IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN FRIDAY, THE 8TH OCTOBER 2010 / 16TH ASWINA 1932 GTA.No. 4 of 2009() ----------------------- GTA.16/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ----------------------------- THE COMMISSIONER OF GIFT TAX COCHIN BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/ RESPONDENT ------------------------------------- ABAD FISHERIES,KOCHANGADI COCHIN-2 BY ADV. SRI.P.BALAKRISHNAN (E) THIS GIFT TAX APPEAL HAVING BEEN FINALLY HEARD ON 08/10/2010, ALONG WITH GTA.NO.10/2009 AND GTA.NO.6/2009 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: SVS/ C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. ----------------------------------- G.T.A.Nos.4, 6 & 10 OF 2009 ----------------------------------- Dated this the 8th day of October, 2010 J U D G M E N T ~~~~~~~~~~~~ C.N.Ramachandran Nair, J. Heard the learned senior counsel appearing for the appellant and Sri.P.Balakrishnan appearing for the respondent. 2. The common question raised in all these Gift Tax Appeals is whether the Tribunal was justified in confirming the order of the CGT (Appeals) cancelling the gift tax assessment made on the respondent assessee for the assessment years 95-96, 96-97 and 97-98. What is assessed is the expenditure claimed by the respondents in the income tax assessment under the head 'Donations and Charity'. The assessing officer did not examine the details of each and every donation or expenditure under the common head Donations and Charity, under which debit was made in the Profit and Loss account. What was done by the officer is to exclude donations covered by certificate G.T.A.Nos.4, 6 & 10/2009 2 issued under Section 80G of the Income Tax Act in terms of Section 5(1)(v) of the Gift Tax Act and then to assess the balance expenditure after excluding the non-taxable limit of Rs.30,000/-. The first appellate authority cancelled the assessment on two grounds; the first one on the ground that the assessee being a 'Firm' is not a 'Person' within the meaning of Section 2(xviii) of the Act and second on the ground that the ingredients of gift as defined under Section 2(xii) of the Act are not satisfied. The Tribunal confirmed the order of the CGT(Appeals) against which these appeals are filed by the Revenue. 3. Senior counsel appearing for the appellant contended that a partnership firm is also covered by definition of the term 'person' covered by the definition clause above referred. Eventhough, we find force in this contention and the matter requires detailed examination, we notice that the department case on the other aspect, that is, assessment of the transaction as gift is not proved. The standing counsel contended that since exemption for an assessee is with reference to the total gifts given in an year, the officer rightly granted exemption and G.T.A.Nos.4, 6 & 10/2009 3 treated the balance as taxable gift. However, counsel for the assessee submitted that entire expenditure towards 'Donations and Charity', which runs into hundreds of transactions cannot be treated as gift because gift as such is not established by the officer in the adjudication proceedings. 4. We are in agreement with assessee's contention because in order to assess the transaction as gift, the assessing officer should establish that the expenditure claimed under the head 'Donation and Charity', is the amount transferred by one person to another voluntarily and without consideration. The donee or beneficiary in none of the cases is identified or tried to be identified by the assessing officer. On the other hand, the entire expenditure claimed in the income tax assessment excluding the donations covered by section 80G of the Income Tax Act was assessed towards Gift Tax. We do not think the approach of the officer is right because without establishing the transaction that is the expenditure claimed by the assessee as real gift by one person to other, there is no scope for assessment. Further, it is to be seen that the donations given to an G.T.A.Nos.4, 6 & 10/2009 4 established organisation, which has registration under Section 80G, is eligible for exemption; whereas direct charity done by an assessee does not qualify for exemption from gift tax. In any case, when gift assessed is not proved with the necessary ingredients, we think, the Tribunal rightly cancelled the assessment. We, therefore, dismiss the Gift Tax appeals. However, we do not endorse to the view of the Tribunal that a partnership firm will not constitute an assessable entity under the Gift Tax Act. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.SURENDRA MOHAN, JUDGE) ps