RAJEEV V.KURUP vs. THE COMMISSIONER OF GIFT TAX
What did the High Court hold?
The High Court held that the Tribunal's order, which found a deemed gift from the assessee to his father under Section 4(1) of the Gift Tax Act, could not be upheld. The Court reasoned that Section 4(1) does not cover cash transactions of the nature involved in this case. The Court noted that the department admitted the father invested at least Rs. 65,000/- for improvements, which should ideally be treated as a gift from the father to the son. The Court observed that the father developed and sold the property, appropriating the sale proceeds, and acted in the son's name. However, the Court found it unclear whether evidence of repayment of Rs. 40,000/- via account payee cheque was available. Therefore, the Court granted the assessee one more opportunity to prove the receipt of the amount by producing Pass Books or other bank account details. The reference case was disposed of by vacating the Tribunal's order and directing the Assessing Officer to exclude any amount proven to have been refunded by the father to the assessee.
What were the facts?
The assessee, Rajeev V. Kurup, is challenging a gift tax assessment for the assessment year 1989-90. The dispute concerns the sale of a property purchased in 1979 for Rs. 30,000/- and sold in 1988 for Rs. 1,65,000/-. The sale was conducted by the assessee's father as his power of attorney holder. The assessee contended that the sale proceeds were temporarily used by his father for constructing his residence and were subsequently repaid, with Rs. 40,000/- received via account payee cheque. The Assessing Officer, after excluding Rs. 65,000/- for investments made by the father, assessed the remaining Rs. 1 lakh as a taxable gift. The assessee's appeals to lower authorities were unsuccessful, leading to this reference.
What were the issues?
1. Whether the Tribunal erred in holding that there was a deemed gift from the assessee to his father under Section 4(1) of the Gift Tax Act, 1958, considering the nature of the cash transactions involved. Assessee's Contention: The assessee argued that the transaction did not constitute a deemed gift under Section 4(1) of the Gift Tax Act, as it involved cash transactions and the amounts were ultimately repaid. The assessee relied on the fact that Rs. 40,000/- was received through an account payee cheque. Revenue's Contention: The revenue, through the Commissioner of Gift Tax, contended that the Tribunal's order was correct in assessing the amount as a taxable gift. The revenue admitted that the assessee's father invested at least Rs. 65,000/- for the improvement of the property. The revenue's argument implicitly supported the Tribunal's finding of a deemed gift.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT Ramachandran Nair, J. The reference case arises from a gift tax assessment of the applicant-assessee for the year 1989-90. We have heard counsel appearing for the applicant-assessee and Standing Counsel appearing for the respondent. An item of property was purchased in 1979 when the assessee was a law student at a sale consideration of Rs.30,000/-. This property was sold in 1988 for Rs.1,65,000/-. However, the sale was made by assessee's father as power of attorney holder of assessee. The case of the assessee is that the amount was temporarily used by father for construction of a house for his residence. Even though assessee claimed that the amounts were repaid to him and Rs.40,000/- was received through Account Payee Cheque, the Assessing Officer after excluding Rs.65,000/- towards investments made by assessee's father, assessed the balance amount of Rs.1 lakh as taxable gift. The assesee did not succeed in two levels of appeals and hence this 2 reference.
We are unable to uphold the order of the Tribunal holding that there is a deemed gift from assessee to his father because deemed gift under Section 4(1) of the Gift Tax Act does not cover cash transactions of the nature involved in this case. The department admits that the assessee's father invested atleast Rs.65,000/- for improvement. In fact, Rs.65,000/- should have been treated as a gift by father to son. Since the father developed the property and sold the same and is seen to have appropriated the sale proceeds, what is clear is that father did everything in the name of his son. In any case short-term deposit held by the father as power of attorney holder cannot be treated as a gift unless it is proved that son was allowed to appropriate the amount for himself. Since it is not known whether evidence is available about the repayment of Rs.40,000/- through Account Payee Cheque by assessee's father to him, we feel one more opportunity can be given to the assesee to prove receipt of the amount, if Pass Book or other Bank Accounts are available. In the circumstances, the reference case is disposed of vacating the order of the Tribunal and directing the Officer to exclude
3 so much of the amount proved to have been refunded by assessee's father to him. Assessee should be given opportunity to produce the evidence for this purpose. A copy of this judgment under the seal of the High Court and signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench, Cochin.
C.N.RAMACHANDRAN NAIR Judge K.SURENDRA MOHAN Judge pms
More judgments on Section 4(1)
- Sbi, (Erstwhile Sbbj), Baran vs ITO (TDS), KotaITA 143/JPR/2026[2017-18]Status: Disposed13 Oct 2026AY 2017-18
- Belathur Srinivasaiyengar Rangaiyengar… vs Income Tax Officer, Ward-1(1), MysoreITA 574/BANG/2025[2017-18]Status: Disposed16 Dec 2025AY 2017-18
- Sanjivani Mahila Gramin Bigar Sheti Sahkari… vs ITO Ward-2, BhandaraITA 198/NAG/2025[2019-20]Status: Disposed27 May 2025AY 2019-20
- Kantibhai Punjyabhai Patel HUF, Surat vs Income Tax Officer, Ward 1(3)(7), SuratITA 723/SRT/2023[2017-18]Status: Disposed22 May 2025AY 2017-18
- Babu Thomas, Shivamogga vs Income Tax Officer, Ward -4, ShivamoggaITA 1434/BANG/2024[2016-17]Status: Disposed17 Oct 2024AY 2016-17
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