9911796707
TMI Blog1982 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------- 18-9-19751971-72 30,836 4,212 18-9-19751972-73 44,497 4,344 24-1-19761973-74 22,254 4,212 24-1-19761974-75 20,582 4,212 -------------------------------------------------------------------------------------------------------------------------------------------------- 2. The remaining four appeals, viz., for the assessment years 1975-76 to 1978-79 are by the assessee. The grievance in these appeals is also common. The objection taken is that the Commissioner (Appeals) erred in upholding the finding of the ITO that the following items of income were rightly assessable in the hands of the assessee-individual for these years and not in the hands of his HUF : -------------------------------------------------------------------------------------------------------------------------------------------------- Date of order of the Asstt. Income assessed Commissioner year ------------------------------------------------------------- (Appeals) Dividend Refund of annuity deposit -------------------------------------------------------------------------------------------------------------------------------------------------- 16-3-19791975-76 16,958 4,344 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed that the dividend income from the above shares of MMLSR Ltd., belonged to 'Lala Bansi Dhar Sons', his joint family comprising himself, as karta, and his son as the other coparcener. This claim was first made for the assessment year 1957-58. The claim was accepted by the department. This position continued for the assessment years 1958-59 and 1959-60 also. However, Bansi Dhar took up a different stand from the assessment year 1960-61 onwards. He now claimed that the said shares had come to him in his individual capacity by way of gift from Sir Shri Ram. Hence, they were not the property of his joint family, but his individual property. The department did not accept this new claim. The dispute reached the Tribunal, the assessment years involved being 1960-61 and 1962-63. 7. The above two appeals filed by Lala Bansi Dhar Sons, the HUF [IT Appeal Nos. 18332 of 1967-68 and 5325 of 1978-79] were decided by a Division Bench of the Tribunal on 3-10-1970. This Bench rejected the contentions of the HUF. It held that though it could be said that the shares were received by Bansi Dhar in 1945 in his individual capacity, following his marriage and later the birth of a son in 1956, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me about because the Division Bench in its order of3-10-1970had referred to the date of the cash gifts as26-9-1964instead of26-12-1944the correct date--apparently an error of typing. The Special Bench proceeded on the basis that Sir Shri Ram had made the gifts in 1964 and on this impression, analysed the position as under : "It does not also stand to reason that he would take 19 years to embark upon the second leg of the scheme. There is no explanation, much less any convincing one, for this delay. These cash gifts made in 1964 relied upon strongly by the earlier Bench to justify the conclusion that late Shri Ram had an intention of effecting a family arrangement, appear to us to be more consistent with the argument advanced by Shri G.C. Sharma that it was due to the philanthropic attitude of late Shri Ram that these gifts were made. At the time these gifts were made, there were gifts made to several other institutions as also to other members of his family. This appears, therefore, more consistent with two separate unconnected transactions of gifts rather than with a theory that there was an intention of effecting a family arrangement in 1945. This matter can be looked at from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on '26-9-1964'. (The date '26-9-1964' was very obviously a typing error. This is evident from the Division Bench making the following endorsement concerning this date. "Note : Siddharth Kumar (no gift as he was born on17-1-1945)." The Division Bench was therefore fully aware that the cash gifts had preceded the share gifts.) 4. When the two gifts (cash and shares) were considered together it was evident that what Sir Shri Ram did was to effect a family arrangement or a partition of his assets 'under a clock' in his lifetime. 'Naturally' such partition would be with reference to his grandsons and not sons. That was why each grandson got more or less the same number of shares. Any 'inequality' therein was set right by the pattern of the cash gifts. 5. What was the intention of the donor/testator ? This was the primary question. This had to be seen from the deed/will. In the absence of clear words, such intention had to be found from the language of the document and the surrounding circumstances. Did the grantor really want to make a gift of property ? Or was the apparent gift only an integral part of a scheme for partition of the property ? There is no presumption that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is was 'much later'. It was not a relevant fact to judge the donor's intention in 1945. 5. Filing returns (as in this case) could (if at all) be merely evidence of blending of separate property with family property. But then the intention to treat separate property as that of the joint family must be unequivocal. It must be declared on a clear appreciation and realisation that the property rightly belongs to the individual but that he wishes to give up his sole rights therein. If the intention was not expressed unequivocally, the separate property in question could not be said to be impressed with the character of joint family property--Venkata Reddy v. Lakshmanna AIR 1963 SC 1601. 6. The facts of the case showed that Lala Bansi Dhar did not say that 'these shares had been blending with the character of joint family property'. On the contrary, he 'had been thinking that the property belongs to the family'. Hence it was difficult to hold that the shares had been impressed with the character of joint family property as held by the Division Bench. 7. In any case, if the revenue claimed that there had been blending, it implied that Lala Bansi Dhar had received the shares in 1945 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition or even a family arrangement qua the grandsons (the assessee here is one of them) in 1944 or 1945. Such a claim was a total negation of the facts on record. 