9911796707
TMI Blog1985 (5) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the return for the assessment year 1969-70, the assessee had explained that he had gifted certain shares belonging to him and certain deposits standing in various concerns, to the HUF consisting of himself, his wife and his son. The value of these shares and deposits was taken at Rs. 2,10,640 and in the original assessment made by the WTO, he had included it in the wealth of the assessee. That assessment has been set aside by the AAC, who had directed that the assessee should be given an opportunity to substantiate his claim of the alleged gift of certain shares and fixed deposits and loans, vide his declaration dated30-10-1968. The present assessment order for this year was passed as per directions of the AAC in his set aside order. 3. The assessee's claim of gift of the above shares, deposits and loans in favour of the HUF was based on an affidavit which reads as under : " AFFIDAVIT I, Kuldip Raj Narang, son of Dr. Dev Raj Narang, resident of 5-Cavalry Lines, Delhi-7, take oath and solemnly affirm as under : 1. That the shares of different companies and fixed deposits and loans more particularly described in the schedule I annexed hereto are my personal properties. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Nawabganj Sugar Mills Co. Ltd. 427-Ord. 4. Saraswati Insurance Co. Ltd. 600-Ord. 5. Narang Industries Ltd. 35-Pref 6. Narang Industries Ltd. 90-Ord. 7. Vijoy Steel General Mills Co. Ltd. 4,730-Ord.(as per last year) 8. Steel General Mills Co. Ltd. 125-Ord. b. FIXED DEPOSITS AND LOANS Particulars Amount a. Fixed deposit account with Vijoy Steel General Mills Co. Ltd. 5,000 b. Loan to Vijoy Steel General Mills Co. Ltd. 20,000 c. Loan to Mrs. Saloni Narang 38,950 d. Loan to Shri Piyara Lal Sarin 2,000 e. Loan to Shri Dipak Raj Narang 2,000 f. Loan to Steel General Mills Co. Ltd. 11,700." This was stated to be schedule II attached with the affidavit but the ITO had held that the schedules were not the part of the affidavit as they were not affirmed in the same manner as the affidavit itself. The ITO had also referred that no action was taken either by the companies concerned or by the assessee to show that there had been an actual gift of these shares to the HUF. It was pointed out that the intimation regarding this gift was only given on telephone orally and there was nothing in the records of the companies concerned to indicate the transfer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary was the intention of volition to transfer the shares. The assessee contended that there could be conditional gift and there was no invalidity in it. It should have been treated as a gift with a condition. The AAC held that a Hindu could impress the property with the character of an HUF and, therefore, the property should be taken to be thrown in the common hotchpot. For this the AAC considered the affidavit to be sufficient. It was also held by the AAC that there was no necessity of transferring the names of the shares and the dividends and the interest was to continue to be given to the assessee as in the past. According to the AAC, there was no prohibition or a conditional transfer and in view of this the shares could be taken as being properly transferred to the HUF and should be excluded from the assessment of the assessee. The AAC, however, included the value of the right to receive income in the next ten years as the assets in the hands of the assessee. 7. The departmental representative submitted that the AAC has not appreciated the factual legal proposition correctly. He contended that the claim of the assessee was about the gift of these assets in the form of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deposits. The income was to continue to be given to the assessee for a period of ten years though the provision was that the income should be given by the HUF to the assessee. He, therefore, contended that it was clearly a irrevocable transfer and this aspect has not been appreciated by the AAC. 9. The learned counsel for the assessee contended that in this case the affidavit was a clear evidence of the intention of the assessee to gift these shares and deposits to the HUF, and as the assessee was the karta of an HUF, he has accepted the gift in his capacity as karta. He, therefore, submitted that the gift was clear and unequivocal as well as valid. It was also contended that schedule II was a part of the affidavit and it was not necessary to separately get the signature of the assessee or the Oath Commissioner on the schedule also. In respect of the transfer of shares, it was contended that there was no necessity in law to get any change made in the companies' records or the records of the parties where the deposits were made. For these ten years the dividend and income was continued to be given to the assessee and, therefore, there was no question of intimating to the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty with the HUF character there should be an unequivocal declaration on the part of the individual. In this connection, it may be mentioned that section 4(1)(a) was inserted in order to bring under the wealth-tax net, the unilateral action of impressing an individual property with the HUF character. Later on it was also clarified that it applied to the properties gifted to the HUF. We are mentioning this to show that the law has made a distinction between the act of throwing a property into a common hotchpot and the act of gifting it away to the HUF. The assessee's letters have also claimed it to be a gift. Thus, on the basis of the documents and the intention as indicated in the letters, it is clear that the assessee had gifted the shares and the fixed deposits and the loans to the HUF. At least that was the assessee's intention when that affidavit was sworn in. 12. Having held that, according to the assessee, there was a gift and, therefore, a transfer of assets from the individual to the HUF, we proceed to consider the other aspects of the question. The objection raised by the departmental representative to the order of the AAC is two-fold. Firstly, it is said that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share from one person to another what is required is to give the scrip along with the transfer memo which may later on be registered. Even if the registration takes place later, the transfer can be effective from the date of the handing over of the transfer memo. In this case nothing of this sort has taken place. In fact throughout the WTO and the ITO have been contending that there has been no actual transfer. The assessee has been stating that nothing was necessary as the transferor was individual and the transferee was himself in his capacity as the karta of the HUF. There is not much discussion about the deposits or loans. On the above facts, we can only record that besides the affidavit no other material was brought on record by the assessee to show that there was a transfer of the assets to the HUF. The deposits and the loans were no actionable claims and could be transferred by an instrument in writing. The parties to whom these loans were given could have been informed about it. Nothing of this sort has taken place. In these circumstances, there appears to be no material to support the case of the assessee on the basic issue of the transfer. 15. We may, however, take into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from all the assets for transfer. Thus, the subject-matter of the transfer was the shares and the fixed deposits and the loans themselves. It is also clear that the assessee reserves for himself a direct benefit for a period of ten years. We have no hesitation in holding that the learned AAC has not appreciated this aspect of the matter and has erred in holding that the value of the assets was to be excluded from the assessment of the assessee. 17. The two aspects which have been considered above may appear to be contradictory but as the arguments have been advanced before us, we have dealt with both the aspects and we are of the view that the order of the AAC should be reversed and the order of the WTO should be restored on this point. 18. We may now come to the other years' appeals where this point continues to appear and in addition there are some other issues as well.As far as this issue which does not differ from year to year, we have to decide in favour of the revenue though the figures which appear in different years are different. We may also repeat that according to the claim of the assessee, the assets had not been thrown in the common hotchpot as suggested by the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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