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Commissioner of Gift-tax Vs. Valluru Venkateswara Rao - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 75 of 1976
Judge
Reported in[1980]123ITR54(AP)
ActsGift-tax Act, 1958 - Sections 2 and 5(1); Hindu Adoptions and Maintenance Act, 1956 - Sections 18(1)
AppellantCommissioner of Gift-tax
RespondentValluru Venkateswara Rao
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateM.J. Swamy, Adv.
Excerpt:
.....of partition of family - under hindu law female is entitled to maintenance at time of partition of family property - in circumstances property given to wife not as gift but in lieu of maintenance - held, property not liable for gift tax. - - can such a transaction be held to be one without consideration although it is voluntary ? under the hindu law it is well settled that a hindu female is entitled to be maintained and if, at the time of the partition of the hindu joint family, some reasonable provision has been made towards the maintenance of a female, it cannot be considered to be a gift, though a hindu female in a joint family is not entitled to a share. unless the ingredient of lack of consideration is satisfied, the transaction cannot be held to be a gift which attracts..........assessment year 1970-71, the assessee filed a gift-tax return on november 28, 1970, declaring the gifted property and claimed exemption of the same on the ground that it was transferred in favour of his wife towards her maintenance according to the hindu law. in the partition that took place between the karta and his minor son represented by his mother and guardian on march 20, 1970, it was contemplated to give property worth about a lakh of rupees by way of settlement to his wife. the partition deed does not indicate these facts specifically. the gto did not agree with the plea of the assessee that the settlement of the aforesaid immovable property to the wife by the karta of the family amounted to a family arrangement at the time of the partition. therefore, the plea that the.....
Judgment:

C.N. Kondaiah, C. J.

1. At the instance of the Commissioner of Gift-tax, Andhra Pradesh-II, the Income-tax Appellate Tribunal has submitted under Section 26(1) of the G.T. Act of 1958, hereinafter called the Act, the statement of case for the opinion of this court on the following question of law :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the immovable property transferred by the karta of the assessee family in favour of his wife by virtue of the deed dated March 26, 1970, was not liable to gift-tax? '

2. We may briefly refer to the material facts that gave rise to the aforesaid question of law. Sri Valluru Venkateswara Rao, who is the karta of a HUF, the assessee herein, made a gift of immovable property of 2 acres 95 cents of dry land worth about a lakh of rupees by a registered deed dated March 26, 1970, in favour of his wife, Smt. Valluru Chandravati, towards her maintenance. For the assessment year 1970-71, the assessee filed a gift-tax return on November 28, 1970, declaring the gifted property and claimed exemption of the same on the ground that it was transferred in favour of his wife towards her maintenance according to the Hindu law. In the partition that took place between the karta and his minor son represented by his mother and guardian on March 20, 1970, it was contemplated to give property worth about a lakh of rupees by way of settlement to his wife. The partition deed does not indicate these facts specifically. The GTO did not agree with the plea of the assessee that the settlement of the aforesaid immovable property to the wife by the karta of the family amounted to a family arrangement at the time of the partition. Therefore, the plea that the transaction was exempt from gift-tax was rejected on the ground that it was an after-thought. The GTO refused the claim of the assessee to allow the exemption to the extent of Rs. 50,000 under Section 5(1)(viii) of the Act on the ground that the assessee was a HUF and the exemption envisaged under Section 5(1)(viii) was permissible only to individuals. He, therefore, completed the assessment bringing the entire amount of gift to tax. The contention of the assessee before the AAC that it was not a taxable gift as the transfer of property was made to the wife of the karta in lieu of her maintenance expenses was rejected. But, however, it was held that the assessee was entitled to the exemption of a sum of Rs. 50,000 under Section 5(1)(viii) of the Act. Aggrieved by the decision of the A AC on the principal question, the assessee preferred a second appeal to the Income-tax Appellate Tribunal. The Appellate Tribunal allowed the appeal holding that the property was given to the wife of the karta in lieu of her maintenance expenses and, therefore, no gift was involved in this transaction. Hence this reference.

