1. This is an appeal filed by Smt. P. Jagadambal as guardian of minor P. Raguraman against the order of the AAC, D-Range, Madras, in respect of a gift-tax assessment on her for the assessment year 1971-72.
2. One Narayana Reddiar died in 1960, leaving his properties to his widow, Narayani Ammal. They had no issues. After her husband's death, the widow Narayani Ammal adopted minor Raguraman, son of her brother Shri Perumal Reddiar, by a deed of adoption dated 26-9-1966. During the year ending 30-3-1970 she had gifted some properties valued at Rs. 63,659 to minor Krishnamurthy and minor Ramamurthy (her brother's other two sons who are natural brothers of her adopted son Shri P. Raguraman) and paid gift-tax thereon, We are, however, concerned with the settlement of properties valued at Rs. 64,200 during the year ending 31-3-1971 on her adopted son Raguraman by a deed of settlement dated 27-9-1970. Smt. Narayani Ammal who was alive at the time of assessment resisted gift-tax liability by claiming that the gift was void on the ground that the adoption converted her inherited properties into family property and that, therefore, she had no right of disposal over them.
The GTO did not accept the contention. He was of the view that she had absolute right of disposal over the properties and the adoption was to her and not to the family. The first appellate authority confirmed the levy of gift-tax, purportedly following the provisions of the Hindu Succession Act, 1956 ('the Succession Act') and the Madras High Court decision in Addl. CIT v. P.L. Kamppan Chettiar  114 ITR 523 (FB), In the second appeal, the claim is repeated.
3. The learned representative of the assessee claimed that the adoption relates back to the date of the death of the husband of the adoptive mother and that, at any rate, the properties became family properties and such properties have always the potential for conversion into family property on the birth or adoption of a son. Proviso (c) to Section 12 of the Hindu Adoptions and Maintenance Act, 1956 ('the Hindu Adoptions Act'), according to him, did not nullify the age-old Hindu law regarding the concept of family property. He relied upon a passage at page 1010 in Mullets Hindu Law, 14th edition, for his proposition.
He, therefore, claimed that she had no right to gift the property.
Secondly, he argued that the gift was incomplete inasmuch as it was in favour of a minor and that Shri Perumal Reddiar (brother of the donor) who accepted the gift on behalf of minor was not competent, as natural father has no right to act on behalf of his natural son after a legal adoption by some body else. It was alternatively claimed that even if it is taken as a valid gift, 50 per cent thereof should be deleted on the basis that he became a co-owner of the property on adoption.
4. The learned departmental representative claimed that the arguments were far-fetched. He relied on Section 12 of the Hindu Adoptions Act for the proposition that the adoption was to the lady and not to the family. The lady had become the absolute owner and relied upon Section 14 of the Succession Act for his proposition. He claimed that adoption does not divest her of her ownership. Hence, the argument that she had no right of disposal and the alternative argument that the donee had only 50 per cent interest, according to him, were based upon a view of law which absolutely ignored the new Hindu Code- As for the argument that the gift was incomplete, he claimed that the argument is a desperate one as the document itself testified that possession was handed over to Perumal Reddiar, to look after the property on the minor's behalf and that it had been witnessed by him. Absolute rights have been conferred on the donee. No material was brought on record to show that it has not been acted upon. Even if the fact that he was a natural father is ignored, he is still the minor's uncle (as he is a brother of the adoptive mother) and, therefore, next of kin who can accept a gift under the Hindu Minority and Guardianship Act. When the donor is the legal guardian, consent on behalf of minor, according to him, is also implied. Unless and until the minor repudiates the gifts, it has to be taken as valid. There is also no reason why a gift which has not been saddled with any liability should not be taken as having been accepted. In any view, he claimed that there was no worthwhile argument against the levy of gift-tax.
5. We have carefully considered the records as well as arguments. In this case the assessee succeeded to the property of her late husband who died intestate in 1960, after the Hindu Succession Act had come into force. There were no other legal heirs. Section 14 of the Hindu Succession Act stipulates that any property possessed by a Hindu female, whether acquired before or after the commencement of this Act, shall be held by her as full owner thereof and not as a limited owner.
This legal position is not disputed. The only question is whether the adoption of minor Raguraman, her brother's son, by an adoption deed dated 26-9-1966, divested her of her full ownership. A clause in the adoption deed mentions that the adopted child should have all his rights as an adopted son. This was claimed to be a stipulation which showed that the lady gave up her absolute right. We are unable to agree. It gives nothing more than the ordinary right of an adopted son.
