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Issues:
Assessment of gift tax on amounts received by the assessee through purported partition of Hindu Undivided Family (HUF). Analysis: The appeal pertains to an order of the CIT (A) dated 11-9-1985 concerning the assessment year 1982-83. The assessee, a Hindu Undivided Family (HUF) known as M/s. Mani Ram, HUF, comprised of one male member, Shri Mani Ram, and his wife, Smt. Mee Kaur. A memorandum of partition was executed on 9th January, 1982, dividing the HUF properties worth Rs. 5,73,707, with Smt. Mee Kaur receiving Rs. 2,25,000 in cash. Prior to this partition, gifts totaling Rs. 1,45,000 were made to Smt. Ved Wati and her children. Subsequently, declarations of gifts were made by Smt. Mee Kaur and Shri Mani Ram for amounts advanced to Smt. Ved Wati. The Gift-tax Officer (GTO) initiated reassessment proceedings under section 16(1)(a) of the Gift-tax Act, 1958, adding Rs. 2,50,000 to the taxable gift amount, resulting in a net taxable gift of Rs. 3,90,000. The Commissioner of Gift-tax (A) upheld the reassessment order, leading to the appeal before the ITAT. The assessee contended that the gifts made by the HUF were not liable to gift tax, citing legal precedents. However, the revenue supported the authorities' decision, emphasizing the Tribunal's judgment on the partition issue under section 171 of the Income-tax Act, 1961. The Tribunal noted the acceptance of a previous judgment by the assessee regarding partition refusal by the ITO. The Tribunal analyzed the legal position based on the Full Bench judgment of the Punjab and Haryana High Court in Sat Pat Bansal v. CIT, which clarified that in an HUF with a sole male member, no partition could be effectuated between the male member and his wife. Considering the legal position, the Tribunal concluded that the memorandum of partition dated 9th January, 1982, was legally invalid, and the amounts purportedly received by Shri Mani Ram and Smt. Mee Kaur continued to belong to the HUF. Therefore, the gifts claimed by the individuals were void ab initio and could not be included in the HUF's gift-tax assessment. The reassessment proceedings were deemed valid, but the gifts were not taxable as they were deemed to belong to the HUF. Consequently, the reassessment proceedings were canceled, and the original assessment order for the asst. year 1982-83 stood. In conclusion, the appeal was allowed in favor of the assessee based on the legal analysis provided by the Tribunal, emphasizing the invalidity of the purported partition and the consequent tax implications on the gifts received by the individuals from the HUF.
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