1966 (10) TMI 15 - HC - Income Tax

Gift-tax - Whether the deed dated Dec. 23, 1957, executed by the assessee in favour of her son, S, constituted a transaction of gift under s. 2(xii) of the GT Act liable for assessment - Held, no

Summary

Issues:
Assessment of gift-tax on reconveyance deed, validity of gift deed executed by son to mother, interpretation of Hindu joint family property laws.

Analysis:

The judgment by the High Court of Andhra Pradesh involved a case where the court had directed the Income-tax Appellate Tribunal to state a case regarding the assessment of gift-tax on a reconveyance deed executed by the assessee in favor of her son. The key issue was whether the deed constituted a transaction of gift under the Gift-tax Act. The assessee, the wife of Valluru Pullayya, had received properties through a gift deed from her son, Sriramulu. However, she later reconveyed the properties to him. The Gift-tax Officer and the Appellate Assistant Commissioner had assessed the assessee to gift-tax on this reconveyance, which was contested by the assessee.

The court considered the circumstances surrounding the gift deed and reconveyance, including the family dynamics and the reasons behind the transactions. It was argued that the first conveyance was a nominal transaction done to prevent the son from dissipating the properties due to immoral behavior. The court analyzed the nature of Hindu joint family property and the power of a coparcener to gift away ancestral property. It was established that the gift by the son to the mother, of the entire share received on partition, was void as it was outside the limits permitted by Hindu law. The court relied on previous decisions to support the conclusion that such gifts to strangers or of entire properties to relations are invalid.

The court highlighted that the gift was made by a divided son, who was the head of the joint family, to his mother, who was not a member of the joint family. As the gift was of the entire share received on partition and was deemed nominal, it was held to be void. Therefore, the reconveyance deed did not attract gift-tax as the original gift deed was invalid. The court ruled in favor of the assessee, holding that she was not liable for gift-tax on the reconveyance transaction. The judgment provided a detailed analysis of the Hindu joint family property laws and the limitations on gifting ancestral property, ultimately determining the invalidity of the gift deed in question.

In conclusion, the court answered the reference in the negative and in favor of the assessee, with costs awarded. The judgment clarified the legal aspects surrounding the gift transactions, the concept of Hindu joint family property, and the implications of gifting ancestral property beyond the permitted limits under Hindu law.