1987 (6) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of the agreement and partnership deed regarding Smt. Vidyawati Rathi's possession of property under section 14 of the Hindu Succession Act, 1956.
2. Determination of Smt. Vidyawati Rathi's share in her husband's estate under the Hindu Women's Rights to Property Act, 1937, and the Hindu Succession Act, 1956.
3. Entitlement of Smt. Ganga Devi to a share in the joint family property.
4. Determination of Smt. Ganga Devi's share if entitled.
5. Consideration of liabilities in determining Smt. Vidyawati Rathi's share.
6. Whether the assessee's relinquishment of her share constitutes a transfer under section 2(xxiv) of the Gift-tax Act, 1958.
7. Whether the assessee's act amounts to a deemed gift under section 4(c) of the Gift-tax Act, 1958.
8. Assessment year for the gift.
9. Validity of the notice issued by the Gift-tax Officer.
10. Liability of the gift to gift-tax under the Gift-tax Act, 1958.

Issue-wise Detailed Analysis:

1. Interpretation of the Agreement and Partnership Deed:
On the facts and circumstances, and on a correct reading and interpretation of the agreement dated October 21, 1957, and the partnership deed dated November 1, 1957, the court held that Smt. Vidyawati Rathi was possessed of the undefined interest of her husband, Seth Vithal Das, in the joint family property within the meaning of section 14 of the Hindu Succession Act, 1956.

2. Determination of Smt. Vidyawati Rathi's Share:
The court concluded that on a correct interpretation of section 3(2) and (3) of the Hindu Women's Rights to Property Act, 1937, and sections 4 and 14 of the Hindu Succession Act, the Tribunal was not right in holding that Smt. Vidyawati Rathi's share became fixed at 1/3rd of the estate left by Seth Vithal Das. Instead, she possessed an undefined interest in the joint family property, which became her absolute property after the passing of the Hindu Succession Act.

3. Entitlement of Smt. Ganga Devi:
The court affirmed that Smt. Ganga Devi, the grandmother, was not entitled to any share either on the death of Seth Vithal Das or on the passing of the Hindu Succession Act, 1956. She was only entitled to maintenance out of the joint family property.

4. Determination of Smt. Ganga Devi's Share:
In view of the answer to question No. 3, question No. 4 does not arise.

5. Consideration of Liabilities:
Given the answers to questions Nos. 1 and 2, that the share possessed by Smt. Vidyawati Rathi on the date of the coming into force of the Hindu Succession Act, 1956, was undefined and fluctuating, this question does not arise.

6. Relinquishment as Transfer:
The court held that the Tribunal was not right in holding that the assessee, by giving up her share or interest in the joint family property in favor of her two sons, transferred the property within the meaning of section 2(xxiv) of the Gift-tax Act, 1958, and thus made a gift as defined by section 2(xii) of the Act.

7. Deemed Gift:
The court found that the Tribunal was not right in giving a finding in the alternative that the act of the assessee amounts to a deemed gift within the meaning of section 4(c) of the Act. The agreement dated October 21, 1957, was accepted as genuine by the taxation authorities, and there was no material on record to show that it was not bona fide.

8. Assessment Year for the Gift:
The court agreed with the Tribunal that the gift was liable to be assessed in the assessment year 1958-59 and not in 1959-60.

9. Validity of the Notice:
The court upheld the Tribunal's finding that the notice dated February 12, 1965, issued by the Gift-tax Officer under section 16(1)(a) of the Gift-tax Act, 1958, was within time.

10. Liability to Gift-tax:
Based on the answers to the preceding questions, the court concluded that Smt. Vidyawati Rathi did not make a gift of the property valued at Rs. 8,01,074, and the same is not liable to gift-tax under the Gift-tax Act, 1958.

Conclusion:
The court answered the questions in favor of the assessee on issues related to the interpretation of the agreement, determination of share, and liability to gift-tax, while upholding the Tribunal's findings on the assessment year and validity of the notice. The parties were left to bear their own costs.