Gift tax

Once, in the income-tax proceedings, it is accepted that the transactions are genuine and bona fide, the additions made in the proceedings under the Gift Tax Act on the ground that the transaction was a colourable device cannot be accepted, as held by MumHC in CGT v Ajay Bajaj — In favour of: The assessee.

The Tribunal, in its judgment relating to the income tax proceedings, has held that in the absence of any material evidence brought on record to suggest that the partnership between the assessee and her son related as far back as to the year 1946, the addition in the hands of the assessee on the mere suspicion that there was a deemed gift cannot be sustained. The Tribunal has held that the sales transaction was at arm’s length. There is nothing on record to suggest that the above findings recorded in the income tax proceedings have been reversed or varied.

Once, in the income-tax proceedings, it is accepted that the transactions are genuine and bona fide, the additions made in the proceedings under the Gift Tax Act on the ground that the transaction was a colourable device cannot be accepted. Therefore, the payments made to the son being in his capacity as a partner of the firm, the said amount could not be treated as a deemed gift given by the assessee to her son.

Decided on: 18 August 2011.