1967 (6) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Whether the difference between the value of the one-fourth share of the properties to which the deceased was entitled on family partition and the share he actually received is a gift includible under the provisions of section 9 read with section 27 of the Estate Duty Act.

Issue-wise Detailed Analysis:

1. Nature of the Difference in Property Value:
The primary issue was whether the difference of Rs. 1,08,591 between the one-fourth share of the net value of the family properties the deceased was entitled to and the share he actually received constituted a gift under section 9 read with section 27 of the Estate Duty Act. The Tribunal initially held that the unequal partition amounted to a constructive disposition, implying a transfer of property to the sons, thus falling within the mischief of section 27.

2. Interpretation of Sections 9 and 27:
The court emphasized that for a transaction to be deemed a gift under section 9, three conditions must be satisfied:
1. Property must be disposed of inter-vivos.
2. It should be by way of transfer, delivery, declaration of trust, settlement upon person in succession, or otherwise.
3. It should be made bona fide two years or more before the death of the deceased.

Section 27 extends these provisions to dispositions in favor of relatives unless full consideration is paid or the deceased was acting in a fiduciary capacity.

3. Definition of Gift and Disposition:
The court noted that there is no specific definition of "gift" in the Estate Duty Act. However, section 9 outlines the manner in which a gift can be effected. The court also referred to the ejusdem generis rule, interpreting "otherwise" in section 9 to mean some kind of legal obligation or transaction enforceable at law or in equity.

4. Nature of Partition in Hindu Law:
The court examined whether partition of a Hindu joint family property constitutes a transfer. It was held that partition is a process where joint enjoyment is transformed into enjoyment in severalty, with each coparcener having an antecedent title to the property. Therefore, no transfer is involved. This view was supported by precedents such as Radhakristnayya v. Sarasamma and Kalooram Govindram v. Commissioner of Income Tax.

5. Applicability of Section 27:
The court concluded that the word "disposition" in section 27, whether construed in its natural or technical sense, connotes a transfer or conveyance, which does not apply to the process of partition in a joint Hindu family. Unequal partitions are permissible under Hindu law and do not amount to a gift or disposition of property within the meaning of sections 9 and 27.

Conclusion:
The court held that the Tribunal erred in assuming a disposition where there was none. The unequal partition did not constitute a gift under section 9 read with section 27 of the Estate Duty Act. The answer to the reference was in the negative and in favor of the assessee. Advocates fee was set at Rs. 250.