4. The use of the expression 'under the cloak of a gift' in paragraph 13 of the Division Bench's order was singularly unhappy. There was, quite simply, no need of any 'cloak' in 1945 for passing off gifts as part of a family arrangement. There was no gift-tax and even the income-tax rates were most bland. There was no need for any tax subterfuges then. Exploitation of the incidents of Hindu law for tax advantages came to be evident much later. The Division Bench misdirected itself in investing the simple gifts of 1944-45 with such sinister undertones. 5. Sir Shri Ram was a hard-headed man of business. He could speak plainly. His yea was yea and his nay was nay. The letter of5-7-1945was all of a piece with this quality of the man. It was in simple terms. It recorded plainly what Sir Shri Ram intended--an 'irrevocable gift of 2,116 of my shares in MMLSR Ltd., to my grandsons'. Followed by a list of individuals, the donees and the number of shares (proposed gift) marked against each name. To read into this simple statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult of a purely business decision taken by independent incorporation, unconnected by family ties. It was a group effort by two branches of the same family with a strong sense of family ties. The two branches (L. Madan Mohan Lall's and L. Shri Ram's) pooled their resources and set up the company. The memorandum and articles were so framed as to stress and preserve the cohesiveness of this family group. Sir Shri Ram, fully alive to this special primary object of incorporation, always acted to further such a purpose. The gift of shares (and of cash) he made to his grandsons could not be torn out of this vital context. His letter of5-7-1945could not, therefore, be read simply as a latter from a man dictating a purely business arrangement. It had to be read as of a man of strong family loyalties acting in tune with his cherished expectations. Reading the letter of July 1945, baldly, de hors the factual context and unmindful of the sentiment that coloured the donor's thinking so deeply, was not valid. In other words, what the letter signified was not an isolated gift of shares to each of the grandsons but a family arrangement, if not a partition. What was material was the donor's inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year was 1966-67. The assessee however returned the dividend income from the said shares as his individual income. The Division Bench's order of3-10-1970(Lala Bansi Dhar Sons, HUF) then came to the assessee's notice. He, therefore, by a revised return, claimed that the disputed income was that of his HUF, for and from the assessment year 1970-72. In conclusion, Shri Vaish submitted that what the assessee really wanted was that the revenue should make up their mind on this issue and act consistently thereafter in all the connected cases. 21. We think that the Division Bench touched the heart of the controversy when it said, what mattered was the intention of the donor at the time of the gifts. We also find that we are in respectful agreement with its reading of Arunachala's case ; and the principles settled therein. We must, however, part company with the Division Bench in its reliance on Mayne's Commentary. We have seen the passage referred to (11th edn., pp. 547-548). Articles 446 and 446A are relevant. Article 446 says that a father has power to effect a division not only between himself and sons but also between the sons inter se. It adds : "So also it would seem that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the persons involved that the shares were not for the exclusive benefit of the individual donees, but for their families yet to come. We think Shri Kapila does have a point here. 24. The donees were very young in 1944-45. In fact one of the grandsons was born after the cash gifts of26-12-1944. Shri Kapila points out that it would be very close to absurd to believe that Sir Shri Ram made the share gifts to these children to have and to hold for their 'families'. We find it difficult to disagree with this reading of the situation. We have also carefully read the letter of5-7-1945. We do not think it requires to be read between the lines. We do not find in it shades of some inner meaning, cleverly concealed. It seems to be a plain letter stating a simple wish of the donor to gift irrevocably a specified number of shares to each of his seven grandsons. 25. Even on the point of blending, the assessee's case is not strong. We have already referred to Venkata Reddy's case. This decision was noticed by the Special Bench in Lala Bansi Dhar Sons (HUF's) appeal [see para 12(6)]. There has been no unequivocal declaration here of the intention of the owner-coparcener to waive his separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the dividend income from the said shares was not his individual income. 27. Shri Vaish had also referred to a number of other gifts made by Sir Shri Ram to his relatives and various institutions (pp. 1-2 and 8-11 of the paper book). The position regarding gifts to relatives may be seen here. The first gift of (shares of MMLSR Ltd.) by Sir Shri Ram was in 1932, to his two sons and to two grandsons by his third son. The next gift is of cash to his six grandsons in 1944 noticed, i.e., 12 years later. Then comes the gift of July 1945--shares of MMLSR Ltd.--to his seven grandsons. Thereafter there are gifts to various members of his family in 1950, 1953, 1959, 1960, 1961 and 1962, all being cash gifts. The cash gifted comprised modest amounts, in the context of the wealth of Sir Shri Ram, and we do not see any grand design behind all these dispositions as Shri Vaish wants us to. In fact (we find) an exactly opposite argument was pressed upon the Special Bench for acceptance, by the learned counsel for Lala Bansi Dhar Sons, HUF (see para 5 of the order dated 28-9-1976). The argument there was : the gifts stemmed from Sir Shri Ram's 'general munificent attitude of benefiting oth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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