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Judges : M.S.MENON,V.BALAKRISHNA ERADI
P.K.SUBRAMONIA IYER - Appellant
Versus
COMMISSIONER OF GIFT TAX - Respondent
Case No : I. T. R. 40 of 1966
Decided On : 09/08/1967
Advocates Appeared :
K. V. Surianarayana Iyer; C. S. Ananthakrishna Iyer; For Applicant C. T. Peter; For Respondent
Gift-tax Act - Abandonment of self-acquired properties to joint Hindu family - S.26(1) - S.2(xii), S.2(xxiv)(d) - Summary: The court considered whether the abandonment of self-acquired properties by the assessee to the joint Hindu family amounted to a gift under S.2(xii) read with S.2(xxiv)(d) of the Gift-tax Act, 1958. The court analyzed the definitions of 'gift' and 'transfer of property' under the Act and referred to relevant case law to determine the nature of the transaction. The court concluded that the act of the assessee was a unilateral action and not a transaction, therefore ruling in favor of the assessee.
Fact of the Case:
The reference was made by the Income-tax Appellate Tribunal, Madras Bench, under S.26(1) of the Gift-tax Act 1958 to determine whether the abandonment of self-acquired properties to the joint Hindu family constituted a gift under the Act.
Finding of the Court:
The court found that the act of the assessee in throwing his self-acquisitions into the hotchpot of his joint family was a unilateral action and not a transaction, therefore ruling in favor of the assessee.
Issues: The main issue was whether the act of the assessee constituted a gift under the Gift-tax Act, 1958.
Ratio Decidendi: The court's decision was based on the interpretation of the definitions of 'gift' and 'transfer of property' under the Act, as well as relevant case law that established the nature of the transaction in question.
Final Decision: The court ruled in favor of the assessee, concluding that the act of abandonment of self-acquired properties to the joint Hindu family did not amount to a gift under the Gift-tax Act, 1958.
1. This is a reference at the instance of the assessee by the Income-tax Appellate Tribunal, Madras Bench, under S.26(1) of the Gift-tax Act 1958. The question referred is:
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the abandonment by the assessee of his exclusive right to the self-acquired properties in favour of the joint Hindu family amounted to a gift within the meaning of S.2(xii) read with S.2 (xxiv)(d) of the Gift-tax Act, 1958?"
2. S.2(xii) of the Gift-tax Act, 1958, defines the expression "gift". 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 S.4". S.4 deals with certain transfers which have to be deemed to be gifts for the purposes of the Act. We are not concerned with that section in this case.
3. S.2(xxiv) of the Gift-tax Act, 1958, defines the expression "transfer of property". According to sub-clause (d) of that section, that expression will include "any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person". The remaining portions of the definition of the expression "transfer of property" do not arise for consideration in view of the wording of the question referred for decision.
4. Counsel for the Department wanted to press into service the whole of the definition. We have not allowed him to do so as we have been called upon to decide only whether what has been done by the assessee can be considered as a transaction entered into by him with intent to diminish directly or indirectly the value of his own property and to increase the value of the property of the joint Hindu family of which he is a member. The words "within the meaning of S.2(xii) read with S.2(xxiv)(d) of the Gift-tax Act, 1958", in the question referred clearly indicate that such is the case.
5. According to counsel for the assessee the action of the assessee of throwing his self-acquisitions into the hotchpot of his joint family will not amount to a transfer in any sense of the term. In the light of our conclusion in the last preceding paragraph this question in all its aspects and the authorities cited in support thereof including the decision of the Supreme Court in Commissioner of Income-tax v. M. K. Stremman, (1965) 55 ITR. 62, under S.16(3)(a)(iv) of the Indian Income-tax Act, 1922, of this Court in Controller of Estate Duty v. Arunachalam Chettiar, (1967) 1 ITJ. 734, under S.10 of the Estate Duty Act, 1953, and of the Mysore High Court in Smt. Laxmibai Narayana Rao Narlekar v. Commissioner of Gift-tax, (1967) 63 ITR. 19, under the Gift-tax Act, 1958, itself, also do not arise for consideration and are not considered in this judgment.
6. The first question for determination is whether the act of the assessee in throwing his self-acquisitions into the hotchpot of his joint family can be considered to be a "transaction" entered into by him. A transaction entered into by a person, in our opinion, should be an act which is bilateral or multilateral in character, and not a mere unilateral action which is all that occurs when a coparcener throws his self-acquisitions into the hotchpot of his joint family.
7. In Mallesappa v. Mallappa, AIR. 1961 Supreme Court 1268, the Court dealt with the matter as follows:
"If it appears that property which is separately acquired has been deliberately and voluntarily thrown by the owner into the joint stock with the clear intention of abandoning his claim on the said property and with the object of assimilating it to the joint family property then the said property becomes a part of the joint family estate; in other words, the separate property of a coparcener loses its separate character by reason
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