IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION. ORIGINAL CIVIL JURISDICTION. ORIGINAL CIVIL JURISDICTION. INCOME INCOME INCOME TAX REFERENCE No. 147 OF 1996 TAX REFERENCE No. 147 OF 1996 TAX REFERENCE No. 147 OF 1996 Mrs Roshan D. Nariman ..Appellant. Vs. The Commissioner of Income-tax, ..Respondent. Mr N. Thakkar a/w Mr R. Poojary i/b Mulla & Mulla C.B.C. for the Applicant. Mr N. A. Kazi, Advocate for the Respondent. CORAM: CORAM: CORAM: DR. S.RADHAKRISHNAN DR. S.RADHAKRISHNAN DR. S.RADHAKRISHNAN AND AND AND V.C.DAGA, JJ. V.C.DAGA, JJ. V.C.DAGA, JJ. DATED: DATED: DATED: 29th September,2008. 29th September,2008. 29th September,2008. P.C.:- ----- ----- ----- 1. Heard the learned counsel for the parties. Perused the reference application. This matter was heard and disposed of on 29.9.2008 for the reasons to be recorded. Accordingly, the reasons are being recorded. 2. The Tribunal has referred the following two questions of law for our opinion under Section 256 of the Income-tax Act, 1961 arising out of the order of the Tribunal dated 19.1.1994. The questions read as under:- ( 2 ) 2 ) 2 ) Questions Questions Questions of Law : of Law : of Law : ------------------ ------------------ ------------------ 1. "Whether on the facts and under circumstances of the case and in law, the Appellate Tribunal was right in holding that the Applicant did not receive premium savings Bond of Pounds 50 along with its prize entitlement of pounds 1,00,000 by way of gift from her cousin Mr Kersi R. Bhadha on 3.12.1987? 2. Whether on the facts and under the circumstances of the case and in law, the Appellate Tribunal was right in taxing the prize of Rs. 23,67,835/- as winning from lottery under Section 115BB of the Income-tax Act, 1961 even though the said receipt was in the nature of capital receipt? THE THE THE FACTUAL MATRIX: FACTUAL MATRIX: FACTUAL MATRIX: ------------------ ------------------ ------------------ 3. The factual matrix drawn from the statement of case are as under: 4. The Assessee is a Citizen of India and domiciled in India. For the relevant assessment year 1988-89 she was resident in India. She is following mercantile system of accounting. Her accounting period ended on 31.3.1988. In her return, she disclosed share of profit received from M/s Zorastrian Dairy. Along with the return of Income, the assessee filed inward remittance certificate dated ( 3 ) 3 ) 3 ) 23.12.1987 from Bank of India, Bombay. As per the certificate a sum of pounds 1,00,000/- was credited by the said bank in the assessee’s account No.21909 in the Central Bank of India on 21.12.1987. The amount was remitted by the Department of National Savings, U.K. through Bank of India (London Branch). This amount was stated to be beyond the ken of Income-tax Act. It was stated that the assessee received the premium savings bond in London on 3.12.1987, a gift from Kersi R. Bhadha, her first cousin, a British citizen, who purchased it in January, 1986 in assessee’s name. It fetched the prize in the draw held in September, 1987. The general conspectus of the main plank of the assessee’s argument was that the prize was borne by Shri Kersi R. Bhadha and not by the Assessee and, therefore, the amount was not exigible to tax in India. 5. The said submission was not accepted by the Assessing Officer holding that right from the inception the bonds purchased were in the name of the Assessee. The Assessee contended that she did not purchase these bonds but those bonds were purchased by Shri K.R. Bhadha in her name without her knowledge. She further submits that the said ( 4 ) 4 ) 4 ) bonds were given in gift to her by Shri. K.R. Bhadha and the said gift was accepted by her on 3.12.1987. Consequently, she could be said to be the owner of the said bonds only after acceptance of the gift on 3.12.1987. Consequently, the assessee did not offer this amount as income on the ground that the said bonds were received by her in London on 3.12.1987 from Shri K.R. Bhadha. In support the assessee relied on declaration of gift dated 3.12.1987. Thus, according to the assessee prize was borne by Shri K.R.Bhadha and not by her and, therefore, it was exempted from