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Surendra Nath Malhotra (Huf) Vs. Gift-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1985)13ITD499(Kol.)
AppellantSurendra Nath Malhotra (Huf)
RespondentGift-tax Officer
Excerpt:
1. this appeal filed by the assessee is directed against the order of the commissioner (appeals) dated 29-9-1983 upholding the order of the gto holding that the assessee made gifts of rs. 3 lakhs in favour of his three daughters.2. the assessee is a huf. for the assessment year 1975-76, the gto issued a notice under section 16(1) of the gift-tax act, 1958 ('the act'). in response to that notice the assessee filed a return of gifts disclosing the value of gifts at rs. 3 lakhs. the assessee, however, claimed that the gifts in question were really in the nature of family arrangement and could not, therefore, be regarded as gifts under section 2(xii) of the act. in the alternative it was claimed that the gifts in question were exempt under section 5(1)(xii) of the act.however, subsequently.....
Judgment:
1. This appeal filed by the assessee is directed against the order of the Commissioner (Appeals) dated 29-9-1983 upholding the order of the GTO holding that the assessee made gifts of Rs. 3 lakhs in favour of his three daughters.

2. The assessee is a HUF. For the assessment year 1975-76, the GTO issued a notice under Section 16(1) of the Gift-tax Act, 1958 ('the Act'). In response to that notice the assessee filed a return of gifts disclosing the value of gifts at Rs. 3 lakhs. The assessee, however, claimed that the gifts in question were really in the nature of family arrangement and could not, therefore, be regarded as gifts under Section 2(xii) of the Act. In the alternative it was claimed that the gifts in question were exempt under Section 5(1)(xii) of the Act.

However, subsequently on 29-7-1979 the assessee filed a 'revised and amended return' disclosing the total value of the gifts at nil. The GTO rejected the assessee's contention and subjected the entire gifts to taxation.

3. The material facts of the case are that at the relevant time the assessee-HUF consisted of its karta, Shri S.N. Malhotra, his wife Mrs.

Soni Malhotra, and his three daughters, Miss Kiran Malhotra, Miss Anjali Malhotra and Miss Renuka Malhotra. At the material time the last two daughters were minors. On 9-9-1971 there had taken place a partial partition as regards the property belonging to the bigger-HUF of Shri H.L. Malhotra. In that partition the smaller-HUF of Shri S.N. Malhotra, namely, the present assessee, got some shares and cash worth Rs. 3,79,600. On 1-4-1974 the capital account of the assessee-HUF showed a credit balance of Rs. 3,98,231. Here it would also be pertinent to point out that Shri S.N. Malhotra had one son named Navin Prakash who had been given away in adoption to Shri V.P. Malhotra, brother of Shri S.N. Malhotra. Though the date of adoption could not be ascertained from the records placed before us but in reply to a query from the Bench it was stated by Shri N.K. Poddar, the learned Counsel for the assessee, that the said adoption had taken place before 1971. It was further stated before us by Shri N.K. Poddar that after the partial partition effected on 9-9-1971 and in respect whereof an order had also been passed by the ITO under Section 171 of the Income-tax Act, 1961 ('the 1961 Act'), the property worth lakhs of rupees was left with the bigger-HUF of Shri H.L. Malhotra.

4. On 11-10-1974, the karta of the assessee-HUF, namely, Shri S.N.Malhotra, made over a sum of Rs. 1 lakh to each of his three daughters by means of a declaration, a copy whereof appears at pages 1 and 2 of the paper book filed by the assessee. The sum of Rs. 3 lakhs was set apart by the karta of the assessee-HUF on behalf of the joint family for the education of his three daughters. The sum in question was made over to the girls through three separate cheques drawn on the Bank of Tokyo Ltd., Bombay. While Miss Kiran Malhotra herself received the cheque, the cheques for the two minor daughters were received on their behalf by Shri S.N. Malhotra in his capacity as the father and natural guardian of the minor daughters. On the basis of these facts, the GTO treated the amounts paid to the three daughters as a gift and, accordingly, brought them to tax.

5. The matter was carried in appeal before the Commissioner (Appeals).

The first contention raised on behalf of the assessee was that the gift in question was not for pious purposes nor was the quantum of gifts reasonable having regard to the total value of the assets of the HUF.The status of the assessee being HUF, the karta was incompetent in law to make the gifts and, therefore, the gifts were invalid. The second contention raised before the lower appellate authority was that the transaction in question must be regarded as a family arrangement, falling outside the pale of the Act. Another contention put forth on behalf of the assessee was that the karta was obliged to educate the children and, therefore, the transaction in question could not be regarded as gifts. Finally, it was contended on behalf of the assessee that even assuming that the transaction amounted to gift, the gift in question was exempt under Section 5(1)(xii). It was pointed out in this connection that the GTO had not raised the question of mala fide.

