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TMI Blog1985 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... certain properties of the Hindu undivided family detailed in the schedule to that deed of the value of Rs. 60,000 to his wife, Smt. B. S. Narasamma. For the assessment year 1973-74 relevant to the previous year ending on March 31, 1973, the assessee filed his return under the Act before XIVth Gift-tax Officer, Circle-I, Bangalore, claiming exemption under section 5 of the Act to the extent of a sum of Rs. 50,000 gifted to his wife with which claim only we are concerned in this case. On February 10, 1975, the Gift-tax Officer completed the assessment allowing the said exemption claimed by the assessee without critically examining the same (annexure-A). With the aforesaid assessment made by the Gift-tax Officer, the assessee was not aggrieved. But, the Commissioner of Gift-tax exercising his suo motu power of revision conferred on him by section 24 of the Act, and after issuing the requisite notice and affording an opportunity of hearing, by his order dated January 11, 1977 (annexure-B), revised the same and directed the Gift-tax Officer to withdraw the exemption granted by him to the assessee and bring the same to tax under the Act. Aggrieved by the said order of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onship which is the essence and distinguishing feature of the institution [vide : Ragunada Deo v. Brozo Kishore, [1876] ILR 1 Mad 69 ; 3 IA 154 (PC)]. This body is purely a creature of law and cannot be created by act of parties, save in so far as by adoption or marriage, stranger may be affiliated as a member thereof. It is also a corporate body [vide Bhagwan Dayal v. Mst. Reoti Devi, AIR 1962 SC 287]. An undivided family which is the normal condition of Hindu society is ordinarily joint not only in estate but also in food and worship and, therefore, not only the concerns of the joint family, but whatever relates to their commonality and their religious duties and observances are regulated by the members or by the manager to whom they have expressly or by implication delegated the task of regulation [vide Janakiram v. Nagamony, ILR 49 Mad 98 ; AIR 1926 Mad 273]. The joint family status being the result of birth, possession of joint property is only an adjunct of the joint family and is not necessary for its constitution. Nor is it that all the members possess equal rights or status, even though the property of the family is called joint family property. A Hindu undivided family an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a firm has been explained by Subba Rao J. (as he then was), in CIT v. Bagyalakshmi Co. [1965] 55 ITR 660 at 664: 'A partner may be the karta of a joint Hindu family; he may be trustee; he may enter into a sub-partnership with others ; he may, under an agreement, express or implied, be the representative of a group of persons; he may be a benamidar for another. In all such cases, he occupies a dual position. Qua the partnership, he functions in his personal capacity; qua the third parties, in his representative capacity.' The karta of a Hindu undivided family unlike other individuals has thus a two-fold capacity. Qua the partnership, he functions in his personal capacity, because the rights of partnership are governed by the Partnership Act, 1932. The relation of partners arises from contract and not from status. The partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The Hindu undivided family may be a person or unit of assessment under the Act, but it cannot become a partner in a firm. Qua the third parties, the karta who becomes a partner retains his representative capacity. He is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wives than one, meaning all the wives together." First, section 5(1) provides that gift-tax shall not be charged in respect of gifts made by any person in respect of the properties referred to in the various clauses of that sub-section to the extent of their exemption. Section 5(1) deals with exemption of properties gifted by a person to whom the Act applies. The term " person " occurring in section 5(1) has been defined in section 2(xviii) of the Act as including a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not. Whether this wide definition of the term " person " occurring in section 5(1) of the Act also applies to clause (viii) of sub-section (1) of section 5 or not is the short and interesting question. Clause (viii) of sub-section (1) of section 5 opens with the terms his or her spouse " and on the very plain language of these terms, this clause only governs a gift made by one spouse to another spouse or husband or a wife to the other as is the case. The term "his or her spouse " will certainly fall within the meaning of the term " person ". But, that term, so far as this clause is concerned, has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of an individual, then the exemption would apply. If the capacity was that of a karta of a joint family, then, on account of the impossibility of a joint family having any spouse, the question of the applicability of section 5(1)(viii) would not arise in the assessment of the joint family..." We are in respectful agreement with these views. A. C. Sampath Iyengar in his treatise " Three New Taxes ", 6th Edition, Vol..2, edited by Bagchi, at page 221, has expressed a similar view and has doubted the correctness of the rulings to the contrary to which we will now refer. We are of the view that this criticism of the learned author is well founded. In Jana Veerabhadrayya v. CGT [1969] 59 ITR 176, a Division Bench of the Andhra Pradesh High Court consisting of Chandra Reddy C. J. and Chandrasekhara Sastry J., dealing with an identical question almost on similar facts, expressed thus (p. 177): " Does the fact that he happened to be the manager of the family make any difference for the consideration of this question ? In our opinion, none. We are not here concerned with the question whether it is open to the manager of a joint family to make a gift of the joint family property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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