Law:

Section:

Gift tax-----Association of persons-Single gift deed by two persons of their separate properties-Whether donors can be assessed s an association of persons. The assessee and her sister, who obtained certain properties under a gift deed executed by their mother and whose interest in the properties was separate and distinct; gifted two items of the properties to their brother by a single gift deed. They were assessed to gift tax on the value of the properties gifted as an association of individuals. The assessee's contention that they could not be taxed as an association of individuals was rejected by the Appellate Tribunal. On a reference to the High Court: Held, that the assessment of the assessee in the status of an association of persons was not proper. Gift tax is not a tax on Property but is a tax on the transaction of gift. If two or more persons execute one deed of gift in favour of the same person in respect of properties which belong to them individually or in which they have separate and distinct interests, they cannot be assessed to gift tax as an association of individuals. Commissioner of Income-tax v. Indira Balkrishna (1960) 39 I T R 546 (S C) and Commissioner of Agricultural Income-tax v. Raja Ratan Gopal (1966) 59 I T R 728 (S C) applied. Opinion of the author of Three New Taxes by A. C. Sampath Iyengar, 1966 Edn., p. 73 disapproved. Commissioner of Income-tax v. Laxmidas Devidas (1937) 5 I T R 584; In re: Dwarkanath Harischandra Pitale (1937) 5 I T R 716 ; In re: Elias (B. N.), (1935) 3 I T R 408 and Mst. Gaindi v. Union of India (1964) 52 I T R 632 ref.   JUDGMENT M. U. ISAAC, J.-This is a reference made by the Madras Bench of the Income-tax Appellate Tribunal under section 26(1) of the Gift Tax Act, 1958 (hereinafter referred to as the Act), on the application of one Smt. R. Valsala Amma, who was assessed under the Act, along with her sister, Smt. R. Rugmani Amma alias Subhadra Amma, as an association of individuals for the year 1962-63 by the Gift Tax Officer, Palghat. The questions referred for decision are : "(1) Whether, on the facts and in the circumstances of the case, the Gift Tax Officer, Palghat, had jurisdiction to…