9911796707
TMI Blog1967 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... itially the self acquisition of No. 1, i.e., Sri Narayan Balakrishna Nerlekar. The joint family had no nucleus or ancestral property with the aid of which the properties in schedule ' A ' and ' B ' could have been acquired by No. 1. They are in fact acquired by No. 1 from time to time by his talent, industry and exertions, without the aid of any joint family property. This position of things is true and accepted by all other executants. (III) That being so, No. 1 is desirous of making a family arrangement, so that every one would live in peace and be able to look after his or her own affairs and live happily and in amity. With this view, No. 1 has voluntarily thrown properties in schedule ' B ' into the common stock with the intention of abandoning all separate claims upon them, though they were his exclusive self-acquired properties. Those properties as are set out in schedule 'B ' having been thrown into the common stock have become joint family properties and are subject to all the incidents of joint family property under Hindu Law. No.1 has, however, retained schedule ' A ' properties as his self-acquired properties and thus of his exclusive ownership. Properties in schedule ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property of the acquirers, i.e., the Hindu undivided family and it was, therefore, a ' transfer ' within the meaning of section 2(xxiv)(d). As it was a voluntary transfer and without consideration, the Tribunal held that, in the circumstances, there was a gift by the assessee in favour of the Hindu undivided family." The above opinion is that of the judicial Member of the Tribunal. The Accountant Member agreed with the proposition that the process was a transfer within the meaning of section 2(xxiv)(d) of the Gift-tax Act, but refrained from expressing any opinion on the contention of the department that the situation would attract the provisions of section 4(d) also. On the above facts, the Tribunal has referred the following question to this court: "Whether, on the facts and in the circumstances of the case, the act of throwing the self-acquired property of the assessee into the common hotch-pot of the Hindu undivided family of which he was the karta, with the intention of abandoning his rights in that property and then dividing it unequally between his wife and sons amounted to a gift within the meaning of the term ' gift ' as defined in the Gift-tax Act ? The general app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition and that an acceptance of the gift by the donee is not mentioned as one of the essential elements of a gift. But the answer to this is contained in clauses (viii) and (ix) of the same section which defines a donor and a donee as follows: " (viii) ' donee ' means any person who acquires any property under a gift, and where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary ; (ix) ' Donor ' means any person who makes a gift ". Two other definitions, to which we might refer even at this stage, are that of "property " in clause (xxii) which is defined as including any interest in property, and that of " person " in clause (xviii) which is defined as including a Hindu undivided family. So far, therefore, there is no difference between the general law and the special law. According to both, a gift is a transfer of property by one living person to another living person without any consideration. The essence of the matter is that what makes a transfer of property a gift is the absence of consideration. From the point of view of the general law, existence of consideration, however inadequate, removes a transfer from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of property ' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes :- (a) the creation of a trust in property ; (b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property ; (c) the exercise of a power of appointment of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power ; and (d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person." Even here, the transactions mentioned in sub-clauses (a), (b) and (c) indubitably involve a transfer of property known to the ordinary law. Sub-clause (a) read with the definition of " donee " in clause (viii) indicates one of the special purposes of the Act, viz., that a transfer to be a gift for the purpose, of the Gift-tax Act need not necessarily be a transfer directly in favour of the donee ; it is enough if the person to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receives support from the discussion of the principle contained in a ruling of the High Court of Australia in Grimwade v. Federal Commissioner of Taxation. In that case, one Grimwade, who held all but five shares described as class "A " shares in a company which alone had the right of voting and the right to receive dividends in contrast to class " B " shares whose holders, in the event of winding up, were entitled to be paid only 21/2 per cent. of the capital value, was party to a resolution of the company whereby 17s. 6d. out of the paid up value of one pound in each share were to be returned to every shareholder. The gift-tax authorities under the Australian Gift Duty Assessment Act took the view that the resolution of the company was a transaction whereby Grimwade aforesaid diminished the value of his own property, viz., " A " class shares and increased the value of the property of " D " class shareholders and held that the gift duty was payable on the amount of the net benefit received by the shareholders other than Grimwade himself. That view was upheld by Williams J. but reversed on appeal. The matter was examined in the light of clause (f) of section 4 of the Australian Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that A had entered into a transaction with B the result of which was to diminish the value of A's property and increase the value of C's property without any consideration being given by C. Such a transaction would therefore (it would seem) fall within paragraph (f). Paragraph (f) refers only to the intent of the person who diminishes the value of his own property, and does not in its own terms require that the transaction should actually produce the effect of diminishing the value of the donor's property and increasing the value of another person's property. But section 11 of the Assessment Act and section 4 of the Gift Duty Act show that, in order that a disposition of property falling within the description of paragraph (f) should be a gift resulting in a liability to duty, the transaction must