1985 (9) TMI 65 - HC - Income Tax

Summary

Issues:
Interpretation of partial partition under Hindu undivided family funds for tax purposes.
Entitlement to relief under section 5(1)(viii) of the Gift-tax Act, 1958.

Analysis:
The High Court of Karnataka addressed the issues concerning the interpretation of partial partition under Hindu undivided family funds and entitlement to relief under section 5(1)(viii) of the Gift-tax Act, 1958 in a common order. The case involved assessees who withdrew amounts from the Hindu undivided family funds and gifted them to their wives. The assessees claimed exemption from gift-tax under section 5(1)(viii) of the Act, which was initially rejected by the Gift-tax Officer but later accepted by the Tribunal, leading to the references before the High Court.

The Tribunal found that the withdrawals and gifts by the coparceners could be construed as a partial partition, making them individual owners before gifting the amounts. The Revenue argued that this action resulted in the coparceners forming minor Hindu undivided families, thereby disqualifying the gifts for exemption under section 5(1)(viii) of the Act. The Revenue relied on a Division Bench ruling to support its contention.

The High Court concurred with the Revenue's argument, stating that the coparceners, upon the partial partition, constituted minor Hindu undivided families, rendering the gifts ineligible for relief under section 5(1)(viii) of the Act. Consequently, the Court answered both questions in favor of the Revenue and against the assessees, directing each party to bear their own costs.

In conclusion, the judgment clarified the implications of partial partition under Hindu undivided family funds for tax purposes and determined the eligibility for relief under section 5(1)(viii) of the Gift-tax Act, 1958 based on the specific circumstances of the case.