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TMI Blog1987 (6) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... n the death of Seth Vithal Das, husband of Smt. Vidyawati Rathi, in the year 1951, the share of Smt. Vidyawati Rathi became fixed, i.e., 1/3rd of the estate left by Seth Vithal Das, and this 1/3rd share was possessed by Smt. Vidyawati Rathi on the date of passing of the Hindu Succession Act, i.e., on June 17, 1956, and this 1/3rd share became her absolute property ? 3. Whether the Tribunal was right in holding that Smt. Ganga Devi, the grandmother, was not entitled to any share either on the death of Seth Vithal Das or on the passing of the Hindu Succession Act, 1956 ? 4. If the answer to question No. 3 is in the affirmative, what was the share of Smt. Ganga Devi ? 5. Whether, on the facts and circumstances of this case, in determining the share possessed by Smt. Vidyawati Rathi on the coming into force of the Hindu Succession Act, all liabilities including book debts and the properties allotted to Smt. Vidyawati Rathi and Smt. Ganga Devi had to be taken into consideration ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee by giving up her share or interest in the joint family property in favour of her tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai, and son, Seth Vithaldas. After the death of Seth Vithaldas in the year 1951, the family jewellery was divided amongst the members of the family on or about April 9, 1952. On October 21, 1957, an agreement was made between Seth Mukunddas, Seth Gokuldas and Sethani Gangabai and the assessee whereby an arrangement was made in respect of the assets of the family. A copy of this agreement is annexure " A " to the statement of the case. Under this agreement, it was decided that during the lifetime of Sethani Gangabai and the assessee, Seth Mukundas and Seth Gokuldas shall keep a joint mess and shall divide the expenses between themselves every year in equal proportions irrespective of any disparity in the number of the members of the family of either of them. By the said agreement, it was also agreed that Seth Mukunddas and Seth Gokuldas shall divide between themselves the net assets of each of the businesses hithertofore carried on by the family determined after taking into account all the back debts due to or by each such business and the assets including stock-in-trade, cash balances at bank and at hand but excluding the immovable properties comprised in the assets thereof and aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer-cum-Gift-tax Officer on April 18, 1958. The Gift-tax Officer, Beawar, issued a notice dated February 12, 1965, under section 16(1) of the Act to the assessee wherein it was stated that on partition of the joint family properties, whether partial or complete, the assessee, as a member, was entitled to a share equal to that of her son and that the assessee was entitled to 1/3rd share, viz., Rs. 8,01,073-70 in the assets worth Rs. 24 lakhs odd in respect of which partition was done and since the assessee has not taken her aforesaid share, she has gifted her share to her sons, Seth Mukunddas and Seth Gokuldas. In response to the aforesaid notice, the assessee submitted a return stating that the provisions of the Act were not attracted as she has not made any gift taxable under the Act. The assessee came out with case of partial partition and submitted that in the agreement itself decision wits taken regarding business assets of the family, jewellery and household belongings having been already divided and that the immovable properties of the family continued to be owned and possessed by the joint family. It was submitted that the family is governed by Mitakshara bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the assessee was in fact entitled to 1/4th share and not 1/3rd share and that value of the deemed gift would work out to Rs. 6,00,000 and not Rs. 8,00,000. The Appellate Assistant Commissioner by his order dated April 15, 1971, allowed the said appeal of the assessee. The Appellate Assistant Commissioner rejected the contention of the assessee that the notice dated February 12, 1965, issued under section 1-6(1) of the Act was barred by limitation because there is no evidence to establish that the Income-tax Officer/Gift-tax Officer had gone into the details of the partnership deed on April 18, 1958, and that the orders accepting the partial partition were passed at a much later stage and that it was only at that stage that the Income-tax Officer became aware that the assessee would be liable to gift-tax. The Appellate Assistant Commissioner accepted the contention of the assessee that the material date on which the gift can be said to have been completed by virtue of surrender and relinquishment was October 24, 1957, and not October 21, 1957, and the said date October 24, 1957, does not fall in the assessment year I958-59 but it falls in the assessment year 1959-60 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 4. The assessee had a share to the extent of Rs. 8,01,073.70 in the property of the Hindu undivided family worth Rs. 24,41,221.11 which was partitioned on October 24, 1957, and on that date she had a definite and transferable share in the property and she had full right of disposition of the same and instead of taking it on partition, she had transferred or abandoned or given away the same in favour of her two sons, Mukunddas and Gokuldas. This transfer was either disposition, conveyance or assignment or delivery or alienation within the meaning of section 2(xxiv) of the Act. By transferring her right or interest in favour of her two sons, the assessee had gifted her property in favour of her two sons and the case was covered by section 2(xii) read with section 2(xxiv) of the Act. 5. The case was also covered by section 4 of the Act because the assessee has given up the ownership of her share in respect of Rs. 24 lakhs odd in favour of her two sons without consideration in money or money's worth and there is no convincing evidence on record to show that the transaction in question was bona fide. 6. The notice issued by the Gift-tax Officer under section 16(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased husband, whether joint or separate. This may be done by the widow getting her maintenance determined and specifically charged on the joint family property