6. The Commissioner (Appeals) rejected all the contentions raised on behalf of the assessee and summarised his findings in the following manner: (i) Shri S.N. Malhotra, as the sole surviving coparcener has the absolute right to dispose of the joint family properties as if they were his separate properties. Hence, the transaction in question cannot be regarded as being void ab initio.

(ii) Lacking as it does the essential indicia of a family arrangement properly so called, the transaction cannot be treated as a family arrangement.

(iii) Involving as it does the setting apart and transfer of a fairly substantial portion of the joint family properties, the transaction cannot be regarded as a mere incident in the discharge of Shri S.N. Malhotra's obligation to educate the girls.

(iv) The sum having been transferred by Shri S.L. Malhotra in his capacity as the karta of the family and on behalf of the family, the exemption under Section 5(1)(xii) is not available to the appellant.

(v) On the facts and in the circumstances of the case, the transaction in question is a gift pure and simple, and as such exigible to gift-tax.

7. The assessee has now come up in further appeal before the Tribunal.

Shri N.K. Poddar, the learned Counsel for the assessee, has contended that even assuming that the transaction whereunder a sum of Rs. 3 lakhs was set apart for the education of three daughters of the karta of the assessee-HUF amounted to a gift, it was void ab initio and not merely voidable and, therefore, there would be no gift within the meaning of the Act. Elaborating his argument Shri N.K. Poddar submitted that a HUF may consist of a single coparcener and that since the money set apart for the education of the three daughters formed part of the ancestral property belonging to the HUF, Shri S.N. Malhotra in his capacity as the father of the daughters or the karta of the HUF or as a sole surviving coparcener had no legal right to give away any part of the property belonging to the HUF and, therefore, the transaction would be void as a gift. In support of this contention reliance has been placed on the following decisions: CGT v. Tej Nath [1972] 86 ITR 96 (Punj. & Har.) (FB), CGT v. Bhupathiraju Venkata Narasimharaju [1975] 101 ITR 74 (AP), CGT v. R. Alagiriswamy [1977] 108 ITR 672 (Mad.) and S.V.Sundaresan v. ACED [1983] 144 ITR 916 (Mad.).

It was further argued by Shri N.K. Poddar that Navin Prakash, who had been given away in adoption to Shri V.P. Malhotra, had acquired an undivided coparcenary interest in the HUF property by birth and that by virtue of the proviso (b) to Section 12 of the Hindu Adoptions and Maintenance Act, 1956, that interest which had already vested in Navin Prakash before adoption shall continue to vest in him even after adoption. In support of this contention reliance was placed on the decision of the Andhra Pradesh High Court in Yarlagadda Nayudamma v.Government of Andhra Pradesh AIR 1981 AP 19. It was further submitted that since the undivided coparcenary interest in the HUF property which had vested in Navin Prakash remained intact even after his adoption and since the daughters of Shri S.N. Malhotra also had a right to claim maintenance out of the HUF property, Shri S.N. Malhotra as the sole surviving coparcener had no right to alienate by sale or gift or by any other mode of disposition any part of the HUF property. In this connection it was also submitted that since the sum of Rs. 3 lakhs given to the three daughters formed part of the ancestral property belonging to the smaller-HUF, for this reason also the sole surviving coparcener could not have made a valid gift of Rs. 3 lakhs in favour of three daughters, as karta of the HUF. It was also submitted in this connection that even though Shri S.N. Malhotra was the sole surviving coparcener at the relevant time, the character of the property did not change and it continued to be the ancestral property of the joint family and in support of this contention reliance has been placed on the decision of the Supreme Court in the case of Gowli Buddanna v. CIT [1966] 60 ITR 293 and N.V. Narendranath v. CWT [1969] 74 ITR 190. In this connection reliance has also been placed on the decision of the Supreme Court in the case of Smt. Sitabai v. Ramchandra AIR 8. The second limb of the argument advanced by Shri N.K. Poddar was that the setting apart of the sum of Rs. 3 lakhs by the karta of the HUF for the education of three daughters amounted to partition through family arrangement. It was also argued that it is open to a Hindu father to unilaterally make a partition and in support of this contention reliance has been placed on the decision in the case of Apoorva Shantilal Shah v. CIT [1983] 141 ITR 558 (SC). It was further submitted that the family property given to the three daughters, namely, the sum of Rs. 3 lakhs through a family settlement, does not amount to a gift and in support of this submission reliance has been placed on the decision of the Supreme Court in CGT v. N.S. Getti Chettiar [1971] 82 ITR 599. Reliance has also been placed on the decision of the Allahabad High Court in CGT v. Ram Kishan [1979] 120 ITR 589. The learned Counsel for the assessee has further cited the decisions in the case of Apoorva Shantilal Shah (supra) and in the case of M.V.S. Kathirvelu Nadar v. CAIT [1968] 68 ITR 786 (Mad.). Reliance has also been placed on the decisions in the cases of CGT v. Vallum Venkateswara Rao [1980] 123 ITR 54 (AP), CGT v. Bandlamudi Subbaiah [1980] 123 ITR 509 (AP) and CGT v. Pappathi Anni [1981] 127 ITR 655 (Mad.). It was, thus, urged that since the transaction amounted to a partial partition through a family settlement, it could not be treated as a gift and, hence, was not liable to gift-tax.

