1996 (3) TMI 31 - HC - Wealth-tax

Summary

Issues:
Validity of gift of assets by karta of Hindu undivided family to sons.

Analysis:
The case involved a Hindu undivided family where the karta made gifts of movable and immovable properties to his five sons and daughters. The gifts were contested as the recipients had become owners of the property, leading to a dispute on whether the income from the properties should be included in the hands of the Hindu undivided family. The main question was whether the gift of almost the entire assets by the karta to his sons was valid or void under the Wealth-tax Act, 1957.

The court referred to Supreme Court precedents to determine the validity of the gift. In the case of Ammathayee alias Perumalakkal v. Kumaresan, the court established that while gifts of movable ancestral property can be made within reasonable limits, gifts of almost the whole of ancestral movable property are not considered valid. On the other hand, gifts of immovable ancestral property are restricted to "pious purposes," which include charitable and religious motives or fulfilling ante-nuptial promises.

Moreover, the court cited the case of Thamma Venkata Subbamma v. Thamma Rattamma, emphasizing that a coparcener's gift of undivided interest in coparcenary property is void. This strict rule aims to preserve joint ownership and prevent disintegration of the joint Hindu family. The court rejected the argument that the gift was merely voidable, clarifying that the gift was void due to being made by a coparcener of the Hindu undivided family.

The court also distinguished cases related to self-acquired property and income from partnerships, highlighting that the specific context of the gift in question was crucial. Ultimately, the court held that the gift made by the karta to his sons was void as it did not serve a pious or religious purpose, and the alternative argument of partial partition was also dismissed. Consequently, the Tribunal's decision to deem the gift void was upheld, ruling in favor of the Revenue and against the applicant (assessee).