either by agreement or decree or order of the court. Since the right of the widow to be maintained does not give her any interest in the joint family property, the said right is not a " jus in rem ", i.e., right in property, but it is " jus ad rem ", i.e., a right against the joint family property. If a specific property is allotted to the widow in lieu of her claim to maintenance under an agreement or a decree or order of a court and she was in possession of the same on the date of coming into force of the Hindu Succession Act, 1956 (hereinafter referred to as " the 1956 Act "), then by virtue of the provisions contained in sub-section (1) of section 14 and the Explanation thereto, the widow would become the absolute owner of the said property with effect from the date of coming into force of the 1956 Act (See Vaddeboyina Tulasamma v. Vaddeboyina Sesha Reddi, AIR 1977, SC 1944). It is not the case of the assessee that Smt. Gangabai had got her maintenance determined and specifically charged on the joint family property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a male owner. " The relevant provisions of the 1956 Act are contained in section 14 which reads as under: "S. 14. (1) Any property possessed by a female Hindu, whether acquired before or after the commencement of this Act, shall be held by her as full owner thereof and not as a limited owner. Explanation.-In this sub-section, 'property' includes both movable and immovable property acquired by a female Hindu by inheritance or devise, or at a partition, or in lieu of maintenance or arrears of maintenance, or by gift from any person, whether a relative or not, before, at or after her marriage, or by her own skill or exertion, or by purchase or by prescription, or in any other manner whatsoever, and also any such property held by her as 'stridhana' immediately before the commencement of this Act. (2) Nothing contained in sub-section (1) shall apply to any property acquired by way of gift or under a will or any other instrument or under a decree or order of a civil court or under an award where the terms of the gift, will or other instrument or the decree, order or award prescribe a restricted estate in such property. " Shri N. M. Ranka, learned counsel for the assessee, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take place in the family of the assessee and, therefore, the share of the assessee in the joint family property could not be said to have been fixed or crystallised and that it remained fluctuating. The submission of Shri Ranka is that the partition which took place on October 24, 1957, was only partial and not complete and that the share of the assessee in the joint family property would be ascertainable only when a complete partition takes place. Shri R. N. Surolia, learned counsel for the Revenue has supported the findings recorded by the Tribunal and has submitted that on the death of her husband, Seth Vithal Das, in 1951, the assessee acquired an interest to the extent of the share of her husband on the date of his death in the joint family property under the Act of 1937 and that the said share was fixed and was not fluctuating and that after the enactment of the 1956 Act the assessee became the absolute owner of that share in the joint family property. Shri Surolia has urged that a demand for partition is not essential for the purpose of crystallisation of the rights that had accrued to the assessee under the Act of 1937. In support of his aforesaid submission, Shri Surolia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu widow is entitled under section 3(2) of the Act of 1937 is to be determined as on the date on which she seeks to enforce a partition under sub-section (3) of section 3. The other view was that it has to be determined as on the date on which her husband died, that is to say, that it was not a fluctuating interest increasing or decreasing as a result of deaths or births in the family. The Supreme Court, after considering the decisions of the various High Courts, approved the first view and have observed (at page 829): " The various decisions to which we have adverted rest on the view that the interest which the law has conferred upon the widow is a new kind of interest though in character it is what is commonly known as the Hindu widow's estate. This interest is in substitution of her right under the pre-existing Hindu law to claim maintenance. The decisions also recognise that though the widow does not, by virtue of the interest given to her by the new law, become a coparcener, she being entitled to claim partition of the joint family property, is in the same position in which her deceased husband would have been in the matter of exercise of that right. That is to say, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fluctuating interest in the property which may be increased or decreased by deaths or additions in the family. We have looked into the decisions on which reliance has been placed by learned counsel for the Revenue and we are of the view that the said decisions have no bearing on the question in issue, viz., the nature of rights conferred on a Hindu widow by sections 3(2) and 3(3) of the Act of 1937. In State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1983] 163 ITR 31 (SC) and Raj Rani v. Chief Settlement Commissioner, AIR 1984 SC 1234, the husband had died after the coming into force of the 1956 Act and the rights of the widow were governed by the provisions of the 1956 Act and not by the Act of 1937. In Sukh Ram v. Gauri Shankar AIR 1968 SC 365, and G. T. M. Kotturuswami v. Setra Veeravva, AIR 1959 SC 577, the court has construed the provisions of section 14 of the 1956 Act. We may now examine the impact of the 1956 Act on the rights which accrue to a Hindu widow under the Act of 1937. The 1956 Act, by amending and codifying the law of intestate succession amongst Hindus, brings about some fundamental and radical changes in the law of succession. An important feature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the businesses hithertofore carried on by the family were divided between Seth Mukunddas and Seth Gokuldas but the immovable properties belonging to the joint family were not divided. This would show that till October 21, 1957, the assessee had not claimed partition of her interest in the joint family property and even under the agreement dated