1985 (1) TMI 103 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the gift of Rs. 3 lakhs by the Karta of the HUF.
2. Whether the transaction can be regarded as a family arrangement.
3. Obligation of the HUF to maintain and educate unmarried daughters.
4. Applicability of exemption under Section 5(1)(xii) of the GT Act.
5. Misapplication of Section 6A of the GT Act.

Issue-wise Detailed Analysis:

1. Validity of the Gift of Rs. 3 Lakhs by the Karta of the HUF:
The assessee, an HUF, claimed that the transaction of Rs. 3 lakhs to the three daughters was not a gift but a family arrangement. The GTO subjected the entire amount to taxation as a gift. The CGT(A) upheld this view, stating that the Karta, being the sole surviving coparcener, had the absolute right to dispose of the joint family properties. The Tribunal examined whether the gift was void ab initio. It was held that a sole surviving coparcener has the absolute power to alienate the family property, including making gifts. The contention that the gift was void because it involved ancestral property was rejected, as the sole surviving coparcener has an absolute right to dispose of it.

2. Whether the Transaction Can Be Regarded as a Family Arrangement:
The assessee argued that the transaction was a family arrangement and not a gift. The CGT(A) rejected this, stating that the declaration was unilateral and did not involve other family members. The Tribunal, however, held that the Karta, as the father and sole surviving coparcener, could unilaterally effect a partial partition through a family arrangement. The Tribunal cited various judgments, including Apporva Shantilal Shah vs. CIT, supporting the view that a father can bring about a complete or partial partition even unilaterally.

3. Obligation of the HUF to Maintain and Educate Unmarried Daughters:
The Tribunal examined whether the HUF had a legal obligation to maintain and educate unmarried daughters. It was held that under Hindu Law, an unmarried daughter has a right to be maintained out of the joint family property. The Tribunal cited several judgments, including CGT vs. Basant Kumar Aditya Vikram Birla, which supported the view that the HUF has a legal obligation to incur expenses for the maintenance and education of unmarried daughters.

4. Applicability of Exemption under Section 5(1)(xii) of the GT Act:
The assessee claimed that even if the transaction was considered a gift, it should be exempt under Section 5(1)(xii) of the GT Act. However, since the Tribunal held that the transaction was a family arrangement and not a gift, this point did not arise for consideration.

5. Misapplication of Section 6A of the GT Act:
The assessee raised a ground regarding the misapplication of Section 6A of the GT Act. However, this ground did not arise out of the order of the CGT(A), and the Tribunal rejected it as it was not substantiated with evidence that it was raised before the CGT(A).

Conclusion:
The Tribunal annulled the assessment, holding that the transaction was a family arrangement and not a gift, thereby not liable to gift-tax. The appeal was allowed in favor of the assessee.