Law:

Section:

Section 4(2) of the Gift-tax Act, 1958 - Deemed gift - Certain sum standing to assessee's credit in accounts of a partnership firm in which he was a partner, was thrown into common stock of joint family on 20-10-1971 consisting of himself, his wife and his son - Since each of them was having equal share, ITO levied gift-tax in view of insertion of section 4(2) with effect from 1-4-1972, on two-thirds of total value of gift for assessment year 1973-74, of which previous year was from 20-10-1971 to 5-11-1972 - Whether even though gift dated 20-10-1971 was made prior to insertion of section 4(2) but since said section was applicable to relevant assessment year 1973-74, tax was leviable in terms of section 4(2) - Held, yes Section 5(1)(viii) [omitted with effect from 1-4-1987] of the Gift-tax Act, 1958 - Exemption - In respect of gift made to one's spouse - Whether in view of facts under head 'Deemed gift' assessee would be entitled to exemption under section 5(1)(viii) in respect of sum falling to his wife's share - Held, yes Facts The assessee was a partner in a partnership firm in his individual capacity. Certain sum standing to his credit in the partnership books was thrown into the common stock of the joint family on 20-10-1971 so that after the individual property was impressed with the character of the joint family property, it became the property of the family consisting of the assessee, his wife and his son. For the assessment year 1973-74, of which the previous year was from 20-10-1971 to 5-11-1972, the GTO was of the opinion that in view of the provisions of section 4(2), a transaction of gift was involved and, accordingly, determined the value of the gift. Each one of the three members of the joint family was entitled to one-third of the total value of the gift and excluding the one-third attributable to the assessee who made the gift, the balance amount was deemed to be a gift by the assessee, and was assessed as such. The GTO levied tax on the two-third of the sum impressed with the character of joint family property, after rejecting the assessee's claim that he was entitled to exemption under section 5(1)(viii) in respect of the sum falling to his…

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