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Issues:
1. Whether the conversion of individual property into joint family property constitutes a gift for the purpose of Gift-tax Act. 2. Whether exemption under section 5(1)(viii) of the Act applies to the gift made in favor of the wife. Analysis: 1. The judgment concerns a reference made by the Income-tax Appellate Tribunal regarding a gift-tax assessment for the assessment year 1973-74. The assessee, a partner in a partnership firm, transferred a sum of Rs. 1,71,373 from his individual account to the common stock of the joint family, comprising himself, his wife, and his son. The Revenue contended that this transfer constituted a gift under section 4(2) of the Gift-tax Act. The Gift-tax Officer assessed the gift value at Rs. 1,14,248, attributing one-third of the total value to each family member. The Appellate Assistant Commissioner and the Tribunal upheld this assessment, rejecting the assessee's claim that the gift was made before the amendment to the Act on April 1, 1972, and hence not liable for gift tax. 2. The assessee also claimed exemption under section 5(1)(viii) of the Act for the gift made to his wife. The Gift-tax Officer refused this exemption, resulting in gift tax being levied on two-thirds of the total amount transferred. The Tribunal, however, granted the exemption under section 5(1)(viii) for the gift to the wife. The High Court affirmed the Tribunal's decision, stating that the provision in section 4(2) of the Gift-tax Act is declaratory of a deemed gift when individual property is converted into joint family property. The Court held that the gift to the wife qualifies for exemption under section 5(1)(viii) as she would be entitled to a share in the converted property upon partition. 3. The Court rejected the assessee's argument that gifts made before the amendment to the Act on April 1, 1972, should not be subject to gift tax, emphasizing that the law applicable for the assessment year governs the tax liability. Citing precedents and legislative intent, the Court held that the conversion of individual property into joint family property constituted a gift for the assessment year 1973-74. The Court also clarified that the exemption under section 5(1)(viii) applies to the gift made in favor of the wife, as she would be entitled to a share in the converted property upon partition, warranting the exemption. 4. In conclusion, the High Court upheld the Tribunal's decision, affirming that the conversion of individual property into joint family property constituted a gift liable for tax under the Gift-tax Act for the assessment year 1973-74. The Court also upheld the exemption under section 5(1)(viii) for the gift made to the wife, as she would be entitled to a share in the converted property upon partition. The parties were directed to bear their own costs.
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