have the effect of diminishing the value of the donor's property and increasing the value of the donee's property, because otherwise it would be impossible to ascertain the value of the property taken under the gift and, therefore, no duty would be payable in respect of the transaction. Thus paragraph (f) is aimed at transactions which are entered into with a particular intent an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad to be effected by a registered instrument. In the latter, the question was whether a house, an agreement for the sale of which was sought to be specifically enforced, was separate property of the father or joint family property of himself and his sons. In the former, Bavdekar J., delivering the judgment of the court, stated the conclusions as follows: "We, therefore, regard the transaction by which a father makes a division of his self-acquired property between his sons as a transaction by which he, in the first instance, effects a severance of status between his sons; in the second instance, he notionally throws into the hotch-pot his self-acquired property and then divides it between his sons, whether equally or unequally in accordance with his pleasure. In that view of the case, the transaction cannot be possibly regarded as one of the five transactions mentioned in the "Transfer of Property Act, which require registration, namely, sale, mortgage, exchange, lease for more than one year, or a gift." In the latter case, Umamaheswaram J. delivering the judgment of the court, quoted with approval the following passage from the judgment of a Bench of the Madras High Court repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no transfer of that property from the coparcener to the coparcenary. It becomes joint family property because the coparcener, who owned it up to then as his separate property, has by the exercise of his volition impressed it with the character of joint family or coparcenary property, to be held by him thereafter along with the other members of the joint family. It is by his unilateral action that the property has become joint family property. Coparcenary property ceasing to be joint family property of the coparceners on a division in status between them and becoming thereafter the property held in severalty by the divided members, and the property of a coparcener ceasing to be his and becoming the property of the coparcenary of which he continues to be a member, are both incidents of a coparcenary governed by the Mitakshara school. Either can be brought about by the unilateral action of the coparcener concerned. Neither transaction amounts to a transfer of property from one juristic entity to another. A transfer is essentially a contract, a bilateral transaction. The transaction by which a property ceases to be the property of a coparcener and becomes impressed with the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with approval to the principles stated by the Bombay High Court in Kisansingh v. Vishnu and by the Andhra Pradesh High Court in D. Sadasiva Vittal v. Bolla Rattain, already referred to above. The only case in which a blending was regarded as a gift within the meaning of section 2 (xxiv) (d) of the Gift-tax Act and therefore liable to gift-tax is the case of Commissioner of Gift-tax v. Satyanarayanamurthy. In the said case, Chandra Reddy C. J. of the Andhra Pradesh High Court appearing to prefer the view of the Gujarat High Court in Keshavlal Lallubhai's case to the view of the Madras High Court stated in Stremann's case and stated his conclusions in the following terms : "Although we are more inclined to agree with the law as stated by the Gujarat High Court, we do not think it necessary to express any final opinion on this aspect of the matter as this reference can be disposed of on the interpretation of clause (xxiv)(d) of section 2 of the Act. This definition is of wider import than that contained in the Transfer of Property Act. The only requirement of this clause is that the transaction, which seeks to accomplish certain results, should have the effect of diminishing di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(xxiv)(d), we have already expressed our view that it does contemplate a transaction involving a transfer of property. Even when his Lordship states that the definition of a transfer in section 2(xxiv)(d) is of wider import than that contained in the Transfer of Property Act, his Lordship does not indicate that it would include a transaction which is not a transfer at all, nor is any reference made to the previous decision of the same High Court already referred to by us, viz., Sadasiva Vittal v. Bolla Rattain. What remains to consider now is the question of principle whether an act of blending or of throwing self-acquired property into common stock involves, according to the ordinary principles of Hindu law and of the Transfer of Property Act, a transfer of property or any interest in property. So far as a partition is concerned, it is well established that it does not involve any transfer of property, the two decisions of the Supreme Court already referred to by us fully supporting the said proposition. The basis of that view is the fundamental doctrine of the Hindu law applying to Mitakshara coparcenary, viz., the right by birth of a coparcener in what is called ancestr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pitru Prasada. It would follow, therefore, that even in the case of father's self-acquired property, throwing the same into common stock, or blending it with other undoubted joint family properties, would be an act of pitru Prasada and not creation of a new right in the son or transference of a new right by the father to the son. It was only removal of a limitation placed on the exercise of a right recognised as always existing from birth. There is nothing incongruous or illogical in this theory, because Hindu law has always recognised what may be compendiously described as a qualified ownership meaning that the law recognises and enforces certain restrictions in the exercise of the right of ownership by a single individual in the interest of or for the benefit of others, also recognised as having a right of ownership in respect of the property. The exercise of the right by a manager or karta of a joint family is only one of the examples of such a right. The ownership of a woman like the widow or daughter is another example though we are used to the idea of describing widows or daughters as limited heirs or limited owners, they are the sole owners and represent the estate ful ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
