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TMI Blog1977 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... was then a minor. On June 12, 1963, he made a gift of an amount of Rs. 42,966 in favour of his wife. He died on January 20, 1965. The adoption of Rajendra Prasad was made in accordance with the custom prevailing in the Vysya community to which he and the adopted son belong. The adopted son was about 22 years old at the date of adoption. On July 20, 1963, he executed a registered deed of adoption. On the same date, he executed another deed, styled as settlement deed, in favour of his adopted son whereby the properties in question, which were self-acquired, were settled upon him. After the death of Potti Venkata Subbarayudu, hereinafter referred to as "the deceased", the accountable person, viz., his daughter, Santhamma, filed the estate duty return. Among the various questions that cropped up was the one relating to the inclusion of the properties covered by the settlement deed dated July 20, 1963, executed in favour of the adopted son. The properties covered by the settlement deed were included for the purpose of determination of the estate duty by the Assistant Controller. Aggrieved by the decision of the Assistant Controller, the matter was carried in appeal. At the appellate sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the properties under settlement deed dated July 20, 1963, are liable to gift-tax under the provisions of the G.T. Act?" The contentions put forth by Mr. Rama Rao, learned counsel for the revenue, are these: (1) the ante-adoption agreement is not valid under the Hindu Adoptions and Maintenance Act; (2) even assuming it is valid, the Tribunal committed an error in law in holding that an oral antecedent agreement conferred antecedent rights upon the adopted son; (3) the adoption of Rajendra Prasad is not in accordance with the requirements of s. 10(iv) of the Act; and (4) even otherwise, the properties covered by the settlement deed constituted gift of immovable properties to the adopted son. Mr. I. S. Gupta appearing for the accountable person on the other hand contended, that the prevailing custom in the Vysya community to which the parties belong permits adoption of a major boy whose upanayanam has not been performed and that the settlement deed is in the nature of a family arrangement or settlement pursuant to the prior oral agreement between the parties and, as such, the properties covered by the deed dated July 20, 1963, are not taxable gifts under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act. Section 17, to the extent relevant for our discussion, reads : "(1) No person shall receive or agree to receive any payment or other reward in consideration of the adoption of any person, and no person shall make or give or agree to make or give to any other person any payment or reward the receipt of which is prohibited by this section." The Tribunal relying upon a decision of this court in Sitamahalaxmi v. Ramachandra Rao [1957] 1 An WR 87; AIR 1957 AP 572 upheld the validity of the ante-adoption agreement. In so upholding, it also relied upon the observations of N. R. Raghavachariar in his book Hindu Law Principles Precedents, 6th Edn., at page 182. What is quoted from Raghavachariar's commentary is the following: "But an adoption cannot be declared invalid by reason merely of a collateral arrangement between the natural father and the adopter. But if the adopted son is of full age and deliberately agrees to an arrangement under which he is to get no more than half of the property of his adoptive father the agreement is binding upon him." The commentator was only quoting the opinion of a Division Bench of the Madras High Court in Subbaraju v. Narayanaraju, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eive any payment". The fact that the community to which the parties belong permitted a major to be adopted does not make any difference because that would be contrary to the public policy and object underlying the prohibition contained in s. 17. Mr. Gupta next sought to contend that the settlement of properties on the adopted son was on account of the antecedent rights. These antecedent rights, according to the learned counsel, Mr. Gupta, are traceable to the oral ante-adoption agreement. We are unable to understand how any antecedent rights would flow under that oral agreement. The question of the adopted son having any antecedent rights in the properties of the would-be adoptive father under that oral agreement does not arise. To sustain a family settlement or arrangement, parties must proceed on the assumption that there is some kind of antecedent title in them. We fail to understand what antecedent title that "oral agreement" could confer on a person who had no kind of antecedent right or claim to the self-acquired properties of the deceased. The rights of this adopted son, if there were any ancestral properties, are traceable only to the date of his adoption. Prior to that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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