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Issues Involved:
1. Validity and effectiveness of the gift of joint family assets without the consent of other adult coparceners. 2. Inclusion of income from the gifted shares in the Hindu undivided family's income for tax purposes. 3. Whether the gift was within reasonable limits under Hindu law. Issue-wise Detailed Analysis: 1. Validity and Effectiveness of the Gift: The primary question under Section 66(1) of the Income-Tax Act was whether the gift of a joint family asset worth Rs. 2,40,000 by Shri Raghbir Singh, the karta, to his wife, without consideration or any ante-nuptial arrangement, is valid without the consent of his son, Shri Harindar Singh. The court highlighted that a Hindu father has the power to alienate coparcenary property with the consent of his sons but is limited by scriptures without their consent. The court referenced Section 225 of Mulla's Principles of Hindu Law, which allows gifts within reasonable limits for purposes such as affection or support of the family. The court concluded that the gift is not void but merely voidable and that it was open to Shri Harindar Singh to avoid it, which he did not do, thus implying consent through acquiescence. 2. Inclusion of Income from Gifted Shares in Family's Income: The Income-Tax Officer included Rs. 48,000 from the dividend on the gifted shares in the family's assessment, arguing the transfer was without legal necessity and not for pious purposes. The court examined whether the transfer was real and intended to be acted upon for all purposes. It was determined that the gift was made out of love and affection and was irrevocable, thus the shares ceased to belong to the family. The court rejected the argument that the transfer was solely for tax avoidance, stating that a taxpayer has the liberty to avoid taxes by lawful means, and the transaction should be upheld if it accomplishes the intended result. 3. Reasonableness of the Gift: The court considered whether the gift was within reasonable limits under Hindu law. It was noted that a Hindu father can make gifts of movable property within reasonable limits to his wife or daughter. The court cited various precedents where gifts of significant value were upheld as reasonable. Given the family's substantial wealth and income, the court found that the gift of shares worth Rs. 2,40,000 was not unreasonable. It represented a small fraction of the family's total assets and income, and thus, the gift was deemed just, fair, and equitable. Conclusion: The court held that the gift of a joint family asset worth Rs. 2,40,000 by Shri Raghbir Singh to his wife was valid and effective, divesting the family of its title to the shares, even without the consent of Shri Harindar Singh. The gift was considered a reasonable share of ancestral movable property made out of affection. The income from the gifted shares should not be included in the Hindu undivided family's income for tax purposes. The judgment was concurred by both judges, leading to an appropriate answer being returned.
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