Though exempt but only in case of movable properties
Under clause (d) of the second proviso to section 56(2)(vii), any
sum of money or any property received
‘in contemplation of the death of the payer or donor’ is granted exemption from
tax. What is contemplation of death has not been defined any where in the act
and rules.
The word “contemplation” as
per dictionary meaning stands for in anticipation
Gift in
contemplation of death otherwise known as donatio mortis causa was defined in
Explanation to Sec. 8 of the Estate Duty Act, 1953 (now not in force) by making
a cross reference to Sec. 191 of the Indian Succession Act, 1925. Such a gift
had also found its way as an excepted gift in Sec. 5(1)(xi) of the Gift Tax
Act, 1950. The definition for the same in Sec. 191 of the Indian Succession
Act, 1991 reads as under:
"191.
Property transferable by gift made in contemplation of death. —
(1) A man may
dispose, by gift made in contemplation of death, of any moveable property which
he could dispose of by will.
(2) A gift is
said to be made in contemplation of death where a man, who is ill and expects
to die shortly of his illness, delivers to another the possession of any
moveable property to keep as a gift in case the donor shall die of that
illness.
(3) Such a
gift may be resumed by the giver; and shall not take effect if he recovers from
the illness during which it was made; nor if he survives the person to whom it
was made."
Two
important requirements laid down in this sub-section are, (i) the donor must be
ill and expects to die shortly of the illness, and (ii) possession of the
property should be delivered to the donee, apparently during the lifetime of
the donor.
So in nutshell
we can say it is that gift of movable property even though not by the relative(As defined in section 56), which takes effect on the death
of the donor. If the donor recovers or the donee predeceases, the gift reverts
to the donor. The gift of immovable
property under contemplation of death is not permitted. For making such gift, it is not necessary
that the donor should be already on his death bed when he made such a gift and
valid gift in this case can be made by person suffering from incurable deceases
or a person about to undergo a serious operation which may prove fatal(may die)
or a soldier about to depart on active service in time of war(may or may not return back).
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