Law: Gift Tax Act, 1958

Section: 5(1)(xiv)

Section 5(1)(xiv) of the Gift-tax Act, 1958 - Exemptions - Gift in course of business - Assessment year 1960-61 - Assessee, a medical practitioner, made gift of a hospital building and adjoining land to his son who became qualified medical practitioner - Whether since there was no evidence to show that gift in question, was made in course of his profession and bona fide for purpose of carrying on his profession as practitioner in medicine, it was not eligible to exemption under section 5(1)(xiv) - Held, yes FACTS The assessee was a medical practitioner. By the deed dated 3-2-1960, he had given to his son, four items of property, which included garden land and the hospital building erected on that land. The assessee claimed that hospital and the adjoining land was exempt from liability to gift-tax because of section 5(1)(xiv). It was the case of the assessee that his son, had graduated in the medical science in December, 1959 and had joined the profession as a house surgeon in July, 1960, and on that account the said gifts were exempt from liability to tax. The Gift-tax Officer rejected the claim. The Appellate Assistant Commissioner confirmed the order of the Gift-tax Officer. The Tribunal held that the assessee was entitled to exemption. On reference, the High Court affirmed the order of Tribunal. On appeal to the Supreme Court : HELD The donor is exempt under section 5(1)(xiv ) from liability to pay tax only if the gift is in the course of carrying on a business, profession or vocation and is made bona fide for the purpose of such business, profession or vocation. The clause does not enact that a gift made by a person carrying on any business is exempt from tax, nor does it provide that a gift is exempt from tax merely because the property is used for the purpose for which it was used by the donor. In the instant case, there was nothing in the deed of gift to suggest that the gift was made by the assessee in the course of his profession and bona fide for the purpose of carrying on his profession as a practitioner in medicine. The recitals in the deed were that the gift was made "out of love and affection". There was no evidence before the taxing authorities…

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