1996 (4) TMI 117 - SC - Income Tax

Whether ITAT is right in upholding the finding of the Appellate Assistant Commissioner that the transaction recorded in the document dated February 11, 1965, is only a partition and not a gift to the extent of the shares allotted to the two sons of the assessee ? Held that - The clear finding of the Appellate Assistant Commissioner whose decision was affirmed by the Tribunal is that it was by means of a partition of the family property in Malayalam Era 1095, corresponding to 1919 A.D. that the assessee came into possession of most of the properties in question and the earnings from the family properties provided the nucleus for acquisition of the other properties which were then included in the family properties and which were the subject-matter of the partition made between the assessee and his children. It was clearly held that this partition made in the year 1919 A.D. between the assessee and his brothers was of coparcenary property and the entire corpus covered by the partition deed on February 11, 1965, is the coparcenary property of the assessee s family. This finding of fact was not challenged before the Tribunal and the Tribunal s judgment of affirmance must be construed as based on this finding as well. Even in the High Court, this finding remained unassailed and the High Court without adverting to this finding of fact relating to the personal law applicable to the assessee s family, has reversed the decision of the Tribunal. It may also be mentioned that the decision against the assessee has been rendered on the basis that the assessee has failed to discharge the burden of proof---the applicability of the rule of survivorship to his family. It is sufficient to observe that the above clear finding on this question in favour of the assessee discharges that burden, if any, on the assessee to prove this fact. There being no evidence to the contrary, this clear finding of fact in the assessee s favour is sufficient to decide the above-quoted question in favour of the assessee

Summary

Issues:
Interpretation of Hindu law in property matters for Cutchi Memons in Travancore.
Determination of whether a transaction was a partition or a gift.

Analysis:
The case involved an appeal by the assessee against the Kerala High Court's judgment in favor of the Revenue. The questions referred to the High Court related to the application of Hindu law to Cutchi Memons settled in Travancore and the nature of a transaction involving partition of family property. The assessee, a Cutchi Memon, executed a partition deed with his sons and daughter in 1965. The Gift-tax Officer treated the transaction as a gift, but the Appellate Assistant Commissioner found it to be a partition of joint family property based on historical partition documents.

The Tribunal upheld the view that the rule of survivorship applied to the assessee's family, citing a precedent to support that the personal law of the family was Hindu law. The High Court ruled in favor of the Revenue, prompting the appeal to the Supreme Court. The Supreme Court found that the partition in 1919 involving the assessee and his brothers established that the properties in question were coparcenary property. The Tribunal's decision was based on this finding, which was unchallenged.

The Supreme Court held that the burden of proof regarding the applicability of the rule of survivorship was discharged by the clear finding in favor of the assessee. As there was no evidence to the contrary, the Court decided in favor of the assessee on the second question without addressing the broader aspect covered by the first question. Consequently, the Court answered the second question in favor of the assessee, setting aside the High Court's judgment and allowing the appeal with no costs incurred.