1984 (10) TMI 31 - HC - Income Tax

Issues Involved:
1. Whether the transfer of Rs. 1,60,000 by the karta of a Hindu undivided family (HUF) to his minor daughter constitutes a gift liable to gift-tax.
2. Whether the provision of Rs. 1,60,000 for the minor daughter was to discharge the obligation of maintenance and education.
3. Applicability of section 5(1)(xii) of the Gift-tax Act for exemption.
4. Validity of partial partition in a Hindu undivided family with only one coparcener.
5. Consideration of previous judgments and their applicability to the present case.

Detailed Analysis:

1. Transfer of Rs. 1,60,000 as a Gift:
The main issue was whether the transfer of Rs. 1,60,000 by the karta of the HUF to his minor daughter should be considered a gift and thus liable to gift-tax. The Tribunal held that the transfer did not amount to a gift as it was a transfer for consideration, specifically the obligation of the assessee to maintain the minor child. The Tribunal also referenced section 20 of the Hindu Adoptions and Maintenance Act, 1956, which mandates the obligation to maintain an unmarried daughter who cannot maintain herself. Therefore, the transfer was not considered a gift under section 4(1)(c) of the Gift-tax Act.

2. Provision for Maintenance and Education:
The assessee argued that the Rs. 1,60,000 provision was for the legitimate right of the unmarried daughter to be maintained out of the family property, and it was reasonable given her educational needs. The Tribunal upheld this claim, stating the transfer was made to discharge the HUF's obligation to maintain the minor child, thus not amounting to a gift. The Tribunal also noted that if the transfer were treated as a gift, only Rs. 75,000 could be considered reasonable for education, but this was not pursued further due to the primary finding.

3. Exemption under Section 5(1)(xii) of the Gift-tax Act:
The assessee contended that the amount was exempt from gift-tax under section 5(1)(xii) of the Act, which provides exemptions for specific transfers. The Tribunal did not delve deeply into this issue, as it concluded that the transfer itself was not a gift.

4. Validity of Partial Partition:
The Revenue contended that there could be no partial or total partition in a Hindu undivided family consisting of only one coparcener. However, this argument was not central to the Tribunal's decision, as the primary issue was whether the transfer constituted a gift.

5. Consideration of Previous Judgments:
The Tribunal and the court considered several previous judgments to reach their conclusion:
- M.S.M. Ratnaswami Nadar v. CIT [1975] 100 ITR 669 (Mad): The court distinguished this case by noting that the obligation to maintain the minor daughter was discharged by the transfer, unlike in Ratnaswami Nadar where the transfer was seen as a device to avoid tax.
- Shardaben Jayantilal Mulji v. CWT [1977] 106 ITR 667 (Bom): The Bombay High Court's decision was discussed but found not directly applicable as it dealt with trusts and the personal obligation of the father.
- CIT v. K. N. Shanmuga Sundaram [1978] 115 ITR 178 (Mad): The court found this case supportive of the assessee's position, noting that a reasonable provision for maintenance and education from joint family property is valid.
- CGT v. Radhakrishna Gade Rao [1983] 143 ITR 260 (Mad): This decision supported the view that a settlement by the karta for an unmarried daughter is in discharge of legal obligation and not a gift.
- Controller of Estate Duty v. Dr. B. Kamalamma [1984] 148 ITR 434 (Mad): The court upheld the validity of reasonable provision for a daughter's maintenance and education.

Conclusion:
The court concluded that the transfer of Rs. 1,60,000 by the karta to his minor daughter did not constitute a gift and was not liable to gift-tax. The decision was based on the finding that the transfer was made to discharge the HUF's obligation to maintain and educate the minor daughter, supported by relevant provisions of the Hindu Adoptions and Maintenance Act, 1956, and consistent with previous judicial decisions. The question referred to the court was answered in the affirmative and against the Revenue, with costs awarded to the assessee.

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