THE COMMISSIONER OF GIFr-TAX, KERALA v. DR. GEORGE KURUVILLA

The assessee-a medical practioner, by a detd gifted a hospital build ing and land appurtenent thereto his son. The gift-deed recited that the gift was made "out of love anci affection··. The asses.set.: clai'lled ex.emp s. 5 ( 1) (xiv) of the Gift Tax Act 1958 tion from gift-tax liability under on the ground that a few months after the gift his son had graduated medicine and had joined "he assessee's profession. No ·evidence was placed before the taxing autho•ities that the gi'ft was made io the course of carrying on the business of tk douor. the Gift-tax Officer rejected the claim, and thl! order was affirmed by the Appellate Commissioner. The Appellate Tribunal held that the assessee was exempt from liability to pay Gift-tax. On reference, the High Court upheld the Tribunal's order. In appeal by the Revenue. this Court. HELD ; The assessee wa, not entitled to the exemption under s. 5 (I) (xiv) of the Act. The donor is exempt under s. 5( I )(xiv) from liability lo pay tax only if the gift is in the course of carrying on a business. pro ession or \location and is made hona flde for the purpose of such business, profe~sion 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 prc-vide that a gift is exempt from tax because the -propcrcy is used by the donor. Without deciding whether the test of "commercial expedience" is strictly appropriate to a claim for eremption under s. 511)(xiv1 of the Gift Tax Act-there was no evide:icc on the record in this case to provi: that the gift was "in the course oi carryin~ on the business" ol the donor, and "for the purpose of the husiness". [375 G-H; 376 Al C1v11 .. APPELLATE JURISDICTION:

1967.' . Civil Appeal No. 764 of . Appeal from the judgment and order dated April 2, 1965 of the Kerala High Court in I.T.R. Case No. 26 of 1964. B, Sen, S. K. Aiyar and B. D .. Sharma. for the appellant. · The respondent did not appear. The Judgment of the Court was delivered by Shllh, J. By our order dated January 1, 1969, we directed the Income-tax Appellate Tribunal to ~ubmit a supplementary statement of the case together with a copy of the deed of gift dated February 3, 1960 executed by the respondent. The Tri- L12SupCl/70-to B c E f G H 374 SUPREME COURT REPORTS (19 71 J 1 S.C.R. bunal has submitted the supplementary statement of tle case to gether with a copy of the deed of gift exe.cuted by the respondent on February 3, 1960. The respondent is a medical practitioner. By the deed dated February 3, 1960 he has given to his son Thomas four iteos of property : ( 1) one-fifth share in cardamom estate valued at Rs. 3,030.80; (2) 1.38 cents of garden land valued at Rs. 4,500; (3) G. K. Hospital Building erected on the garden land valued at Jls. 17,250; and ( 4) Othi rights valued at Rs. 6,000. ; In response to a notice under s. 13 (2) of the GMt Tax Act 18 of 1958 the assessee filed a return for the assessment year .1960-61 disclosing taxable gifts of property valued at Rs. 27,251. But he claimed exemption in respect of item No. (2), i.e. the -garden land. In the course of the hearing the respondent claimed that the G.K. Hospital Building item No. (3) was also exempt from liability to gift-tax because of s. 5(1) (xiv) of the·Gift-tax It was t;,e case of the respondent that his son Thomas had Act. _in in the medical science at an examination held graduated December 1959 and had joined the respondent's profession as a House-Surgeon in July 1960, and on that account the gifts in . respect of items ( 2) & ( 3) 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 ·Appellate Tribunal held that the exemption in respect of items (2) and (3). respondent was entitled At the instance of the Commissioner of Gift Tax, the Tribu nal referred the following question to the High Court of Kerala for <>pinion: · "Whether on the facts and in the circumstances of the case, the. as~essee was entitled to the exemption in respect of G.K. Hospital and the adjoining land of 1.38 cents under s. 5 (I )(xiv) of the Gift Tax Act ?" The High Court answered the question in the affirmative. The Commissioner of Gift Tax, Kerala, has appealed to Court. Section 5 of the Gift Tax Act provides for exemption in res pect of certain gifts : insofar as it is relevant it provTdes : " ( 1) Gift-tax shall not be charged under this Act in respect of gifts made by any person- . (xiv) in the course of carrying on a business, pro fession or vocation, to the extent to which the gift is proved to the satisfaction of the Gift-tax Officer to have B c D E F H A B c D • E F G H COMMR, OF GIFT TAX v. G. KURUVILLA (Shah, J.) 375 been made bona fide for the purpose of such business, profession or vocation." suggests remotely The respondent practises the profession of medicine. A few months aftert the deed of gift his sor. Thomas also qualified to be a medical practitioner. But there is nothing in the deed of gift which wa.,; made by the respondent 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 are clear : it is r.ecited in the deed that the gift was made love and affection". There was no evidence before the taxing authorities that the gift was made to the donee Thomas in the course of carrying on the business by the donor or for the purpose of such business, profession or vocation. The Tribunal observed paragraph· 7 of the judgement : 'out of in · "There is no finding that the assessee has ceased to carry on his professiol) as a doctor, Therefore it will be clear that the gift had been. mac!e in the course of the carrying on the profession. Now the next condition is that it should have bee11 made for the purpose of the pro It is not the case of the Department thaf the fession. gift property had been used for any purpose other than .;.vhat it had been put to while it was with the donor. The High Court observed : I "We feel it difficult to resist the conclusion that in the background and circumstances, the gift could well be regarded as having been made for the better order ing of the business of the assessee. . . . . it would be enough to show that the gift was made on gfounds of commercial expediency and in order to directly or in directly facilitate the carrying on of the business, pro fession or vocation " We are unable to agree with the views so expressed. The donor is exempt under s. 5(l)(xiv) from liability to pay tax only if the gift is in the course of carrying on a business, pro fession or vocation and is made bona fide for the purpose of such business, profession or vocation. The clause does not enact that a gift mad.e 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 .. Without deciding whether the test of to the claim "commercial expediency" is strictly appropriate 376 .SUPREME COURT REPORTS [1971 J l S.C.R. for exemption under s. 5 (1) (xiv), we are of the view that chc;e is no evidence on the record to prove that the gift to Thomas was "in the course of carrying on the business" of the donor, _and "for the purpose of the business". The appeal is allowed and the oroer passed by the ! Ii,;h Court is set aside. The Commissioner of Gift Tax will "et; his costs in this Court and the High Court. A B Appeal allowed.