1971 (3) TMI 25 - HC - Income Tax

Gift Tax Act, 1958 Whether the act of throwing self-acquired property by the assessee into common hotchpotch of the Hindu undivided family with the intention of abandoning their rights in that property amounted to a gift within the meaning of the term gift as defined in the Gift-tax Act, 1958 Question is answered in the negative

Summary

Issues:
Interpretation of the term 'gift' under the Gift-tax Act, 1958 in the context of throwing self-acquired property into the common hotchpotch of the Hindu undivided family with the intention of abandoning individual rights.

Detailed Analysis:

The case involved two assessees, Shmt. Sharbati Devi and Munshi Lal, who held one-half share each in a building in Delhi and impressed their shares with the character of joint family property. The issue was whether this act constituted a gift under the Gift-tax Act, 1958. The Gift-tax Officer and the Appellate Assistant Commissioner held them liable for gift-tax, but the Appellate Tribunal ruled in favor of the assessees, stating that their act did not amount to a gift. The question was then referred to the High Court for clarification.

The High Court, after considering arguments from both sides, referred to the decision of the Supreme Court in Goli Eswariah v. Commissioner of Gift-tax, which emphasized that the act of throwing separate property into the common stock of a Hindu family does not constitute a gift under the Transfer of Property Act. This principle was reiterated in the case of H. E. Maharana Rajasaheb Shri Pratapsinji Saheb of Wankaner v. Commissioner of Gift-tax, where it was held that such an act does not fall under the definition of a gift as per the Gift-tax Act.

The Revenue argued that the act of Shmt. Sharbati Devi in impressing her share in the property with the character of joint family property could be considered a transfer of property under the Gift-tax Act. However, the Court rejected this argument, stating that the act was a unilateral one and did not involve a transaction with another party, as required by the Act. The Court cited the decision in Goli Eswariah's case to support this conclusion.

Additionally, reference was made to a Bench decision in Commissioner of Income-tax v. Pushpa Devi, which was unrelated to gift-tax issues. The Court concluded that this reference was not relevant to the present case and decided in favor of the assessees, stating that the gender of the family member impressing the property with joint family character did not affect the applicability of the Gift-tax Act.

In conclusion, the High Court answered the question in the negative, ruling in favor of the assessees and emphasizing that the act of impressing self-acquired property into the joint family stock did not amount to a gift under the Gift-tax Act. No costs were awarded in the case.