1968 (7) TMI 4 - HC - Income Tax

Gift-tax Act, 1958 - sum transferred to the account of sons in the previous year - gift - assesment

Summary

Issues Involved
1. Determination of the assessee's status as a Hindu Undivided Family (HUF) for income-tax, wealth-tax, and gift-tax assessments.
2. Liability of the sum of Rs. 1,60,000 transferred to the assessee's sons under the Gift-tax Act.

Detailed Analysis

1. Determination of the Assessee's Status as a Hindu Undivided Family (HUF)

Facts and Background:
The assessee, who had previously filed returns as an individual, claimed the status of a Hindu Undivided Family (HUF) for the assessment year 1958-59, which was initially rejected by the Income-tax Officer. The claim was renewed for the assessment year 1959-60 but was again not accepted. However, the Appellate Assistant Commissioner and the Tribunal favored the assessee's claim. The Commissioner of Income-tax referred the matter to the High Court.

Legal Precedents and Arguments:
Both parties cited the case of *Arunachala Mudaliar v. Muruganatha Mudaliar* to support their respective contentions. The Supreme Court in this case emphasized that the intention of the donor, as derived from the document and surrounding circumstances, is crucial in determining whether the property is self-acquired or ancestral.

Court's Analysis:
The court examined the deeds executed by the assessee's father in 1932, which gifted the Ceylon properties to his three sons. The court noted that the language used in the deeds did not indicate an intention to benefit the family but rather the individual sons. The court also referenced the Supreme Court's decision in *Thyagasundarados Thevar v. Sevuga Pandia Thevar*, which held that clear language is required to establish an absolute interest.

Conclusion:
The court concluded that the deeds did not confer a family benefit but rather an individual benefit to the sons. The assessee's claim to be assessed as a Hindu Undivided Family was not supported by the language of the documents or the surrounding circumstances. Therefore, the first question was answered in the negative and against the assessee.

2. Liability of the Sum of Rs. 1,60,000 Transferred Under the Gift-tax Act

Facts and Background:
During the assessment year 1958-59, the assessee transferred Rs. 80,000 each to his two sons and claimed that this transfer was part of a partial partition of ancestral assets, thus not liable to gift tax. The Income-tax Officer did not accept this contention.

Court's Analysis:
Given the court's conclusion that the properties obtained under the deeds were self-acquired and not ancestral, the transfer of Rs. 1,60,000 to the assessee's sons was considered a gift. The court held that this transfer was a gift and thus liable to assessment under the Gift-tax Act.

Conclusion:
The court answered the second question in the affirmative, holding that the transfer was a gift and subject to gift tax. The tax case was allowed with costs, and counsel's fee was set at Rs. 250.

Additional Judgment

Tax Case No. 326 of 1964:
The court applied the same reasoning and ratio from Tax Case No. 325 of 1964 to conclude that Ramaswami Chettiar, under similar circumstances, could not claim the status of a Hindu Undivided Family for the assessment years 1959-60 and 1960-61. The question was answered in the negative and against the assessee, and the tax case was allowed with no costs.