vs. DR. GEORGE KURUVILLA

CIVIL APPEAL No. 764/1967Supreme Court[1971] 1 S.C.R. 37324 April 1970Bench: 3 JudgesAuthor: J.C. SHAH, K.S. HEGDE, A.N. GROVER4 pages

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What did the Supreme Court hold?

The Supreme Court held that the assessee was not entitled to the exemption under Section 5(1)(xiv) of the Gift Tax Act, 1958. The Court reasoned that the exemption under this clause is available only if the gift is made 'in the course of carrying on a business, profession or vocation' and 'bona fide for the purpose of such business, profession or vocation'. The mere fact that the donor was carrying on a business or that the property was used for a similar purpose after the gift was insufficient. The Court found no evidence on record to prove that the gift to the son was 'in the course of carrying on the business' of the donor and 'for the purpose of the business'. The recitals in the gift deed stating 'out of love and affection' further weakened the claim for business purpose. The Court set aside the High Court's order. The issue of whether the test of 'commercial expedience' is strictly appropriate was left undecided, as there was no evidence to support it in this case.

What were the facts?

The assessee, a medical practitioner, gifted a hospital building and land to his son via a deed dated February 3, 1960. The gift deed stated it was made 'out of love and affection'. The assessee claimed exemption from gift tax for the hospital building and land under Section 5(1)(xiv) of the Gift Tax Act, 1958, arguing his son had graduated in medicine and joined his profession shortly after the gift. The Gift-tax Officer rejected the claim, and the Appellate Assistant Commissioner upheld this decision. The Appellate Tribunal, however, held the assessee was exempt. The High Court affirmed the Tribunal's order. The Revenue appealed to the Supreme Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to exemption in respect of the G.K. Hospital and the adjoining land under Section 5(1)(xiv) of the Gift Tax Act, 1958. Assessee's contention (as understood from the Tribunal's reasoning and High Court's decision): The gift was made in the course of carrying on the profession and for the purpose of the profession, especially since the donee subsequently joined the donor's profession. The property continued to be used for the same purpose. The High Court considered the gift to be for the 'better ordering of the business' and based on 'commercial expediency'. Revenue's contention: There was no evidence to prove that the gift was made 'in the course of carrying on the business' or 'for the purpose of the business' as required by Section 5(1)(xiv). The gift deed itself recited the reason as 'love and affection', not business purposes.

Which sections of the Income-tax Act were involved?

Section 5(1)(xiv)

AI-generated summary — verify with the full judgment below

J 7:! A THE COMMISSIONER OF GIFr-TAX, KERALA B c E f G H v. DR. GEORGE KURUVILLA April 24, 1970 [J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] Gift-•ax Act, (18 o/1958) s. 5(1) (tiv)-Gift of Ho.1pitt1/ building h.v medical practitioner to his son who later joins donor's profession-Gift describ;td as for love and affection-Whether exenzp; under s. 5(l)(xiV).

The assessee-a medical practioner, by a detd gifted a hospital build- ing and land appurtenent thereto his son.

The gift-deed recited that the gift was made "out of love anci affection··. The asses.set.: clai'lled ex.emp- tion from gift-tax liability under s. 5 ( 1) (xiv) of the Gift Tax Act 1958 on the ground that a few months after the gift his son had graduated in medicine and had joined "he assessee's profession.

No ·evidence was placed before the taxing autho•ities that the gi'ft was made io the course of carrying on the business of tk douor. the Gift-tax Officer rejected the claim, and thl! order was affirmed by the Appellate Commissioner.

The Appellate Tribunal held that the assessee was exempt from liability to pay Gift-tax.

On reference, the High Court upheld the Tribunal's order.

In ap

The order continues below.

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