1971 (1) TMI 29 - HC - Income Tax

Gift Tax Act, 1958 - transfer of property - blending of individual property with property of joint family - it not amounts to gift because it is not a bilateral/multilateral Act - but it is just a unilateral act of throwing self acquired property

Summary

Issues:
1. Whether the act of throwing separate property into the common hotchpot constitutes a "gift" as defined in the Gift-tax Act.
2. Whether the separate property thrown into the hotchpot by the petitioner is assessable to gift-tax.

Detailed Analysis:
The petitioner, a businessman and assessee under the Income-tax Act, conducted a partial partition of his assets, including property inherited from his deceased brother, among his family members. The revenue authorities issued notices alleging that the act of blending his separate property into the joint family assets constituted a gift, thus necessitating gift-tax assessment for the year 1966-67. The petitioner contended that such blending did not amount to a gift, leading to further notices and demands for disclosure of documents. The core issue revolved around whether the act of merging separate property into the joint family assets qualified as a gift under the Gift-tax Act.

The High Court deliberated on the legal interpretation of the term "gift" under the Act. Referring to precedents, particularly the case of Goli Eswariah v. Commissioner of Gift-tax, the Court established that under Hindu law, the conversion of separate property into joint family property is not considered a gift if done voluntarily by the coparcener without involving a bilateral or multilateral transfer. The Court emphasized that the unilateral act of blending self-acquired property into the common hotchpot does not constitute a transfer attracting the provisions of the Gift-tax Act. This principle was upheld by the Supreme Court in the case of H. H. Mahayana Rajasaheb Shri Pratapsinhji Saheb of Wankamer v. Commissioner of Gift-tax.

Based on the legal analysis and precedents, the Court concluded that the separate property thrown into the joint family assets by the petitioner before partition did not amount to a gift and was not liable for gift-tax assessment. Consequently, the Court allowed the writ application, quashing the impugned notices and orders issued by the revenue authorities. A writ of mandamus was issued to prevent the opposite parties from proceeding with the assessment. The judgment was delivered by G. K. Mishra, Chief Justice, with concurrence from A. Misra, J.