9. The third point pressed before us by Shri N.K. Poddar was that the sum of Rs. 3 lakhs was given to the three daughters for their education. Reference was made to the definition of the word 'maintenance' as given in Section 3(b) of the Hindu Adoptions and Maintenance Act to show that 'maintenance' includes education. It was further argued that since the amount of Rs. 3 lakhs was set apart for the maintenance of the three daughters by the karta of the HUF, he discharged his legal obligation to provide for the maintenance of the unmarried daughters out of the joint family property, and, therefore, the transaction did not amount to a gift within the meaning of the Act.

In support of this contention reliance has been placed on the following decisions: CGT v. M. Radhakrishna Gade Rao [1983] 143 ITR 260 (Mad.), Bandlamudi Suhbaiah's case (supra), CGT v. Basant Kumar Aditya Vikram Birla [1982] 137 ITR 72 (Cal.) and GTO v. N. Venkatarayulu [1984] 19 Taxman 65 (Hyd. - Trib.).

On the basis of the definition of the word 'maintenance' as given in the Hindu Adoptions and Maintenance Act it was further submitted that while considering the question of maintenance, the point whether the sum set apart for the education of the three daughters is reasonable is irrelevant and should not have been looked into by the lower appellate authority.

10. The last submission made before us in the alternative was that the assessee is entitled to exemption under Section 5(1)(xii) and in support of this contention reliance has been placed on the decisions in M.S.P. Rajah v. CGT [1982] 134 ITR 1 (Mad.), CGT v. Mary Antony [1972] 86 ITR 469 (Ker.), Dr. Xavier v. GTO [1982] 2 ITD 414 (Coch.) and CGT v. P.V. John [1977] 108 ITR 225 (Ker.).

11. Shri S.R. Das, the learned departmental representative, in his submissions first replied to the argument of the learned counsel for the assessee that the transaction evidenced by the declaration dated 11-10-1974 made by Shri S.N. Malhotra, karta of the assessee-HUF, effected a partial partition through a family settlement in favour of the three daughters by setting apart a sum of Rs. 3 lakhs for their education and that this transaction was neither a transfer nor a gift.

Besides, relying upon the order of the Commissioner (Appeals) in this regard, it was submitted by the learned departmental representative before us that the declaration in writing made by the karta of the HUF does not indicate that the sum of Rs. 3 lakhs was set apart for the education of the three daughters in consequence of a partition through a family settlement. It was also pointed out that the language of the declaration clearly indicated that the money set apart for the education of the three daughters was handed over through three cheques and was given directly to the donees. This, in the view of the learned departmental representative, amounted to a direct transfer from the donor to the donees of the sum of Rs. 3 lakhs and that the transaction amounted to a gift within the meaning of Section 2(xii). Though it was admitted that the joint family had an ancestral nucleus, it was asserted on behalf of the department that in order to effect a valid partition through a family settlement or family arrangement there must be some antecedent title in the person deriving benefit under such a transaction. It was further submitted that there was nothing in the declaration to show that any member of the joint family made any claim against the joint family property which included the sum of Rs. 3 lakhs which was the subject-matter of the transaction evidenced by the declaration. In support of the contention that the transaction evidenced by the declaration does not amount to a family settlement, reliance has been placed on the decision of the Mysore High Court in Nanjiah Setty v. CGT [1964] 54 ITR 425. It was also contended by the learned departmental representative that, in the instant case, the three daughters of the karta of the HUF had no antecedent title to or right in any of the properties belonging to the joint Hindu family and that they did not even have a claim for maintenance out of the properties of the joint Hindu family and that for this simple reason the transaction whereunder they were beneficiaries could not be regarded as a family settlement and that it was a case of gift and for this proposition also reliance has been placed on the aforesaid decision of the Supreme Court in the case of N.S. Getti Chettiar (supra). It was also pointed out in this connection that so far as the claim of the partial partition through family arrangement is concerned, no order has so far been passed by the ITO under Section 171 and this also indicated that in fact the transaction did not amount to a partial partition.