3. The submission of Mr. P. Rama Rao, learned counsel for the revenue, is that the transaction in question is really a gift within the meaning of Section 2(xii) of the Act and there was no family settlement and it is, therefore, taxable. This claim of the department is resisted by Mr. M. J. Swamy, learned counsel for the assessee, contending, inter alia, that the Tribunal has rightly found that it is not a gift but a settlement towards maintenance of the wife of the karta and the question must be answered in favour of the assessee.

4. The crux of the matter is whether or not the transaction is a gift within the meaning of Section 2(xii) of the Act, which reads thus :

' '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 or conversion of any property referred to in section 4, deemed to be a gift under that section.'

5. The essential ingredients of a gift are : (1) voluntary nature, and (2) absence of consideration. The gift no doubt must be in respect of the existing movable or immovable property. The consideration also must be in relation to money or money's worth. Where the transaction does not involve any transfer made voluntarily and without consideration in money or money's worth, it cannot be termed to be a gift. Not only the transaction must be voluntary but it should also be without consideration in money or money's worth. In the absence of any one of these ingredients, the transaction cannot be termed to be a ' gift ' within the meaning of Section 2(xii) of the Act.

6. In the case on hand, the Income-tax Appellate Tribunal, which is the fact-finding authority has, on a consideration of the facts and circumstances, found that the transaction is a settlement made towards the maintenance of the wife of the karta of the HUF at the time of the partition of the family. Can such a transaction be held to be one without consideration although it is voluntary Under the Hindu law it is well settled that a Hindu female is entitled to be maintained and if, at the time of the partition of the Hindu joint family, some reasonable provision has been made towards the maintenance of a female, it cannot be considered to be a gift, though a Hindu female in a joint family is not entitled to a share.

7. Section 18(1) of the Hindu Adoptions and Maintenance Act, 1956, reads thus:

' Subject to the provisions of this section, a Hindu wife, whether married before or after the commencement of this Act, shall be entitled to be maintained by her husband during her lifetime.'

8. No doubt Sub-section (2) of Section 18 provides for the maintenance of a Hindu wife although she lives separately from her husband under the circumstances specified in Clause (a) to (g). Sub-section (3) of Section 18 makes it clear that a Hindu wife is not entitled to a separate residence and maintenance from her husband if she is unchaste or ceases to be a Hindu by conversion to another religion. Sub-sections (2) and (3) of Section 18 are not material for our purpose. Sub-section (1) of Section 18 would amply apply to the instant case. The karta's wife was given a property of acres 2.95 of dry land, worth about one lakh of rupees, by means of a registered deed on March 26, 1970, pursuant to the agreement entered into between the parties on March 20, 1970, when the partition of the family took place. In the circumstances, it can, by no stretch of imagination, be said that the property was given to the lady as a gift and not in lieu of her maintenance. The right to maintenance is a statutory one provided under the Hindu Adoptions and Maintenance Act, 1956. Though this right has been codified under Section 18 of the aforesaid Act, it was in existence even prior to that Act as she is entitled under the Hindu law. Unless the ingredient of lack of consideration is satisfied, the transaction cannot be held to be a gift which attracts gift-tax. The transaction is undoubtedly for consideration. The consideration is to provide for the maintenance of the wife of the karta.

9. This view of ours gains support from a decision of the Division Bench of the Madras High Court in CGT v. Rm. S. Ramanathan Chettiar : [1969]74ITR758(Mad) . Therein a provision for payment to the wife of the karta of a sum of Rs. 50,000 to be expended by her was made in a partial partition of the joint family of the assessee. It fell for decision whether such payment was for consideration and consequently not liable to pay gift-tax. It was held that the payment, in the circumstances of the case, to the wife had the effect of giving quittance to the family obligation to maintain the karta's wife and, therefore, such consideration is money's worth and hence the payment was not a gift. That apart, the transaction can be justified even as a family settlement in view of the decision of the Supreme Court in Kale v. Deputy Director of Consolidation, : [1976]3SCR202 . The Supreme Court held that the family arrangement may be even oral and if there is a memorandum which is only a record of the settlement entered into orally earlier, it does not require registration even if it involves immovable property.

10. In the present case, the finding of the Income-tax Appellate Tribunal that the property was given to the wife of the karta in lieu of maintenance is correct. For all the reasons stated, our answer to the question is in the affirmative and in favour of the assessee.

11. The reference is answered accordingly with costs. Advocate's fee, Rs. 250.


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