Cash gifts received on occasions that are a prelude to the actual marriage would also be exempt

The Finance Minister, Mr P. Chidambaram, while presenting the first Budget of the UPA Government, in July 2004, gave the following reasons for treating gifts as income:

"Hon'ble Members are aware that I abolished gift tax in 1997. That decision remains, but a loophole requires to be plugged to prevent money laundering. Accordingly, purported gifts from unrelated persons, above the threshold limit of Rs 25,000, will now be taxed as income. Gifts received from blood relations, lineal ascendants and lineal descendants, and gifts received on certain occasions like marriage will continue to be totally exempt."

The present position is that gifts, vide Section 56(1)(v), are taxable as income in the following situations:

The taxpayer

receiving the gift(s) is an individual or a Hindu Undivided Family (HUF);

The gift

received is in the form of money;

Exceed Rs 25,000

and received without any consideration;

Received on

or after September 1, 1994;

The sum

of money so received does not fall in the exceptions.

If these conditions are not satisfied, the whole of such sum received by the individual/HUF will be taxable as "income from other sources".

Exemptions

In the following circumstances, the gifts received will not be taxable: Any sum of money received before September 1, 2004; in lieu of some consideration; from any relative; on the occasion of the marriage of the individual; under a will or by way of inheritance; in contemplation of death of the payer; which does exceed Rs.25,000 (no restriction on number of transactions).

In the Indian context, especially in the case of Hindu marriages, certain ceremonies such as

sagai

(engagement),

goad bharai

(meeting the bride with presents), and

tilak

(formalising the marriage event) take place before the actual marriage. There is a common practice of giving gifts in cash and kind on these occasions. The issue for examination is whether cash presents on these occasions will also be covered by the exemption that has been given for gifts `on the occasion of marriage'.

The phrase used is `on the occasion of marriage' and not `on the event of marriage'. Hence, the earlier mentioned ceremonies, which are a prelude to the actual marriage ceremony, would be covered by the exemption provided.

The word `occasion' has not been defined in the I-T Act.

In the

Coffee Board, Bangalore vs Joint Commercial Tax Officer, Madras (AIR 1971 SC 870/882)

case, it was observed that the word `occasion', in a wide sense, means to bring about especially in an incidental or subsidiary manner. Hence, the earlier mentioned ceremonies would certainly be covered by the phrase `on the occasion of marriage'.

The issue can be examined from the angle of rules of interpretation as well. If the legislature wanted that gifts given on marriage only should be treated as exempt, there was no need to preface the word `marriage' with the phrase `on the occasion of'. Merely `on the marriage of individual' would have sufficed.

It is settled rule of construction that while it is not permissible to add words or fill any gap or lacuna, efforts should be made to give meaning to each and every word used by legislature

(Maheshkumar vs Addl. Collector, AIR 1988 MP 210)

.

Hence, cash gifts on the occasions which arise before the actual marriage would be covered by the exemption, which is worded as "received on the occasion of the marriage of individual".

(The author is a former chairman of the CBDT.)

T. N. Pandey

(This article was published in the Business Line print edition dated August 5, 2006)
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