Law:

Section:

JUDGMENT L. Narasimha Reddy, J. - This reference is made under section 26(1) of the Gift-tax Act, 1958 (for short "the Act"), by the Income-tax Appellate Tribunal, Hyderabad Bench A (for short "the Tribunal"). 2. The circumstances that led to the making of the reference are as under : The applicant, his brother, Sri Arjun Das, and their mother Smt. Susheela Devi jointly owned a building at Nizamabad. In addition to that, the two brothers held an open land at Nizamabad in common. The building was leased to the State Bank of India at monthly rent of Rs. 16,230. 3. Through a deed of partnership, dated April 7, 1986, the mother and two sons constituted a partnership firm and the two properties referred to above were made the assets of the firm. However, the firm was dissolved within one year, i.e., on March 2, 1987. At the time of dissolution, the building at Nizamabad was allotted towards the share of the mother, open land to the share of one of the sons, by name Arjun Das and the applicant herein was allotted some liquid assets. 4. In the income-tax return submitted for the assessment year 1987-88, the value of the building was shown at Rs. 6,21,000. While processing the return, the Income-tax Officer, who also happens to be the authority under the Act, took the view that a transaction of gift has taken place from the applicant herein to his mother to the extent of his one-third share in the house. In addition to that, he assessed the value of the house at Rs. 20,28,750 through the method of capitalisation. Accordingly, he proposed to levy gift-tax at Rs. 1,34,77. After considering the explanation submitted by the applicant, the assessing authority confirmed the levy and demand. 5. Aggrieved by the order of the assessing authority, the applicant carried the matter to the Commissioner of Income-tax (Appeals)-IV. The appeal was dismissed on January 17, 1996. Thereafter, the applicant availed of the remedy of further appeal before the Tribunal. The further appeal was dismissed on March 4, 1999. On an application submitted under section 26(1) of the Act, the following questions are referred to this court : "1. Whether, on the facts and in the circumstances of the…

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