October 21, 1957, only partial partition of some other properties, viz., businesses, was effected but the immovable properties of the joint family were not partitioned. In these circumstances, it is not possible to hold that the interest of the assessee in the joint family properties which had devolved on her under the provisions of sections 3(2) and 3(3) of the Act of 1937 had been defined either on the death of her husband Seth Vithal Das in 1951 or on the date of the coming into force the 1956 Act and it cannot, therefore, be said that on the date of the execution of the agreement dated October 21, 1957, the assessee was the absolute owner of defined share in the joint family properties. The Tribunal has found that in pursuance of the provisions of the Act of 1937, the rights of the assessee in the properties of her husband were statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y property and after the coming into force of the 1956 Act, she became the absolute owner of that undefined interest by virtue of section 14 of the 1956 Act. With regard to question No. 5, we are of the opinion that the said question does not arise in view of our finding with regard to questions Nos. 1 and 2 that the share possessed by the assessee on the date of coming into force of the 1956 Act was undefined and fluctuating. We may now deal with questions Nos. 6 and 7. Question No. 6 is as to whether the assessee, by giving up her share or interest in the joint family property in favour of her two sons, transferred the property within the meaning of section 2(xxiv) of the Act and thus made a gift as defined by section 2(xii) of the Act. The said question involves the interpretation of the provisions of sections 2(xii) and 2(xxiv) of the Act which may be reproduced as under : " 2. (xii) '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 or conversion of any property referred to in section 4, deemed to be a gift under that section. " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 55 ITR 637, has held that the partition in the family does not effect any transfer as generally understood in law and that it could not be considered to be a disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property within the meaning of these words under section 2(xxiv) of the Act and, therefore, it does not constitute a gift under section 2(xii) of the Act. In that case, the learned judges have also observed that the expression " transaction " referred to in clause (d) of section 2(xxiv) of the Act takes its colour from the main clause, namely, it must be a transfer of property in some way and that the said clause can have no application to a partition of the joint family property. In this context, the learned judges have observed that a member of a Hindu undivided family who has no definite share in the family property before division cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he had gone to enforce his claim, and that till partition his share in the family property is undete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement dated October 21, 1957, and by giving up her share or interest in the businesses of the joint family, the petitioner had transferred any property to her sons within the meaning of section 2(xxiv) of the Act and had thus made a gift as defined in section 2(xii) of the Act. The Tribunal was, in our opinion, not right in taking the said view. Question No. 7 is as to whether the act of the assessee in executing the agreement dated October 21, 1957, amounts to a deemed gift within the meaning of section 4(c) of the Act. It turns on the interpretation of section 4(c) of the Act which reads as under : "4. Gifts to include certain transfers.-For the purposes of this Act, (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment." In relation to the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and that in the present case the partial partition effected by the agreement dated October 21, 1957, has been accepted by the Department as genuine. The Tribunal, while dealing with this aspect of the case, has held that the agreement and the partnership deed do not go to show that there was any bona fides in this transfer. The Tribunal has also observed that the fact that the partial partition had been accepted by the Department, by itself, would not go to prove that the transaction in question was bona fide. In the view of the Tribunal, there should be some evidence to show that on account of definite reasons, the assessee had given up her claim to the extent of Rs. 8 lakhs odd which was her share in the property in question and on this point there was no convincing evidence on record. The aforesaid observations of the Tribunal show that the Tribunal has proceeded on the basis that it was for the assessee to establish the bona fides of the transactions and to adduce evidence in that regard. In our opinion, the Tribunal was not right in proceeding on that basis. In order to bring the case within the ambit of section 4(c) of the Act, it was necessary for the Department to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Succession Act, i.e., on June 17, 1956, Smt. Vidyawati Devi Rathi was possessed of the undefined interest of her husband, Seth Vithal Das, in the joint family property and after the passing of the Hindu Succession Act, she became absolute owner of that undefined interest. Question No. 3 : The Tribunal was right in holding that Smt. Gangabai, the grandmother, was not entitled to any share either on the death of Seth Vithal Das or on the date of the passing of the Hindu Succession Act, 1956, and that she was only entitled to a right of maintenance out of the joint family property. Question No. 4: In view of the answer to question No. 3, question No. 4 does not arise. Question No. 5: In view of the answers to questions Nos. 1 and 2 that on the date of coming into force of the Hindu Succession Act, 1956, the share of Smt. Vidyawati Devi Rathi was not definite and was fluctuating, this question does not arise. Question No. 6: On the facts and in the circumstances of the case, the Tribunal was not right in holding that the assessee, by giving up her share or interest in the joint family property in favour of her two sons, transferred the property within the meaning of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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