M/S KHODAY DISTILLERIES LTD. vs COMMISSIONER OF INCOME TAX

The Supreme Court addressed the applicability of the Gift Tax Act, 1958, specifically Section 2(xii) and Section 4(1)(a), in determining whether the allotment of rights shares and bonus shares constituted a 'gift'. The Court held that the allotment did not involve a transfer of existing property, thus no gift tax was applicable, overturning the Karnataka High Court's decision. The Court concluded that the transaction was not a colorable device to evade taxes, affirming the Tribunal's ruling that there was no deemed gift under the Act.