1971 (9) TMI 61 - SC - Income Tax

Whether there was gift by N. S. Getti Chettiar of ₹ 2,46,377 on which he is liable to pay Gift-tax ? Held that - the word disposition , in the context, means giving away or giving up by a person of something which was his own, conveyance means transfer of ownership, assignment means the transfer of the claim, right or property to another, settlement means settling the property, right or claim--conveyance or disposition of property for the benefit of another delivery contemplated therein is the delivery of one s property to another for no consideration and payment implies gift of money by someone to another. We do not think that a partition in a Hindu undivided family can be considered either as disposition or conveyance or assignment or settlement or delivery or payment or alienation within the meaning of those words in section 2(xxiv). The transaction referred to in clause (d) of section 2(xxiv) takes its colour from the main clause, viz., it must be a transfer of property in some way. This conclusion of ours gets support from sub-clauses (a) to (c) of clause (xxiv) of section 2, each of which deals with one or the other mode of transfer. If Parliament intended to bring within the scope of that provision partitions of the type with which we are concerned, nothing was easier than to say so. In interpreting tax laws, courts merely look at the words of the section. If a case clearly comes within the section, the subject is taxed and not otherwise. We agree with the view taken by the High Court of Madras, the Tribunal and the Appellate Assistant Commissioner that the assessee made no gift under the partition deed in question.

Summary

Issues Involved:
1. Whether the partition of property within a Hindu Undivided Family (HUF) constitutes a "gift" under the Gift-tax Act, 1958.
2. Applicability of sections 2(xii) and 2(xxiv) of the Gift-tax Act, 1958 to the partition of HUF property.
3. Whether the partition deed resulted in a "transfer of property" as defined under section 2(xxiv) of the Gift-tax Act, 1958.

Issue-wise Detailed Analysis:

1. Whether the partition of property within a Hindu Undivided Family (HUF) constitutes a "gift" under the Gift-tax Act, 1958:

The primary question referred to the High Court was whether the partition of properties by N. S. Getti Chettiar amounted to a gift liable for gift-tax. The High Court answered this question in the negative, and the Commissioner of Gift-tax appealed this decision. The Gift-tax Officer initially concluded that the partition, which allotted greater shares to other family members than to the assessee, constituted a "gift" under the Act. However, the Appellate Assistant Commissioner and the Tribunal both held that since no member of an undivided HUF has a definite share in the family assets before partition, the partition did not result in a gift. The Supreme Court upheld this view, stating that the partition did not constitute a "gift" as defined under section 2(xii) of the Act.

2. Applicability of sections 2(xii) and 2(xxiv) of the Gift-tax Act, 1958 to the partition of HUF property:

The Solicitor-General argued that the partition fell under sections 2(xii) and 2(xxiv) of the Act, specifically clause (d) of section 2(xxiv), which includes transactions intended to diminish the value of one's property and increase the value of another's property. The Supreme Court disagreed, stating that a coparcener's share in HUF property is undetermined until partition. Therefore, the act of partition does not fit the definitions of "gift" or "transfer of property" under these sections. The Court emphasized that the partition did not involve any conveyance or disposition of property as typically understood in legal terms.

3. Whether the partition deed resulted in a "transfer of property" as defined under section 2(xxiv) of the Gift-tax Act, 1958:

The Supreme Court examined whether the partition deed could be considered a "transfer of property" under the extended definition in section 2(xxiv). The Court referenced previous judgments, including Commissioner of Income-tax v. Keshavlal Lallubhai Patel, which held that partition of HUF property does not constitute a transfer in the strict legal sense. The Court noted that the terms used in section 2(xxiv) such as "disposition," "conveyance," "assignment," etc., imply a transfer of ownership or interest, which does not occur in a partition. The Court concluded that the partition did not diminish the value of the assessee's property or increase the value of others' property in a manner that would constitute a transfer under section 2(xxiv).

Conclusion:

The Supreme Court upheld the High Court's decision, agreeing that the partition of HUF property did not constitute a "gift" under the Gift-tax Act, 1958. The Court found that neither section 2(xii) nor section 2(xxiv) applied to the partition in question. The appeals were dismissed, with Civil Appeal No. 1341 of 1971 dismissed on merits and Civil Appeal No. 128 of 1969 dismissed as not maintainable. The assessee was entitled to costs.