A gift by a Hindu undivided family to its wife is exempt from gift tax under Section 5(1)(viii) of the Gift-tax Act.

D.K.Mahajan, J.

1. The Income-tax Appellate Tribunal has stated the following question of law for our opinion :

"Whether a gift made by a person who is the manager of a joint Hindu family to his wife of a portion of the property belonging to the family is a gift by a person to his spouse within the meaning of Section 5(1)(viii) of the Gift-tax Act ?"

2. The facts are simple. The assessee is a Hindu undivided family and Shri Hari Chand is its karta. The assessment year in question is 1966-67, the previous year being Samvat year 2023. During the assessment year, Hari Chand made a gift of Rs. 49,000 from the funds of the Hindu undivided family to his wife, Sunder Shanta, and a further gift of Rs. 4,900 to his minor daughter, Miss Bina Devi. In the gift-tax return filed by the karta of the Hindu undivided family for the year in question, exemption under Section 5(1)(viii) was claimed in respect of the gift made to Smt. Sunder Shanta. This claim was negatived by the Gift-tax Officer with the following observations :

"Exemption was claimed of the gift made to the wife, but the assessees status is Hindu undivided family and a Hindu undivided family has no wife. A karta of a Hindu undivided family is not free to gift away the Hindu undivided family property even to his wife and the total amount of Rs. 53,900 is taken as taxable gift. "

3. The assessee then went in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner allowed the appeal and held that the gift by the karta to his wife was exempt under the provisions of Section 5(1)(viii) of the Act. The Appellate Assistant Commissioner observed that " person " in Section 5 includes Hindu undivided family. Therefore, he gave effect to Clause (viii) of Section 5(1). Against the order of the Appellate Assistant Commissioner, the department moved the Income-tax Appellate Tribunal, Chandigarh Bench. The Tribunal affirmed the decision of the Appellate Assistant Commissioner. For its opinion, the Tribunal relied on Jana Veera Bhadrayya v. Commissioner of Gift-tax, [1966] 59 I.T.R. 176 (A.P.).. The department being dissatisfied moved the Tribunal under Section 26(1) of the Gift-tax Act, and that is how the question of law already stated has been referred for our opinion.

4. Before I deal with the contention of Mr. Awasthy, it will be proper to set out certain provisions of the Act. Section 2 is the definition section and defines " assessee ", " donor " and " person in the following terms :

"2.(ii) assessee means a person by whom gift-tax or any other sum of money is payable under this Act and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the determination of gift-tax payable by him or by any other person or the amount of refund due to him or such other person ;

(b) every person who is deemed to be an assessee under this Act;

(c) every person who is deemed to be an assessee in default under this Act."

"2.(ix) donor means any person who makes a gift."

"2.(xviii) person includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not."

5. Section 5 of the Act is the exemption section in respect of certain gifts and is in the following terms :

"5. (1) Gift-tax shall not be charged under this Act in respect of gifts made by any person- (i) of immovable property situate outside the territories to which this Act extends;

(ii) of movable property situate outside the said territories unless the person- (a) being an individual, is a citizen of India and is ordinarily resident in the said territories, or

(b) not being an individual, is resident in the said territories, during the previous year in which the gift is made ;

(iii) being an individual who is not resident in India, to any person resident in India, of foreign currency or other foreign exchange (as defined, respectively, in Clause (c) and Clause (d) of Section 2 of the Foreign Exchange Regulatio