12. Replying to the contention raised on behalf of the assessee that even after passing of the Hindu Adoptions and Maintenance Act, the daughters have a claim for maintenance out of the properties belonging to the HUF, the learned departmental representative contended that the daughters have no such right and in this connection reference was made to article 304 in Mulla's Principles of Hindu Law, Fifteenth edn., and reliance was placed on a decision of the Madras High Court in Karuppana Gounder v. Chinna Nachammal AIR 1974 Mad. 329. It was further urged that under the Hindu Adoptions and Maintenance Act it is the personal obligation of a Hindu father to maintain his unmarried dependent daughters. It was also submitted that under Section 4 of the said Act it is clearly laid down that any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of the said Act shall cease to have effect with respect to any matter for which provision has been made in the said Act. It was, thus, submitted that in view of the provision contained in Section 4, which has an overriding effect, the old Hindu law under which an unmarried daughter was entitled to maintenance out of the joint family property stood abrogated with the result that after coming into force of the Hindu Adoptions and Maintenance Act, an unmarried daughter has no claim of maintenance out of the joint family property.

It was also submitted that the authorities cited on behalf of the assessee are distinguishable on facts.

13. The learned departmental representative next countered the arguments advanced on behalf of the assessee in a bid to show that the alleged gift was void ab initio by submitting that a sole surviving coparcener is entitled to dispose of the coparcenary property. He may sell or make a gift of it and that if a son is subsequently born to him or adopted by him, the alienation, whether it is by way of sale, mortgage or gift, will stand. In support of this view, the learned departmental representative drew strength from article 257 of Mulla's Hindu Law and the decision of the Supreme Court in Guramma Bhratar Chanbasappa Deshmukh v. Mallappa Chanbasappa AIR 1964 SC 510.

14. The learned departmental representative next submitted that the undivided coparcenary interest in the HUF properties acquired by Navin Prakash, son of Shri S.N. Malhotra, by birth cannot be treated as a property vested in him within the meaning of proviso (b) to Section 12.

Elaborating, it was submitted by the learned departmental representative that an undivided coparcenary interest, which is a fluctuating interest decreasing or increasing by birth or death in the family, is incapable of being vested in a coparcener. In support of this proposition reliance has been placed on the decision of the Supreme Court in Sawan Ram v. Mst. Kalawanti AIR 1967 SC 1761. Reliance has also been placed on the decision of the Privy Council in Attorney General of Ceylon v. AR. Arunachalam Chettiar [1958] 34 ITR 20 (ED) and on a decision of the Bombay High Court in Y.K. Nalavade v. Ananda G.Chavan AIR 1981 Bom. 109. On the strength of these authorities it was further submitted that Navin Prakash did not acquire any vested right in the HUF properties and that it was by partition of the properties, of the bigger-HUF before adoption that the adoptee could have acquired a vested interest in the property allotted to him. As this has not been done, in the opinion of the learned departmental representative, the adoptee ceased to have any interest or right in the HUF properties after he had been given in adoption prior to the year 1971. Reference was also made to the provisions of Sections 6 and 30 of the Hindu Succession Act, 1956, in a bid to show that the undivided coparcenary interest cannot be treated as a property vested in a coparcener. The learned departmental representative, thus, doubted the correctness of the decision of the Andhra Pradesh High Court in the case of Yarlagadda Nayudamma (supra) and submitted that it should not be followed. On the strength of the decision of the Tribunal, Delhi Bench in WTO v. Sunil Lamba [1982] 1 ITD 916, it was further submitted that the Tribunal is not bound to follow the aforesaid decision of the Andhra Pradesh High Court.

15. The learned departmental representative then submitted that even if the adoptee had any interest even after he had been given in adoption, that was only in the properties belonging to the bigger-HUF at the time of adoption and that he had absolutely no right or interest in the properties belonging to the smaller-HUF of which he was no longer a member or a coparcener after his adoption. It was next contended that even if it is assumed for the sake of argument that the adoptee retained interest in the properties belonging to the smaller-HUF after his adoption, vis-a-vis, those properties his status would be that of a tenant-in-common and not as a joint tenant and that in such a situation the gift would not be void to the extent of the interest so held by the adoptee but it would be avoidable at his instance. In this connection it was also pointed out that the adopted son or his guardian has not challenged the validity of the transfer. It was also submitted that all the authorities cited on behalf of the assessee to show that the gift was void are distinguishable on facts as none of those authorities dealt with a case of a sole surviving coparcener.