Section 13 of the Hindu Adoptions Act lays down that "subject to any agreement to the contrary, an adoption does not deprive the adoptive father or the mother of the power to dispose of his or her property by transfer inter vivos or by will". The present position of law in this regard will be obvious from the following extract from N.R.Raghavachariar's Hindu Law, 1980 edition, vol. II, p. 1189 : 5. POSITION WHEN THE ADOPTER is A WOMAN : Under the Hindu Succession Act a woman who inherits her husband's estate or who has acquired property in any other way except under decrees or documents which confer on her only a life or restricted estate, becomes an absolute owner of the property, and if she subsequently makes an adoption, the adopted son does not get any right in that property. The fact that the property was originally the ancestral property in the hands of her husband does not enable the adopted son to get an interest in that property. No doubt, if the widow dies without alienating the property, the adopted son would succeed to the property as her heir, but during her lifetime he has no right to question her regarding her dealings with the property. The theory of relation back applicable prior to this Act which had enabled the son to claim that he must be considered to have been born at the time of the adoptive father's death has no longer any operation and the right of the adopted son springs only on the date of the adoption. The adoption does not divest any estate vested in any body and since the property in the hands of the woman, who makes an adoption is her own property at the time of the adoption in whatever way it might have been acquired by her, the adopted son cannot claim to have any interest in that property. In this connection one exception ought to be remembered, if the adopting widow has obtained the property of her husband for a limited estate with the power of adoption to him under a will or settlement and the will or the settlement mentions that on adoption by her the adopted son should take the property, the widow would be divested by the adoption and any intermediate alienation by her contrary to the terms of the will or settlement will not be binding on the adopted son. The same will be the position if the adoption is of a daughter instead of a son.
The learned representative for the assessee relied upon the decision of the Supreme Court in Sitabai v. Ramchandra  2 SCR 1 cited at page 1010 of Mullet's Hindu Law, 14th edition, for a contrary proposition.
He was obviously in error because it related to a case of a lady whose husband died and who adopted a child, both the incidents taking place before the Hindu Succession Act and the Hindu Adoptions Act. Actually there is a subsequent specific decision of the Supreme Court in Punithavalli Ammal v. Minor Ramalingam  3 SCR 894 where the Supreme Court observed that the doctrine of relation back of the adoption to the date of death of the husband by Hindu law texts no longer survives in view of Section 14(1) of the Hindu Succession Act.
The Supreme Court negatived the claim of the adopted son's right which was earlier upheld by the Madars High Court on the basis of the theory now canvassed before us. Hence, the assessee donor continued to be the full owner with full right of disposal and the donee had no right over the property. The gift is, therefore, valid in law. Even the alternative argument that 50 per cent only could, at best, be taxed, also failed, since he had no pre-existing right in the property.
6. We have yet to consider one more argument that the gift is incomplete. This argument was resisted on the question of jurisdiction.
Since it is a question of law, it could be adjudicated upon on the basis of facts on record and we cannot shut out the assessee in this regard. It is true that the definition of 'gift' in Section 1(xii) of the Gift-tax Act is conspicuous for the absence of the words 'and accepted by or on behalf of the donee', when compared with the definition of 'gift' under Section 122 of the Transfer of Property Act, 1882. A gift of movable or immovable property, therefore, requires acceptance under geneial law. Without such acceptance, the gift is incomplete. It is no gift at all. Even the omission of the words relating to acceptance in the definition of 'gift' for gift-tax purposes cannot have the effect of taxing what is not a gift as a gift.
Thus far, we are in agreement with the learned representative for the assessee. However, when the gift document is seen, we are unable to see any factual basis for his argument. It is because the document itself shows that there has been acceptance. The registered gift deed dated 27-9-1970 appoints Perumal Reddiar (the assessee's brother and incidentally the natural father of the minor-donee) as the guardian to take possession of the property as from that date and administer the same till the minor attains majority. It is mentioned that even patta has been changed with effect from that date. Perumal Reddiar has also witnessed the document. It was claimed on behalf of the assessee that Shri Perumal Reddiar has no right to act as guardian after giving away his natural son for adoption. It is so but, in this case, the mother as natural guardian has given the gift. Her interest as a donor is not conflicting with the interest of the donee. Their interest are complementary and not competing. Hence, she herself could accept the gift on his behalf. She had handed over possession to her brother also from that date as donor. When her brother accepted it, he accepted it as a trustee and/or a de facto guardian for the minor's interest, at the instance and on behalf of natural guardian. Even ignoring the natural relationship he was the brother of the adoptive mother and, therefore, a maternal uncle on adoption. He can be next friend or next of kin. It is not as though the property is saddled with mortgage or any other liability. Non-acceptance of such a gift would, in such circumstances, be considered more damaging to the minor's interest and, hence, there is neither presumption nor material to suggest that there is no acceptance. Acceptance 'on behalf is implied when gift is made by the natural guardian, unless perhaps where the gift is onerous or possession had not been handed over. In this case, change of patta and transfer of possession are both mentioned in the gift deed itself.
Hence, in any view of the matter, the orders of authorities below have to be upheld.