1979 (5) TMI 20 - HC - Income Tax

Summary

Issues: Interpretation of provisions of Gift-tax Act regarding exemption for gifts made by the karta of a Hindu undivided family to family members.

Analysis:
The High Court of PUNJAB AND HARYANA addressed the question of law referred by the Income-tax Appellate Tribunal regarding the application of section 5(1)(viii) of the Gift-tax Act to a gift made by the 'karta' of an assessee-Hindu undivided family to the wife. The case involved a Hindu undivided family (HUF) that had gifted an amount to the wife of the 'karta' from the sale proceeds of agricultural lands. The Gift-tax Officer (GTO) and the Appellate Authority confirmed the assessment, considering the gift taxable. However, the Tribunal, in the second appeal, ruled that a portion of the gift was exempt under section 5(1)(viii) of the Act. The Tribunal's decision was based on precedents like Jana Veera Bhadrayya v. CGT and CGT v. Hari Chand, which were relied upon to support the exemption claim.

The Division Bench of the High Court directed the Tribunal to clarify whether the gift was made by the 'karta' as an individual or on behalf of the HUF. The Tribunal's additional statement confirmed that the gift was made by the 'karta' in his capacity representing the HUF, not as an individual. This distinction was crucial in determining the applicability of section 5(1)(viii) of the Act. The Court highlighted the findings in previous cases where gifts were made as individuals to individuals, not as karta of the HUF. In the present case, since the gift was made by the 'karta' of the HUF, the provisions of section 5(1)(viii) did not apply as there cannot be a spouse of the HUF as envisaged in the section. Consequently, the Court held that the Tribunal erred in law by applying section 5(1)(viii) to the gift made to the wife by the 'karta' of the assessee-HUF, ruling in favor of the revenue. The judgment was unanimous, with no representation from the assessee leading to no order as to costs.