16. The learned departmental representative has also contended that there is no dispute that the transfer in question was voluntary. It was then submitted that as the karta was under no legal obligation to maintain his unmarried daughters out of joint family properties, the transfer of Rs. 3 lakhs in favour of the daughters was a voluntary transfer without consideration in money or money's worth and, hence, it amounted to a gift within the meaning of Section 2(xii). It was also submitted that since nothing passed from the donees to the donor and the donor in his capacity as karta of the HUF was under no legal obligation to maintain his daughters out of the HUF properties, there was no consideration for the transfer of the sum of Rs. 3 lakhs to the donees and that, therefore, it was a clear case of gift. Reliance has been placed in this connection on the decision of the Bombay High Court in Shardaben Jayantilal Mulji v. CWT [1977] 106 ITR 667. In the alternative it was contended that it would be a case of deemed gift either under Clause (a) or Clause (b) of Section 4(1) of the Wealth-tax Act, 1957 ('the 1957 Act'), as the expenses required to be incurred on the education of the three daughters would be much less than the amount of money transferred to them.

17. Refuting the contention that in case the transaction is held to be a gift the assessee is entitled to exemption under Section 5(1)(xii), it was submitted by the learned departmental representative that the exemption under Section 5(1)(xii) is available only in respect of gifts which are proved to the satisfaction of the GTO as being reasonable having regard to the circumstances of the case and that for this reason the benefit of this provision is not available to the assessee. It was also submitted that while considering the claim that the amount of Rs. 3 lakhs was set apart for the education of the three daughters, the reasonableness of the amount should also be kept in view and that for this purpose the provision contained in Section 23(2) of the Hindu Adoptions and Maintenance Act should also be kept in mind. It was also submitted that since the gift was made by the karta on behalf of the HUF, the claim for exemption under Section 5(1)(xii) is untenable. In this connection reliance has been placed on the decisions in the cases of M.S.P. Rajah (supra) and CGT v. Harbhajan Singh & Sons [1979] 119 ITR 542 (Punj. & Har.).

18. In reply, Shri N.K. Poddar submitted that in order to effect partition through family settlement it is not necessary that the claimant should have an antecedent title and that what is necessary is that there must be a relationship between the parties and there should be a possible claim to the property or a claim or even a semblance of a claim on some other ground as say affection and in respect of this contention reliance has been placed on the decisions of the Supreme Court in Ram Charan Das v. Girja Nandini Devi AIR 1966 SC 323 and the Gauhati High Court in Ziauddin Ahmed v. CGT [1976] 102 ITR 253. It was reiterated on behalf of the assessee that even after enactment of the Hindu Adoptions and Maintenance Act, an unmarried daughter has a right to be maintained out of the HUF properties and that the controversy has been set at rest by the decision of the Calcutta High Court in Basant Kumar Aditya Vikram Birla's case (supra). In this connection reliance has also been placed on the decision of the Madras High Court in M.Radhakrishna Gade Rao's case (supra). It was then submitted that no order under Section 171 in respect of the partial partition effected through family arrangement was required to be obtained for the simple reason that the purpose is already achieved as the property forming subject-matter of family settlement has already been excluded from the HUF property. It was next contended that in view of the decision of the Bombay High Court in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589, the decision of the Andhra Pradesh High Court in the case of Yarlagadda Nayudamma (supra) is binding on the Tribunal in the absence of any contrary decision by any other High Court on the point. It was contended that the undivided coparcenary interest acquired by birth by the adoptee remained vested in him even after he had been given in adoption and ceased to be a member of his natural family. It was urged that the authorities cited on the point on behalf of the department do not apply to the facts of the case. In this connection it was also pointed out that no property has so far been given to the adopted son.

It was also submitted that since there was a legal obligation to maintain the three daughters out of the HUF property, the transaction in question cannot be said to be without consideration and that for this reason also, it could not be a case of gift within the meaning of Section 2(xii) of the 1957 Act. It was further argued that there was no substance in the contention that it is a case of deemed gift under Clause (a) or Clause (b) of Section 4(1) of the 1957 Act. It was further submitted that while considering the question whether it is a case of gift or not, the question of reasonableness of the amount gifted is irrelevant. It was further submitted that Section 23(1) of the Hindu Adoptions & Maintenance Act has no relevance as it applies only when a claim for maintenance is made in a Court of Law and the Court is required to adjudicate in respect of that claim and quantify the amount of maintenance. Refuting the contention that the amount set apart for the education of the three daughters is unreasonable, it was submitted that after setting aside the sum of Rs. 3 lakhs for the education of the three daughters, Rs. 8,11,342 were left with the assessee-HUF and that the bigger-HUF also has properties worth lakhs of rupees and, therefore, it could not successfully be argued that the amount set apart for the education of the three daughters was unreasonable having regard to the facts and circumstances of the case.

