1980 (10) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Liability to gift-tax for a gift made by the Karta of a Hindu Undivided Family (HUF).
2. Applicability of exemption under Section 5(1)(viii) of the Gift Tax Act (GT Act) for gifts made by a sole surviving coparcener.
3. Interpretation of Hindu law regarding the disposal of property by a sole surviving coparcener.

Detailed Analysis:

1. Liability to Gift-Tax for a Gift Made by the Karta of an HUF:
The primary issue was whether the gift of Rs. 30,000 made by Shri Gondi Pullaiah, as the Karta of his HUF, to his wife Smt. Ramalaxamamma, was liable to gift-tax. The Gift Tax Officer (GTO) held the gift to be taxable, reasoning that the gift was made out of joint family funds and not from the individual property of Shri Gondi Pullaiah. Therefore, the exemption under Section 5(1)(viii) of the GT Act, which applies to gifts between spouses, was deemed inapplicable.

2. Applicability of Exemption under Section 5(1)(viii) of the GT Act:
The assessee argued that the gift should be exempt under Section 5(1)(viii) of the GT Act, citing precedents from the Andhra Pradesh High Court and the Punjab and Haryana High Court. However, the Appellate Assistant Commissioner (AAC) upheld the GTO's decision, stating that the gift was made by Shri Pullaiah in his capacity as Karta and not as an individual. The AAC relied on the Punjab and Haryana High Court decision in CGT Patiala vs. Harbhajan Singh & Sons, which distinguished between gifts made by an individual and those made by a Karta of an HUF.

3. Interpretation of Hindu Law Regarding the Disposal of Property by a Sole Surviving Coparcener:
The Tribunal examined the principles of Hindu law, particularly the provisions that allow a sole surviving coparcener to dispose of coparcenary property as if it were his separate property. According to Paragraph 257 of Mulla's Principles of Hindu Law, a sole surviving coparcener has the right to treat joint family property as his own and can dispose of it by gift. The Tribunal concluded that since Shri Gondi Pullaiah was the sole surviving coparcener, he was entitled to make the gift in his individual capacity, thereby qualifying for the exemption under Section 5(1)(viii) of the GT Act.

Conclusion:
The Tribunal held that the gift made by Shri Gondi Pullaiah, as the sole surviving coparcener, to his wife Smt. Ramalaxamamma, should be treated as a gift made by an individual to his spouse. Consequently, the gift was entitled to exemption under Section 5(1)(viii) of the GT Act. The appeal by the assessee was allowed, and the gift of Rs. 30,000 was exempted from gift-tax. The Tribunal's decision was fortified by previous orders from other benches of the Tribunal on similar facts, further supporting the assessee's claim.

Result:
The appeal by the assessee succeeded, and the gift was exempted under Section 5(1)(viii) of the GT Act.