1979 (10) TMI 63 - HC - Income Tax

Summary

Issues:
1. Validity of a gift of 35 shares by the assessee to his minor son.
2. Inclusion of dividend income on the gifted shares in the assessment of the assessee.

Analysis:
The case involved the validity of a gift of 35 shares by the assessee to his minor son and the subsequent inclusion of dividend income on the gifted shares in the assessment of the assessee. The Tribunal initially upheld the validity of the gift and ruled against including the dividend income in the assessee's total income. The primary legal question was whether the gift of shares was permissible under the law. The standing counsel for the department argued that a coparcener cannot gift his undivided interest in family property, citing various legal precedents. However, it was noted that the gift was being challenged solely on legal grounds, not as a fraudulent attempt to evade tax on dividend income.

The court delved into Hindu law principles regarding gifts of ancestral property, distinguishing between movable and immovable assets. It was established that a father can gift ancestral movable property within reasonable limits for pious or permissible purposes without the consent of his sons. The court referred to previous judgments where such gifts were upheld, emphasizing the importance of reasonableness and pious intent in determining the validity of gifts. In this case, the gift of 35 shares was deemed within reasonable limits given the assessee's overall wealth, and thus, valid under the law.

Furthermore, the court clarified that any alienation of undivided interest, including gifts by a father or HUF karta, is not void but voidable by other coparceners. Since no challenge was raised by other coparceners in this case, the gift was considered valid. Consequently, the court affirmed the validity of the gift of shares to the minor son, leading to a positive resolution of the first issue. As a result, the second issue regarding the inclusion of dividend income became unnecessary to address. The judgment concluded by awarding a consolidated cost to the assessee.

In a concurring opinion, Justice SHIVESHWAR PRASAD SINHA agreed with the findings and decision of Justice NAGENDRA PRASAD SINGH, thus providing unanimous support for the judgment.