19. About the claim for exemption under Section 5(1)(xii), it was submitted on behalf of the assessee that as the gift was made by the sole surviving coparcener, exemption under Section 5(1)(xii) was available to the assessee.

20. We have given our careful consideration to the rival submissions as also the facts on record. We have also perused the paper book filed by the assessee as well as various authorities cited on behalf of the parties. We propose to take up for consideration the points arising in this case in the same order in which they have been argued before us on behalf of the assessee.

21. The first controversy which requires consideration is whether the alleged gift of Rs. 3 lakhs in favour of the three daughters of the karta of the assessee-HUF is void ab initio as contended before us by the learned Counsel for the assessee. At this stage it would be appropriate to recapitulate few relevant facts which have already been set out above even at the risk of repetition. At the material time when the alleged gift was said to have been made the assessee-HUF consisted of its karta, namely, Shri S.N. Malhotra, as the sole surviving coparcener, his wife and three daughters out of whom two were minors.

Before the partial partition which had taken place in the bigger-HUF of Shri H.L. Malhotra in the year 1971, Navin Prakash, the only son of Shri S.N. Malhotra, had already been given in adoption to Shri V.P.Malhotra, brother of Shri S N. Malhotra. There can be no dispute about the proposition that under the Hindu system of law a joint family may consist of a single male member and that a joint family property does not cease to belong to the joint family merely because the family is represented by a single coparcener. It is, therefore, unnecessary for us to discuss the authorities cited before us in support of this proposition. The learned Counsel for the assessee cited various authorities as pointed out above in support of the contention that a gift made by a coparcener in respect of the HUF property is void. All those cases are, however, clearly distinguishable as none of them was the case involving a sole surviving coparcener. We, therefore, do not propose to discuss all those authorities here.

22. True, according to the Mitakshara law, no person can dispose of his undivided interest in the coparcenary property by gift and that such a transaction would be void. He may, however, make a gift of his interest with the consent of the other coparceners--article 258 in Mulla's Principles of Hindu Law. However, a person who for the time being is the sole surviving coparcener is entitled to dispose of the coparcenary property as if it was his separate property. He may sell or mortgage the property without legal necessity or he may make a gift. If a son is subsequently born to him or adopted by him, the alienation, whether it is by way of sale, mortgage or gift, will nevertheless stand, for a son cannot object to alienations made by his father before he was born or begotten--article 257 in Mulla's Principles of Hindu Law.

23. In the case of Guramma Bhratar Chanbasappa Deshmukh (supra), their Lordships of the Supreme Court held thus: ...The sole surviving member of a coparcenary has an absolute power to alienate the family property, as at the time of alienation there is no other member who has joint interest in the family. If another member was in existence or in the womb of his mother at the time of the alienation, the power of the major son was circumscribed as aforesaid and his alienation would be voidable at the instance of the existing member or the member who was in the womb but was subsequently born, as the case may be, unless it was made for purposes binding on the members of the family or the existing member consented to it or the subsequently born member ratified it after he attained majority....

The ratio laid down in the aforesaid case by the Supreme Court does apply to the facts of the present case for the simple reason that here also we are concerned with the case where the gift was said to have been made by the sole surviving coparcener. We are not impressed by the argument advanced on behalf of the assessee that the ratio laid down by the Supreme Court in the aforesaid case will not apply to a gift made by a sole surviving coparcener in respect of ancestral property. An ancestral property belonging to a joint Hindu family is also a family property in respect of which the sole surviving coparcener has an absolute right of disposition including alienation by way of sale or gift.

