1967 (4) TMI 29 - HC - Income Tax

Gift Tax Act - Gifts by karta and coparcener of HUF in favour of their respective sons - gift was not valid

Summary

Issues: Validity of gifts under Gift-tax Act

The judgment pertains to a case where the Income-tax Appellate Tribunal referred a question regarding the taxability of gifts made by a Hindu undivided family to their sons under the Gift-tax Act. The gifts were made through deeds of gift by two brothers to their respective sons, some of whom were minors. The assessee initially claimed the gifts were inoperative as they were made by the father to his sons. The Gift-tax Officer assessed the gifts, which was upheld by the Appellate Assistant Commissioner. However, the Appellate Tribunal reversed the decision, stating that a member of a joint family cannot make gifts of property to coparceners. The Tribunal cited Hindu law principles, emphasizing that a Hindu father in a Mitakshara family cannot deal with his son's interest or properties in a manner altering the devolution of properties under Hindu law. The Tribunal further explained that a karta of a Hindu undivided family can only gift or alienate property within the limits recognized by Hindu law, such as for legal necessity or in favor of female family members. The Tribunal also highlighted that the partition of joint family property does not constitute a transfer, as clarified by the Supreme Court in a previous case. Consequently, the Tribunal concluded that the gifts in question did not attract the provisions of the Gift-tax Act, and therefore, were not taxable. The court answered the question in the negative, ruling against the department and awarding costs to the assessee.