1977 (10) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Validity of gifts of immovable properties by the karta of a Hindu undivided family to his minor daughters.
2. Inclusion of income from such gifted properties in the assessment of the assessee-family.
3. Inclusion of the value of such gifted properties in the wealth-tax assessment of the assessee-family.

Issue-wise Detailed Analysis:

1. Validity of Gifts of Immovable Properties:
The primary issue was whether the gifts of immovable properties made by the karta of a Hindu undivided family to his minor daughters were valid under Hindu law. The court examined various precedents and Hindu law texts, which generally allow a father or karta to make gifts of small portions of ancestral immovable property to his daughters, particularly on the occasion of their marriage. However, the court noted that the Supreme Court in Guramma v. Mallappa extended this principle, allowing such gifts even outside the marriage context if they are reasonable and fulfill a moral obligation. The court concluded that the gifts in this case, made to minor unmarried daughters, were valid as they constituted a reasonable portion of the family's total assets.

2. Inclusion of Income from Gifted Properties in the Assessment of the Assessee-Family:
The court addressed whether the income from the gifted properties should be included in the assessee-family's income for tax purposes. The Tribunal had previously held that since the gifts were valid, the income from these properties should not be included in the assessee's income. The court upheld this view, noting that valid gifts transfer ownership and the associated income to the donees, thereby excluding it from the donor's taxable income.

3. Inclusion of the Value of Gifted Properties in Wealth-Tax Assessment:
The court also considered whether the value of the gifted properties should be included in the wealth-tax assessment of the assessee-family. The Tribunal had excluded these values, consistent with its finding on the validity of the gifts. The court agreed, stating that validly gifted properties no longer belong to the donor and thus should not be included in the wealth-tax assessment of the assessee-family.

Conclusion:
The court held that the gifts made by the karta to his minor daughters were valid, the income from these properties should not be included in the assessee-family's income, and the value of these properties should not be included in the wealth-tax assessment. The judgment reinforced the principle that reasonable gifts fulfilling moral obligations are valid under Hindu law, even if made outside the traditional context of marriage. The court directed the revenue to pay the costs of the references to the assessee, concluding that the Tribunal's decisions were correct in law.