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TMI Blog1979 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... gifts made in the above manner were not 'cross-gifts'? The facts in this judgment are being given from Income-tax Reference Nos. 19 to 22 of 1977. The dispute is regarding the assessment. years 1969-70 to 1972-73. The assessee family comprised of the following members : 1. Daljit Singh (married in 1958) 2. Smt. Charanjit Kaur (wife of Daljit Singh) 3. Ajaypal Singh (Son-date of birth: 23-2-1959) 4. Bhupinder Kaur (daughter-date of birth: 17-6-1963) 5. Karanbir Singh (son-date of birth: 2-4-1967) The assessee is an HUF. It started the business in the year 1957-58 after having separated from the bigger HUF headed by Jaimal Singh. The constitution of the bigger HUF headed by Jaimal Singh and the dates of separation of various members of the said HUF are mentioned as under : 1. Jaimal Singh 2. Smt. Ram Kaur (wife) 3. Satnam Singh (son) (separated from the joint family prior to 29-3-1957 and is carrying on business at Ludhiana) 4. Daljit Singh (son) (separated from HUF on 29-3-1957) 5. Inderjit Singh (son) (separated from HUF on 31-3-1962) 6. Baldev Singh (son) (separated from HUF on 31-3-1964) 7. Gurmit Singh (son) (separated from HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /o Inderjit Singh (minor) 10,000 30-9-1971 6. Khushbir Kaur, D/o Baldev Singh (minor) 10,000 30-9-1971 The ITO further found that the husbands of the above-mentioned donees (except that of Smt. Parminder Kaur) and father of the donee mentioned at serial Nos. 5 and 6 above made gifts to Smt. Charanjit Kaur, wife of the assessee, from their personal accounts in the books of the firm, M/s. Gurdit Singh Inderjit Singh, as under, S. No. Date Name of donor Amount 1. 25-12-1967 Inderjit Singh 5,000 2. 6-1-1968 Baldev Singh 5,000 3. 5-5-1968 Gurmit Singh 5,000 4. 9-3-1970 Inderjit Singh 5,000 5. 16-3-1970 Baldev Singh 5,000 He further found that the following amounts of interest were credited to the account of Smt. Charanjit Kaur on the above-mentioned gifts: Rs. Year ending 31-3-1968 235 Year ending 31-3-1969 1,958 Year ending 31-3-1970 2,229 Year ending 31-3-1971 4,223 Year ending 30-9-1971 2,284 Later,Smt. Charanjit Kaur became partner of the firm, M/s. Gurdit Singh Inderjit Singh, with effect from October 1, 1971. The ITO was, prima facie, of the opinion that the above gifts were crossgifts. He, therefore, asked the assessee to explain as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the gifts did not form part of the same transaction and could not be said to be cross-gifts. He, therefore, deleted the additions made by the ITO and WTO on account of interest income and share of profit from the various firms in the name of the assessee's wife towards the total income of the assessee for the various years and also assets standing in the name of the assessee's wife in various firms towards the wealth-tax assessment of the assessee. The department filed appeals against the order of the AAC before the Income-tax Appellate Tribunal, Amritsar. The Appellate Tribunal came to the conclusion that the gifts made by the assessee to the wives and the minor children of his brothers were quite valid as they were made out of love and affection. It also held that these were fully covered by the provisions of art. 225 of Mulla's Hindu Law. It also found that the gifts by the brothers of the karta to his wife were out of love and affection and could not be equated with the gifts made to the family, Consequently, it did not accept the plea of cross-gifts advanced by the department. Reliance was placed by it on the observations of this court in S. Raghbir Singh Sandhawalia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requested the company, in which the family held 800 shares, to transfer 300 shares to his second wife. The board of directors of the company at a meeting held in December, 1948, approved the transfer and later confirmed this decision. The son of the karta was present at the meeting of the board of directors when the application for transfer of these shares in the name of the second wife was being considered but he took no steps to challenge the gift. In March, 1949, the karta made transfer entries in the books of the family debiting the capital account with a sum of Rs. 2,40,000 representing the paid up value of 300 shares and crediting the account of the wife with a corresponding amount. In the year 1950-51, the karta submitted a return declaring the income of the family but excluding the dividend on those shares. The wife submitted a separate return showing the dividend as her personal income but the department assessed the dividend as the income of the family on the ground that the gift of the shares to the wife was void. The Tribunal, on appeal, upheld the assessment. The matter was referred to this High Court. It was observed by the learned Bench that there was an intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directly or indirectly (i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is partner; ...... (iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm." From a bare persual of the section it is evident that it does not relate to the gifts. According to cl. (i), the income of the spouse of an individual arising from his/her membership in a firm carrying on a business in which such individual is a partner is liable to be included in the income of the individual. The section, as stated above, does not talk of gifts. In the present case, even the wife of the assessee is not a partner in the firm in which he is a partner. Similarly, the minor childern are not partners in the firms. Consequently, the income of the wife of the karta cannot also be clubbed with the income of the assessee. We, consequently, answer question No. 2 in the negative, i. e., against the department. Question No. 3 is whether the Tribunal was justified in holding that the gifts made in the above manner were not " cross-gifts This matter has been dealt with while dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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