IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN WEDNESDAY, THE 11TH MARCH 2009 / 20TH PHALGUNA 1930 ITR.No. 185 of 1999() --------------------- AGAINST THE ORDER IN RA.133/COCH//1998 IN GTA.45/COCH/93 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT(S): -------------- SRI.RAJEEV V. KURUP, ADVOCATE, S/O.M.K.VASUDEVA KURUP, KOTTAYAM. BY ADV. SRI.P.BALAKRISHNAN (E) SRI.MOHAN PULIKKAL RESPONDENT(S): --------------- THE COMMISSIONER OF GIFT-TAX, TRIVANDRUM. ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) FOR R SRI.JOSE JOSEPH, SC FOR IT FOR R THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 11/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. .................................................................... I.T. Reference No.185 of 1999 .................................................................... Dated this the 11th day of March, 2009. 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. 2. 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