1986 (5) TMI 73 - AT - Income Tax

Summary

Issues:
1. Whether the gift of a house property valued at Rs. 97,000 to the wife by the karta of an HUF is exempt under section 5(1)(viii) of the Gift-tax Act, 1958.
2. Whether the partition of immovable properties between the karta and his sons affects the entitlement to claim exemption.
3. Whether the settlement deed clearly indicates the capacity in which the gift was made and its implications on the exemption claim.

Detailed Analysis:
1. The case involved a gift of a house property valued at Rs. 97,000 by the karta to his wife and sons. The Gift Tax Officer (GTO) disallowed the exemption under section 5(1)(viii) stating that the gift was out of the HUF property. The Appellate Tribunal considered the partition of properties and the karta's entitlement to dispose of coparcenary property. It relied on legal precedents to establish that the karta, as the sole surviving coparcener, could alienate the property in his individual capacity, thus allowing the exemption claim for the gift to the wife.

2. The appellant argued that a partition had taken place, and the karta was the sole surviving coparcener entitled to gift the property. The Tribunal noted that post-partition, the karta had the right to dispose of the property individually. The legal representative supported the lower authorities' decision based on the HUF filing the return, but the Tribunal emphasized the karta's individual capacity post-partition, allowing the exemption claim.

3. The settlement deed clarified that the gift was made by the karta in his individual capacity as a husband, not as the karta of the HUF. Legal precedents from various High Courts were cited to support the interpretation that gifts made by the karta in their capacity as a husband to their spouse are eligible for exemption under section 5(1)(viii). The Tribunal concluded that the gift to the wife was made in the karta's individual capacity, entitling the assessee to the exemption claim.

4. The Tribunal distinguished other cases cited by the departmental representative, emphasizing the specific circumstances and legal provisions applicable in the present case. It reiterated that the gift in question was made by the karta in his individual capacity as a husband, entitling the assessee to claim the exemption under section 5(1)(viii) for the gift to his wife. The appeal was allowed in favor of the assessee based on the interpretation of the settlement deed and relevant legal precedents.