The taxability of gifts under the Gift Tax Act is determined regardless of the donor's legal right to transfer the property.

1. These two cases, which have been referred to us under S. 28(1) of the Gift Tax Act , (18 of 1958), relate to three settlement deeds dated 20-5-1957, 11-10-1957 and 23-1-1959 executed by Sri Bhupatiraju Venkata Narasimha Raju hereafter mentioned as the assessee. By the first settlement deed, he gave absolutely, out of paternal affection 11 items of land of the total extent of Ac. 17-68 cents, stated to be his immoveable property to his first three unmarried minor daughters, Kausalya, Krishnaveni and Prabhavathi, represented by their mother Appallanarasaiah as guardian. By the second settlement deed he similarly gave 7 items of land of the total extent of Ac. 7-28 (which appears to be a mistake for Ac. 6-79 cents) described as being in his possession and enjoyment as on right, to his three minor sons, Venkata Appalaraju, Satyanarayana Raju and Sriharibabu, represented by their mother Appalanarasiah as guardian. By the third settlement deed, he similarly gave 4 items of land of the total extent of Ac. 7-46 cents, described as belonging to him by virtue of a partition with his father and brothers, to his fourth unmarried minor daughter, Aruna Udaya Lakshmi, represented by tier mother Appalanarasiah as guardian.
All the documents recite that possession of the properties concerned was delivered on the very day of execution. The first two gifts formed the subject matter of the Gift Tax Officer's assessment order dated 15-3-60 for the assessment year 1958-59. He valued the entire property covered by the first settlement deed as a taxable gift. With regard to the second settlement deed, which was in favour of the sons, it was contended on behalf of the assessee that the lands were his ancestral property, in which the donees were entitled to shares. The Gift Tax Officer found that three items of the total extent of. Ac. 1-40 cents were the assessee's self acquired property and the remaining four items of the total extent of Ac. 5-39 cents were the assessee s family property. He treated and valued the gift as one of Ac. 2-75 cents of land, comprising the assessee's self acquired property of Ac. 1-40 cents and the assessee's one - fourth share of Ac. 1-35 cents in the family property. The third settlement deed formed the subject matter of the Gift Tax Officer's assessment order dated 26-4-60 for the assessment year 1959-60. It was contended on behalf of the assessee firstly, that each of his three sons were entitled to a share in the property concerned and that as they had not joined in executing the deed, the gift was only of the assessee's one - fourth share; and secondly, that the gift was not liable to tax being for the minor daughter's maintenance and education. The Gift Tax Officer rejected both these contentions and valued the entire property conveyed as taxable gift.

2. The assessee preferred appeals to the Appellate Assistant Commissioner of Gift - Tax against both these orders. The Appellate Assistant Commissioner found that the assessee had erroneously declared his status to be an individual, that he was in fact the Karta of Hindu undivided family, that all the property in his hands was the property of the undivided family in which his share could not be predicated before a partition. He held that the gift to his undivided sons amounted to a family arrangement of the nature of a partial partition. As regards the gifts to the unmarried daughters, since they continued to be members of the undivided family, he held that the properties continued to be family properties; and that the gifts which could only materialise either at a partit