income-tax. This submission of the assessee was not accepted by either of the authorities under the Act. In other words, her appeal failed before the CIT (A) and also before the Income-tax Act. 6 The aforesaid factual matrix have given rise to the question framed in the opening part of the judgment. SUBMISSIONS:- SUBMISSIONS:- SUBMISSIONS:- ------------ ------------ ------------ 7. The learned counsel for the Assessee submits that unilateral action of Shri K. B. ( 5 ) 5 ) 5 ) Bhadha of buying bond in the name of the Assessee by itself does not amount to a gift. According to him, the gift is complete only when it is accepted. In order to make a valid gift, it is essential that the gifted property must vest in the transferee. There cannot be gift, in law, without vesting of the property gifted to the transferee and such vesting cannot take place without the consent or the concurrence of the transferee donee. According to the learned counsel, conjoint reading of Section 2 (xii), coining of expression "gift" and Section (xiv), coining a definition of expression "transfer of property", makes it clear that before a transaction can be styled as a gift, it must result in transfer by one to another, i.e. there must be plurality of parties involved in the transaction. In other words, these provisions postulate that there must be a transaction between at least two parties. Thus, it must be bilateral or multilateral transaction. In this view of the matter, a unilateral transaction whereby a person purchasing bonds merely in the name of another cannot be said to be covered by the definition of the expression ‘gift’ in Section 2 (xii) of the Gift Tax Act. He, thus, submits that the income was not exigible to ( 6 ) 6 ) 6 ) tax in the hands of the assessee. 8. Adverting to the applicability of the Section 115BB of the I.T. Act, the learned counsel submitted that since the prize received on the above said ‘gift’ cannot be equated with the lottery prize, as such the provisions of Section 115BB cannot be applied in the facts and circumstances of the case. 9. Per contra, the learned counsel for the Revenue strongly canvassed that the Premium Savings Bonds were in the name of Assessee and were not transferable. He, thus, submits that there is no question of receiving gifts since the bonds in the name of the assessee right from the purchase. He also tried to justify the finding touching the applicability of Section 115BB. 10. In rejoinder, the learned counsel appearing for the assessee has placed reliance on the judgment of the Orissa High Court A.I.R. 1962 Orissa 74 and reiterated his submission and urged that there was no evidence of acceptance by the donee, as such assessee cannot be made liable to pay ( 7 ) 7 ) 7 ) tax on the amount of prize money. ------------- ------------- ------------- CONSIDERATION:- CONSIDERATION:- CONSIDERATION:- ------------- ------------- ------------- 11. Having heard rival parties, considering the settled legal position that unless the gift is accepted by the donee gift is not complete. It is not in dispute that, K.R.Bhadha had purchased premium bonds in the name of the present assessee out of his own funds without the knowledge of the assessee. It is also not in dispute that the donee has accepted gift duly on 3.12.1987. Under these circumstances, transaction of gift could be said to be complete only on 3.12.1987. If that be so, the prize money which was earned by K.R.Bhadha could not be assessed in the hands of assessee. 12. So far as the applicability of Section 115B is concerned, the transaction in question cannot be said to be one prize tentamount of free winning from lottery as contemplated under Section 115BB. The findings recorded in this behalf with respect to applicability of the Section 115BB cannot be said to be legal and valid. ( 8 ) 8 ) 8 ) 13. In the result, both these questions referred to for our opinion are answered in favour of the assessee and against the revenue. Reference accordingly stands disposed of in terms of this order with no order as to costs. (V.C.DAGA, (V.C.DAGA, (V.C.DAGA, J.) (Dr.S.RADHAKRISHNAN, J.) J.) (Dr.S.RADHAKRISHNAN, J.) J.) (Dr.S.RADHAKRISHNAN, J.)