1982 (5) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the declaration dated 5-9-1969 by Kishan Devi.
2. Existence of a joint family between Kishan Devi and her sons.
3. Nature of the compromise decree dated 15-1-1970.
4. Valuation of the gift for tax purposes.
5. Registration requirement of the compromise decree.

Detailed Analysis:

1. Validity of the Declaration Dated 5-9-1969 by Kishan Devi:

The assessee contended that the declaration made by Kishan Devi on 5-9-1969, which stated that the properties belonged to the joint family, should not be considered a gift. The Commissioner (Appeals) and the Tribunal found that this declaration had no legal consequences. It was established that a female member of a Hindu joint family cannot blend her self-acquired property with the coparcenary property. This position was supported by the Supreme Court's decision in Pushpa Devi v. CIT, which held that a Hindu female cannot share her property with the joint family to the exclusion of herself. Therefore, the declaration dated 5-9-1969 was not valid and had no effect in law.

2. Existence of a Joint Family Between Kishan Devi and Her Sons:

The Tribunal examined whether there was a joint family between Kishan Devi and her sons. The evidence showed that the three sons of Bhagirath Mal were treated as individual taxpayers even during their father's lifetime. There was no indication of an ancestral nucleus or a joint family subjected to income tax. The award dated 16-10-1955 and the subsequent compromise decree treated the properties as jointly held by the parties as 'tenants-in-common' rather than joint family properties. The Tribunal concluded that there was no joint family, and therefore, Kishan Devi could not throw her property into a common hotchpot.

3. Nature of the Compromise Decree Dated 15-1-1970:

The compromise decree was considered a bilateral transaction rather than a unilateral act by Kishan Devi. The decree resulted from a consensus among the parties to the suit, including Kishan Devi and her sons. The Commissioner (Appeals) and the Tribunal held that the compromise decree effectively transferred Kishan Devi's one-fourth interest in the property to her sons for inadequate consideration, constituting a gift under the Gift-tax Act. The Tribunal rejected the argument that the compromise decree was a unilateral act by Kishan Devi.

4. Valuation of the Gift for Tax Purposes:

The assessee argued that only the life estate of Kishan Devi in the property should be valued for gift tax purposes. However, the Tribunal found that under section 14(1) of the Hindu Succession Act, Kishan Devi's limited rights in the property were enlarged into absolute rights. Therefore, the entire value of her one-fourth share in the property, amounting to Rs. 2,84,188, was correctly assessed for gift tax purposes. The Tribunal rejected the argument that the valuation was excessive and arbitrary.

5. Registration Requirement of the Compromise Decree:

The Tribunal addressed whether the compromise decree needed to be registered to be considered a valid gift. It was noted that the compromise decree was a self-contained document that transferred rights from Kishan Devi to her sons. Under section 17(2)(vi) of the Registration Act, a compromise decree involving immovable property, which is the subject matter of the suit, does not require registration. The Tribunal also referenced the Supreme Court's decision in Pushpa Devi's case, which treated an unregistered declaration as a deemed gift. Therefore, the argument that the compromise decree was invalid due to lack of registration was rejected.

Conclusion:

The Tribunal upheld the findings of the Commissioner (Appeals) that the declaration dated 5-9-1969 had no legal effect, there was no joint family, the compromise decree constituted a gift, the valuation of the gift was correct, and the compromise decree did not require registration. Consequently, the assessee's appeal was dismissed.