24. The contention raised on behalf of the assessee that Navin Prakash, son of the karta who had been given in adoption prior to the year 1971, retained his undivided coparcenary interest in the property even after adoption may now be examined. Section 12, inter alia, lays down that an adopted child shall be deemed to be the child of his/her adoptive father or mother for all purposes with effect from the date of the adoption and from that date all his ties in the family of his/her birth shall be deemed to be severed and replaced by those created by the adoption in the adoptive family. Proviso (b) to Section 12 lays down the rule that any property that might have vested in the adoptee before the adoption, continues to vest in the adoptee, subject, of course, to any obligations attaching to the ownership of such property including the obligation of the adoptee to maintain relatives in the family of his/her birth, so the adopted person is not, by the fact of adoption, divested of any property already vested in him. Now, in the present case, when Navin Prakash had been given in adoption prior to the partial partition which took place in the year 1971, he was a coparcener in the bigger HUF of Shri H.L. Malhotra. By birth he acquired an undivided coparcenary interest in the properties belonging to the bigger HUF as by that time no partition had taken place in the family. About the character and nature of an undivided coparcenary interest, there cannot be any dispute between the parties. The essence of a coparcenary under the Mitakshara law is unity of ownership. The ownership of the coparcenary property is in the whole body of coparceners. No member of an undivided family governed by the Mitakshara law can predicate of the joint and undivided property, that he has a definite share in the property. His interest is a fluctuating interest capable of being increased by deaths in the family and liable to be diminished by births in the family. As has been mentioned in article 216 in Mulla's Principles of Hindu Law the most appropriate term to describe the interest of a coparcener in coparcenary property is 'undivided coparcenary interest'. The question which crops up for consideration at this stage is, if the undivided coparcenary interest acquired by the adoptee by birth remained intact or it ceased to exist after he had been given in adoption. The learned Counsel for the assessee has submitted before us that by reason of proviso (b) to Section 12, the undivided coparcenary interest of the adoptee remained intact and he was not divested of that interest despite the fact that his ties with the natural family got severed on adoption and he became a member of the family of his adoptive father. This contention is fully supported by the decision of the Andhra Pradesh High Court in the case of Yarlagadda Nayudamma (supra). It has been held in this case by their Lordships that notwithstanding the adoption, a person in Mitakshara family has got a vested right even in the undivided property of his natural family which on adoption he continues to have a right over it.

So this authority supports the proposition that if an adoptee held undivided coparcenary interest in the natural family, he would continue to hold that interest even after adoption. No authority of any other High Court including the Calcutta High Court has been cited before us laying down a contrary view. Also no Supreme Court decision on the point has been brought to our notice. As the decision of the Andhra Pradesh High Court in the aforesaid case is directly on the point and as there is no other decision on the point by any other High Court, we feel bound by that decision. It has been held by the Bombay High Court in Smt. Godavaridevi Saraf's case (supra) that an authority like the Tribunal, acting anywhere in the country, has to respect the law laid down by the High Court, though of a different State so long as there is no contrary decision of any other High Court on that question. This general proposition laid down by the Bombay High Court is applicable irrespective of the fact whether the decision of a particular High Court is in respect of the constitutional vires of a certain provision contained in a taxing statute or it covers an aspect of interpretation of the provisions of the 1961 Act or some other statute. The Tribunal in the case of Sunil Lamba (supra) no doubt made an observation to the effect that the ratio in Smt. Godavaridevi Saraf's case (supra) was laid down in the peculiar context of the constitutional vires of certain provision, i.e., Section 140A(3) of the 1961 Act and not on the aspect of the interpretation as such of provisions of the 1961 Act.

This decision of the Tribunal, in our opinion, cannot be accepted as an authority for the proposition that the Tribunal is not bound to follow the decision of a High Court even if it applies to the case which the Tribunal is called upon to decide. Following the decision of the Bombay High Court in the case of Smt. Godavaridevi Saraf (supra), we are of the opinion that the ratio laid down by the Andhra Pradesh High Court in the case of Yarlagadda Nayudamma (supra) has to be applied to the facts of the instant case, with the result that it must be held that even after his adoption, Navin Prakash was not divested of his undivided coparcenary interest acquired by him by birth. In this view of the matter, we do not propose to go into the merit of the submissions made by the learned departmental representative challenging the correctness of the decision of the Andhra Pradesh High Court in the aforesaid case and for the same reason we consider it unnecessary to discuss the authorities cited by the learned departmental representative while expressing doubt about the correctness of the aforesaid decision.

