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TMI Blog1969 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... see was at all material times the manager and karta of a Hindu undivided family consisting of himself, his wife, his widowed mother, his two minor sons and three unmarried daughters. On 30th March, 1962, a day before the close of the relevant year of account, the assessee threw into the common hotchpot of the family certain shares which belonged to him till then as his separate property and impressed them with the character of joint family property and executed a deed of declaration on the same day recording the said fact and declaring that the said shares would thereafter be held as assets of the Hindu undivided family. It was common ground between the parties that by this unilateral declaration on the part of the assessee, the said shares were impressed with the character of joint family property and they became the property of the Hindu undivided family. On these facts the question arose whether there was a gift of the said shares by the assessee to the Hindu undivided family so as to attract the liability to gift-tax under the Act. The Gift-tax Officer held that there was a gift and he assessed the assessee to gift-tax on the value of the said shares. The Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trustee and the beneficiary. " Donor" is defined in section 2(ix) to mean any person who makes a gift. "Gift" is defined in section 2(xii) and according to that definition : " 'Gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under section 4. " There are two expressions in this definition which are material : one is "person" and the other is "transfer of property". "Person" is defined in section 2(xviii) to include a Hindu undivided family and "transfer of property", according to section 2(xxiv), " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of money or money's worth. Now, of these four elements, the last two do not present any difficulty, for, if throwing by the assessee of his separate property into the common hotchpot of the joint family, constitutes transfer of property within the meaning of section 2(xxiv) by the assessee to the Hindu undivided family, it cannot seriously be contested that it is a transfer made by the assessee voluntarily without consideration in money or money's worth. But the question is whether the first two elements exist in the present case. When a coparcener by a unilateral action throws his separate property into the common hotchpot of the joint family and impresses it with the character of joint family property, does it involve any transfer of property within the meaning of section 2(xxiv) by the coparcener to the Hindu undivided family ? The question is not free from difficulty and has not unnaturally led to divergence of judicial opinion. The difficulty arises chiefly from the fact that the doctrine of blending of separate property with joint family property is a peculiar doctrine of Hindu law unknown to the British system of jurisprudence on which our judicial concepts are mainly base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear from a declaration made by the coparcener or a recital in a deed of partition or some other act or conduct of the coparcener or it may even be gathered from a continuous course of dealing with the property by the coparcener. Where a coparcener clearly manifests his intention to abandon his separate claim upon the property and impresses it with the character of joint family property, the character of the property changes and it becomes joint family property irrespective of the volition of the other members of the joint family. The other members of the joint family cannot resist the blending by a coparcener of his separate property with joint family property just as they cannot avoid disruption of the joint status if a coparcener wants to bring about such disruption. Any single coparcener can, by his unilateral action, disrupt joint status and so also can a single coparcener by his unilateral action blend his separate property with joint family property. Both are incidents of the coparcenary as known to Hindu law. Now, the first question which arises for consideration is when an individual coparcener, by a unilateral action, of the intention, converts his separate property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues to subsist and it extends to the whole of the property, though, of course, by reason of the property becoming joint family property, the other coparceners also have an interest in it. It is precisely because every coparcener has interest in the coparcenary property and such interest extends to the whole of the coparcenary property that it is held that partition does not involve any transfer of property. Subba Rao J., then a judge of the Madras High Court, pointed out in Gutta Radhakrishnayya v. Gutta Sarasamma, that "partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty. Each one of the sharers had an antecedent title and therefore no conveyance is involved in the process as a conferment of a new title is not necessary." These observations were approved by the Supreme Court in Commissioner of Income-tax v. Keshavlal Lallubhai Patel. Every coparcener has an antecedent title to the whole of the coparcenary property and therefore when there is partition and a particular property is allotted to a coparcener, there is no transfer of any interest passing the title from one in whom it resides to another without title. The title t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count, can it be said that there is transfer of property by one person, namely, A, to another, namely A and B jointly, so as to constitute a gift of the property by A and B? That would be ignoring the objective and outward fact that A continues to have title or interest in the property even after it is transferred to himself and B. But even if conversion by an individual coparcener of his separate property into joint family property does not involve transfer of the property by the individual coparcener to the Hindu undivided family, the question still remains whether any interest in the property is transferred by the individual coparcener to the other coparceners when he impresses his separate property with the character of joint family property. The definition of "transfer of property" in section 2(xxiv) is very comprehensive and it says that "transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property. The words "conveyance", "assignment", "settlement", "delivery", "payment" and "other alienation of property", though undoubtedly wide, are referable only to those cases where there is passing of ownership of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ceylon said to belong to the son was subject to estate duty as being either "property passing on the death of the deceased" within the meaning of section 7 of the Ordinance or "property of which the deceased was at the time of his death competent to dispose" within section 8(1)(a) of the Ordinance. To answer this question the Privy Council was called upon to consider what is the nature of the interest of a coparcener in joint family property. Viscount Simonds, giving the opinion of the Privy Council, observed : First, then, did any and what property 'pass' on the death of the son ? An attempt was made at the hearing before their Lordships to argue that the whole of the property in Ceylon of the Hindu undivided family so 'passed',........ but 'Their Lordships considered this argument to be inadmissible'........ and 'Counsel was therefore limited to the argument that the son's share...... was one-half.' It appears to their Lordships that this contention is refuted by the most elementary consideration of the Mitakshara law. The district judge observed that 'to describe the deceased as a coparcener in relation to the joint property is but to adopt a convenient term in the process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parceners, and further to devote such money as may be necessary for such family purposes as the education, marriage, and religious ceremonies of the coparceners and of the members of their respective families (see Mulla, sec. 237). " The interest of a coparcener in any particular property belonging to the Hindu undivided family is thus not a specific defined interest with a definite ascertainable content. It is a peculiar interest known only to Hindu law. It has a shifting and variable content in that it is liable to be diminished by the birth of a coparcener and augmented by the death of a coparcener. It does not entitle the coparcener to any particular part of the income of the property ; the disposition of the income is in the discretion of the karta and the income is liable to be applied in maintenance of the coparceners and the female members of the family as also for such family purposes as education, marriage and religious ceremonies of the coparceners and their respective families and in fact it may so happen that, in a given case, no part of the income of the particular property may be spent on him. It is no doubt true that according to Mitakshara law as applied in Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l act on the part of an individual coparcener and where an individual coparcener clearly manifests his intention to blend his separate property with joint family property, the character of the property changes and it becomes joint family property irrespective of the volition of the other members of the joint family. The other members of the family have no choice in the matter: they cannot avoid the conversion of the separate property into joint family property even if they do not want it. Can there be a gift of property in invitum against the will of the donee ? It is no doubt true that, unlike the definition of "gift" in the Transfer of Property Act, the definition in section 2(xii) of the Gift-tax Act does not specifically bring in the element of acceptance on the part of the donee but as under the English law the element of acceptance on the part of donee is always implicit in the concept of a gift. The law in England does not insist on acceptance by the donee as a condition of making the gift but even so it is always open to the donee to refuse to accept the gift, in which event the gift becomes inoperative. It is difficult to conceive of a gift which can be imposed upon a done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donor (vide section 29) and it can hardly be believed that the legislature could have intended to impose liability to gift-tax on the donee, if the donee could have no choice whether to accept the gift or not and the gift could be imposed on the donee. We are fortified in this view by the decision of the Supreme Court in Hariprasad Shivshankar Shukla v. A. D. Divikar, where we find that a similar approach was adopted by the Supreme Court in construing the definition of "retrenchment" in section 2(oo) of the Industrial Disputes Act, 1947. On this view, the conversion by an individual coparcener of his separate property into joint family property would clearly not be comprehended within the term "gift" as defined in the Gift-tax Act. That leaves for consideration only the last question, namely, whether any "transfer of property" can be said to take place within the meaning of section 2(xxiv), clause (d), when an individual coparcener impresses his separate property with the character of joint family property, Section 2(xxiv), clause (d), includes within the category of "transfer of property" any transaction entered into by any person with intent thereby to diminish the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned and reinforced by words "entered into by any person". What clause (d) requires is that the donor must "enter into a transaction" and that can only be with some person. We cannot equate the words "enter into a transaction" with "do an act or abstain from doing an act". We must give due effect to the words "enter" and "transaction" and if we do so, it is clear that what clause (d) is intended to bring within the net of taxation is not a unilateral act or omission of the donor but a bilateral transaction, a transaction between the donor and some other person. This is the view which we are inclined to take on a plain natural construction of the words used but we find that it is amply supported by the decision of the High Court of Australia in Grimwade v. Federal Commissioner of Taxation. The question which arose in that case was whether E. N. Grimwade could be said to have entered into a transaction within the meaning of paragraph (f) of section 4 of the Australian Gift-tax Assessment Act, 1941-42, when he voted for a resolution reducing capital which had the effect of diminishing the value of shares held by him and increas ing the value of shares held by his sons. Paragraph (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, though on another point arising out of paragraph (f), namely, the construction of the words "to diminish directly or indirectly the value of his own property and to increase the value of the property of any person", the majority judges in Gorton's case led by Betwick C.J. expressed dissent from the view taken by Latham C.J. and Webb J. in Grimwade's case. Since the decision in Grimwade's case in 1948-49, this view as to the meaning of the words "any transaction entered into by any person" has always been regarded as good law by authors of all standard text books in Australia and we see no reason why we should differ from it. It may also be noted that when the Gift-tax Act was enacted in 1958 containing section 2(xxiv), clause (d), the decision in Grimwade's case was already given and it held the field since 1948-49. The legislature, when it enacted clause (d), must be taken to have been aware of the decision in Grimwade's case interpreting the words "any transaction entered into by any person" and yet the legislature retained the same phraseology as in paragraph (f) of section 4 of the Australian Act. it may, therefore, be reasonably assumed that the words "any transaction en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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