Case: Commissioner of Gift Tax, Kerala Vs. R. Valsala Amma

One Smt. Unniammalu Amma executed a will dated December 4, 1959, bequeathing her properties to her two daughters, Valsala Amma and Rugmini Amma. After the death of Unniammalu Amma, her two daughters appear to have effected a partition on June 7, 1961, of some of the properties bequeathed to them under the will of their mother. Two items of properties which had been bequeathed to them, namely, a cinema theatre building with machinery and a building called police quarters, were not divided between them. These two ladies gifted those buildings to their brother, Sri Rajan Menon, by means of a gift deed dated June 8, 1961. The question for decision is whether in respect of the said gift the assessee should be assessed as an association or as a body of individuals or individual. TheOfficer assessed the assessee as an association. The Appellate Assistant Commissioner upheld the assessment as an assessment on a body of individuals. The Tribunal came to the conclusion that the assessment in question is a valid assessment and it is an assessment on an association. The High Court differed from the conclusions reached by the above authorities and came to the conclusion that the assessees could only be assessed as individualsSection 2(xviii) of theAct, 1958, defines "person" as " person includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not." Section 3 is the charging section says "subject to the other provisions contained in this Act, there shall be charged for every (assessment year) commencing on and from the 1st day, of April, 1958, a tax (hereinafter referred to asin respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957) at the rate or rates specified in the Schedule"

Court's reasoning:
In law each one of them had half the right in the property that they gifted to their brother. They were holding that property aand not as joint tenants. Hence they made the gift asand not as joint tenants. Each one must be held to have made a gift of her share of the property though the gift is made through one single document. It is surprisinig that theOfficer, or the Appellate Assistant Commissioner or the Tribunal should have ever thought that the gift in question was by an association or by a body of inndividuals. TheAct did not change the general law relating to the rights of property. It merely sought to tax a gift of the property owned by a person. As mentioned earlier the property with which we are concerned in this case is a property owned by two persons aseach one having a definite shareIn our opinion, the High Court was absolutely right in answering the question referred to it in favour of the assessee. Civil Appeal No. 1436 (NT)/71 accordingly fails and the same is dismissed with costs.