1985 (8) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Appellate Tribunal is right in law in allowing relief under section 5(1)(viii) of the Gift-tax Act, 1958, when the karta of a Hindu undivided family (HUF) has given a gift to his wife from HUF funds.

Issue-wise Detailed Analysis:

1. Applicability of Section 5(1)(viii) of the Gift-tax Act, 1958:

The primary issue revolves around whether the exemption under section 5(1)(viii) of the Gift-tax Act applies when a gift is made by the karta of an HUF to his wife using HUF funds. The court examined the language and intent of section 5(1)(viii), which states that gift-tax shall not be charged in respect of gifts made by any person to his or her spouse, subject to a maximum of Rs. 50,000 in value.

2. Definition and Role of Karta in HUF:

The court elaborated on the role of a karta in a Hindu undivided family. A karta, while managing HUF properties, represents the HUF and not his personal property. The court cited the Supreme Court's ruling in Kapurchand Shrimal v. Tax Recovery Officer, which clarified that a karta and an individual are distinct entities. The karta represents the HUF and cannot be equated with an individual acting in a personal capacity.

3. Interpretation of "Person" and "Spouse" in Section 5(1)(viii):

The court analyzed the terms "person" and "spouse" within the context of section 5(1)(viii). It was concluded that the term "person" includes an individual but does not extend to an HUF when considering the exemption clause. The term "spouse" refers to a living husband or wife, and the exemption applies only to gifts made by one spouse to another as individuals, not in a representative capacity as a karta.

4. Legal Precedents and Principles of Statutory Interpretation:

The court referred to several legal precedents and principles of statutory interpretation. It emphasized the need to interpret statutes based on their plain language and intent, without extending meanings beyond what is clearly stated. The court reiterated the principle that in tax law, one must look at what is explicitly stated without presumption or equity.

5. Distinction Between Individual and Karta:

The court highlighted the distinction between an individual acting in a personal capacity and a karta acting on behalf of an HUF. It was noted that gifts made by a karta using HUF property do not qualify for the exemption under section 5(1)(viii) as the karta is not acting as an individual but as a representative of the HUF.

6. Analysis of Contradictory Rulings:

The court reviewed and respectfully disagreed with rulings from other High Courts (Andhra Pradesh, Madras, Punjab, and Haryana) that had previously allowed such exemptions. The court found these rulings inconsistent with the principles established in Kapurchand Shrimal's case and the correct interpretation of section 5(1)(viii).

Conclusion:

The court concluded that section 5(1)(viii) of the Gift-tax Act applies only to gifts made by one living spouse to another as individuals and not to gifts made by a karta of an HUF using HUF property. The court answered the reference in the negative, in favor of the Revenue and against the assessee, and directed the parties to bear their own costs.