CHANDRA REDDY C.J. - '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 ?'
The facts giving rise to his reference lie in a very narrow compass and are undisputed. One Nagamallayya who happened to be the manager of the joint Hindu family made gift of some property belonging to the joint family to his wife on July 14, 1957, of an extent of Ac. 31-83 cents, valued at Rs. 34,000. He also made some gifts to his daughters and other near relations; but we are not concerned with them here, as no exemption is claimed in regard thereto. He submitted a return of the gifts made by him and therein he claimed exemption in respect of the gift of his wife.
The Gift-tax Officer allowed the exemption, as in his opinion the matter fell within the contemplation of section 5(1) (viii) of the Gift-tax Act (hereinafter referred to as the Act). But the Commissioner of Gift-tax felt that this gift could not be regarded as falling within the scope of that clause - since the donor happened to be the manager of the joint Hindu family. He, therefore, revised the order of the Gift-tax Officer and called upon the assessee to pay tax under section 32 of the Act.
The assessee took the matter in appeal to the Appellate Tribunal, Hyderabad. But it was unsuccessful. However, at the request of the assessee, this reference was made under section 26(1) of the Act.
The short question that calls for decisions is whether this gift falls outside the purview of section 5(1)(viii) of the Act. Before we proceed to consider the matter further, it is convenient to quote that clause which reads as follows :
'(viii) to his or her spouse, subject to a maximum of rupees one lakh in value in the aggregate in one or more previous years, the expression spouse in this clause, where there are more wives than one, meaning all the wives together.'
It is indisputable that if a gift is made by the husband to the wife or vice versa - and is within the limits prescribed by that clause, it is exempt from gift-tax. Having regard to the tenor and language of the document, it cannot be denied that the gift in question is by the husband to the wife. The relevant contents of the document may be extracted here :
'Your are my wife. Out of love and affection for you, I have to-day gifted to you the landed property worth Rs. 30,000 measuring Ac. 31-83 cents, as described in the Schedule hereto appended and I have this day delivered the same to you. So, you shall hereafter enjoy the same with absolute right with powers of alienation paying taxes thereon to Government.'
The other recitals of the document are not quite relevant. It may be stated that there is nothing in the document to indicate that he was making the gift in any capacity other than as a husband. There is thus no obstacle in the way of the applicability of section 5(1)(viii).
Does the fact that he happened to be the manager of the family make any difference for the consideration of this question In our opinion, none. We are not here concerned with the question whether it is open to the manager of a joint family to make a gift of the joint family property to his wife, nor are we concerned with the question whether it should be allotted to his share.
The controversy relates to the capacity, in which he made the gift. It cannot be postulated that he made the gift as the manager of the family, since the words of the document make it abundantly clear that it is in his capacity as the husband that he made the gift. If that were so, there is no reason why this gift should be excluded from the ambit of clause (viii) of section 5(1) of the Act. In our opinion, the Gift-tax Officer was right in granting the exemption. We are firmly of the opinion that this gift cannot be subjected to tax as it comes within the contemplation of clause (viii) of section 5(1) of the Act.
The reference is answered in favour of the assessee and against the department.
This answer covers the other Reference No. 36/1962 also as the question raised is the same.
The assessee will get his costs from the department. Advocates fee in each is Rs. 50.
Reference answered in favour of the assessee.