# [1971] 1 S.C.R. 373

- **Citation:** [1971] 1 S.C.R. 373
- **Court:** Supreme Court of India
- **Decided:** 1970-04-24
- **Case number:** Civil Appeal No. 764 of 1967
- **Bench:** J.C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1971-1-s-c-r-373-5049
- **Pages:** 4

## Headnote

Gift-•ax Act, (18 o/1958) s. 5(1) (tiv)-Gift of Ho.1pitt1/ building h.v
medical practitioner to his son who later joins donor's
profession-Gift
describ;td as for love and affection-Whether exenzp; under s. 5(l)(xiV).
The assessee-a medical practioner, by a detd gifted a hospital building 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.emption from gift-tax liability under s. 5 ( 1) (xiv) of the Gift Tax Act 1958
on the ground that a few months after the gift his son had graduated in
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
l
o pay tax only if the gift is in the course of carrying on a business. proession 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: . Civil Appeal No. 764 of
1967.'
.
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.

## Text

J 7:!
A
THE COMMISSIONER OF GIFr-TAX, KERALA
B
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f
G
H
v.
DR. GEORGE KURUVILLA
April 24, 1970
[J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Gift-•ax Act, (18 o/1958) s. 5(1) (tiv)-Gift of Ho.1pitt1/ building h.v
medical practitioner to his son who later joins donor's
profession-Gift
describ;td as for love and affection-Whether exenzp; under s. 5(l)(xiV).
The assessee-a medical practioner, by a detd gifted a hospital building 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.emption from gift-tax liability under s. 5 ( 1) (xiv) of the Gift Tax Act 1958
on the ground that a few months after the gift his son had graduated in
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
l
o pay tax only if the gift is in the course of carrying on a business. proession 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: . Civil Appeal No. 764 of
1967.'
.
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 TriL12SupCl/70-to
374
SUPREME COURT REPORTS
(19 71 J 1 S.C.R.
bunal has submitted the supplementary statement of tle case together 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
Act. It was t;,e case of the respondent that his son Thomas had
graduated
in the medical science at an examination held
_in
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
respondent was entitled
to
exemption in respect of items (2) and (3).
At the instance of the Commissioner of Gift Tax, the Tribunal 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 this
Court.
Section 5 of the Gift Tax Act provides for exemption in respect 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."
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
even
remotely
suggests
that
the
gift
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 'out of 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
in ·
paragraph· 7 of the judgement :
"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 profession.
It is not the case of the Department thaf the
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 :
"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 ordering 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 indirectly facilitate the carrying on of the business, profession 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, 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 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
"commercial expediency"
is strictly appropriate
to the claim
I
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.
Appeal allowed.
A
B