1972 (5) TMI 10 - HC - Income Tax

Estate Duty Act, 1953 - Late Lala Thakurdas was the karta of a Hindu undivided family transfers property equally to minor sons whether it amounts to partial partition?

Summary

Issues Involved: Validity of gifts, partial partition of Hindu undivided family (HUF) assets, inclusion of amounts in the dutiable estate under the Estate Duty Act, 1953.

Issue-wise Detailed Analysis:

1. Validity of Gifts:
The Assistant Controller of Estate Duty observed that the deceased, as the karta of a Hindu undivided family, had transferred various sums of money to his two minor sons and married daughter. The Assistant Controller held that these transfers did not constitute valid gifts due to insufficient cash balance and the minors' incapacity to accept gifts. Consequently, the amounts were included in the dutiable estate under section 5 of the Estate Duty Act, 1953.

2. Partial Partition of HUF Assets:
The Appellate Controller of Estate Duty excluded the impugned amounts from duty, deeming the transfers as valid gifts despite insufficient cash balance. The Appellate Controller also held that subsequent transfers to the sons were made by the HUF, not by the deceased individually, and thus could not be deemed to have passed on the death of the deceased under section 9 of the Estate Duty Act, 1953.

3. Tribunal's Consideration of Partial Partition:
During the appeal before the Appellate Tribunal, the counsel for the accountable persons introduced a new argument, claiming that the transfers represented a partial partition of the family assets rather than gifts. The Tribunal accepted this argument, ruling that the transfers constituted a partial partition of the HUF assets, thereby excluding the amounts from the dutiable estate. This decision was based on the equal distribution of amounts to the sons on each date, suggesting partial partition.

4. High Court's Analysis and Decision:
The High Court examined whether there was evidence to support the Tribunal's finding of partial partition. The court noted that the deceased had the right to divide family property, but such division must be equitable among the sons. The court emphasized that partial partition could involve either property or persons, but there was no indication that the interests of the two minor sons were ascertained and partitioned off while the deceased and his wife remained joint with respect to the remaining property. The court found no evidence of intention to sever joint family status or any conduct indicating such intention. The court also referenced legal principles from Mulla's Hindu Law and Mayne's Treatise on Hindu Law and Usage, which support the possibility of partial partition but require clear evidence of intention and conduct. The court concluded that the mere equal distribution of amounts did not indicate partial partition.

5. Conclusion:
The High Court answered the question of law in the negative, ruling in favor of the revenue. The court held that there was no evidence to support the Tribunal's finding of partial partition, and the amounts should be included in the dutiable estate. The respondents were ordered to pay costs, with counsel's fee set at Rs. 500.