1989 (3) TMI 19 - HC - Income Tax

Summary

Issues:
1. Assessment of individual as Hindu undivided family member.
2. Inclusion of gifted shares in the net wealth of an individual.
3. Ownership of shares in a Hindu undivided family context.

Analysis:
The case involves a dispute regarding the assessment of an individual as a Hindu undivided family member and the inclusion of gifted shares in the individual's net wealth. The Tribunal referred a question of law to the High Court concerning the individual's liability to be assessed as an individual in respect of shares in a corporation. The individual's father-in-law gifted shares to a Hindu undivided family consisting of the individual and his wife. The Income-tax Officer included the value of these shares in the individual's net wealth, leading to an appeal. The Appellate Assistant Commissioner held that as there was no Hindu undivided family in existence at the time of the gift, the shares should be included in the individual's net wealth.

Upon further appeal, the Tribunal considered the nature of ancestral property and ownership of the gifted shares. The Tribunal emphasized that a person could be assessed as a Hindu undivided family member only in respect of ancestral property. As the individual and his wife had not received any ancestral property, the Tribunal analyzed the intention behind the gift of shares. The Tribunal concluded that the gift was made to the family of the assessee and not to the individual personally. Therefore, if there was no Hindu undivided family in existence, the gift would fail, and the individual could not claim ownership of the shares solely based on the absence of the family.

The High Court, in agreement with the Tribunal's findings, highlighted the legal principle that if a gift is made to a Hindu undivided family and there is no such family in existence, the gift would fail, and the transferred property would revert back to the donor. The Court upheld the Tribunal's decision, ruling in favor of the assessee and answering the question in the affirmative. The judgment emphasizes the importance of the existence of a Hindu undivided family for the validity of gifts made to such families, clarifying the ownership rights in the context of ancestral property and family structures.

In a concurring opinion, Justice Bhagabati Prasad Banerjee agreed with the decision and provided additional support for the Tribunal's findings. The judgment underscores the legal principles governing the assessment of individuals in the context of Hindu undivided families and the implications of gifts made to such families on ownership rights and wealth assessment.