25. As has already been stated above, a partial partition had taken place in the bigger HUF of Shri H.L. Malhotra on 9-9-1971. In respect of that partition the ITO passed an order under Section 171, a photostat copy whereof appears at pages 11 and 12 of the paper book. It was through that partition that the smaller-HUF of Shri S.N. Malhotra, i.e., the present assessee, received shares and cash worth Rs. 3,79,600. It has neither been asserted nor shown by the assessee that before the partial partition which took place on 9-9-1971, the assessee held any ancestral or joint family property. Here it may also be recalled that during the course of argument, it was stated by Shri N.K.Poddar that after the partial partition effected in the year 1977, the bigger-HUF was left with properties worth lakhs of rupees. So when Navin Prakash was given in adoption before 1971, he had an undivided coparcenery interest in the properties held by the bigger HUF of Shri H.L. Malhotra. At the time when he was given in adoption the smaller-HUF of Shri S.N. Malhotra, namely, the assessee had no coparcenary property of its own with the result that the adoptee could not have any undivided coparcenary interest in the family property of the smaller-HUF for the simple reason that neither at the time of the birth of the adoptee nor at the time of his adoption did the smaller-HUF had any property. Whatever interest the adoptee had was in respect of the properties belonging to the bigger HUF. Here it would be worthwhile to point out that the existence of joint estate is not an essential requisite to constitute a joint family and a family which does not own any property may nevertheless be joint. So even if the smaller-HUF of which Shri S.N. Malhotra is the karta came into existence when he married, as contended by Shri N.K. Poddar, the fact remains that it did not have any ancestral or joint family property until there was a partial partition in the bigger HUF on 9-9-1971. When the smaller HUF did not have any family property until 9-9-1971, how can it be said that the undivided coparcenary interest acquired by the adoptee by birth also covered the property which did not belong to the assessee even at the time of adoption. It was only by virtue of the partial partition effected in the year 1971 that the property, out of which the sum of Rs. 3 lakhs was set apart for the education of the three daughters of the karta of the assessee-HUF, came into the hands of the smaller HUF as joint family or ancestral property. We are, therefore, of the opinion that Navin Prakash could not have any undivided coparcenary interest in the property allotted to the smaller-HUF in the said partial partition. In this view of the matter, we hold that as a sole surviving coparcener, Shri S.N. Malhotra had an absolute right to alienate the property belonging to the smaller HUF by sale or gift. This right is not curtailed, abridged or taken away simply because some of the members of the smaller HUF, namely, the three daughters of the karta, may have a claim for maintenance out of the properties belonging to the HUF. So the contention raised on behalf of the assessee that even if it is assumed that the declaration executed by the karta amounted to a gift made in favour of his daughters, the gift would be void, must be repelled.

26. According to the assessee, setting apart by Shri S.N. Malhotra of a sum of Rs. 3 lakhs for his three daughters for their education amounts to a partition of the family property through a family arrangement. The declaration dated 11-10-1974 was executed by Shri S.N. Malhotra in his capacity as karta of the undivided Hindu family declaring that out of the assets owned by the joint family a sum of Rs. 3 lakhs has been set apart on 10-10-1974 on behalf of the joint family for the education of his three daughters and in pursuance of the said arrangement Rs. 1 lakh was given to each of the three daughters through separate cheques. The contention of the assessee that it was a case of family arrangement was rejected by the Commissioner (Appeals) mainly on the ground that the declaration in question was made unilaterally by Shri S.N. Malhotra and that there was nothing to indicate that the other members of the family particularly his wife, Smt. Soni Malhotra, was a party to the declaration. It was further observed by the Commissioner (Appeals) that even as regards the three daughters the position is that they are only the beneficiaries under the declaration and cannot, therefore, be called parties to an agreement which is the essence of a family arrangement. In Apoorva Shantilal Shah's case (supra) it has been held by their Lordships of the Supreme Court that the father in exercise of his superior right or of his right as patria potestas is entitled to bring about a complete disruption of a joint family and to effect a complete partition of joint family properties of a Hindu joint family consisting of himself and his minor sons even against the wishes of the minor sons. This right which a father enjoys is always expected to be exercised in the best interest of the members of the family. It was further held that there is no reason why the father, who can bring about a complete partition of a joint family properties between himself and his minor sons, will not be entitled to effect a partial partition of joint family properties between himself and his minor sons. Another proposition laid down in this case is that a partial partition of any joint family property by the father between himself and his sons does not become invalid on the ground that there has been no equal distribution amongst the co-sharers. So this authority supports the view canvassed before us on behalf of the assessee that Shri S.N.Malhotra in his capacity as the father of the three daughters and also as karta and the sole surviving coparcener was competent to unilaterally effect partial partition through family arrangement.

27. The decision of the Punjab & Haryana High Court in CIT v. Narain Dass Wadhwa [1980] 123 ITR 281 also supports the view that a partition through family arrangement can be made by a sole surviving coparcener.

In that case an HUF consisted of only one male coparcener, his mother and two sisters. The HUF was a partner in a firm. The family had invested Rs. 60,000 in the firm. The sole surviving coparcener effected a partition dividing the said amount amongst the members of the family.

An application under Section 171 was filed requesting the ITO to record a finding as to partial partition in the family. The ITO rejected the claim on the ground that the sole surviving coparcener had no right to effect the partition. The AAC, however, accepted the claim and his order was upheld by the Tribunal on the ground that the sole surviving coparcener could validly effect such a partial partition and alternatively on the ground that the division was a valid family arrangement. It was held by the High Court that the coparcener could not be compelled to remain joint with his mother and his sisters and there was no such legal obligation on his part to keep the joint family property intact and that he was within his right to divide the joint family funds amongst the members of the family. It was also pointed out in this case by their Lordships that under the Hindu law where the minor coparcener has limited right of partition, the adult coparcener can put an end to a joint status by his conduct and declaration where the family consists of only an adult and a minor coparcener. It was further held that the law does not compel a karta, who happens to be the only male coparcener of the family, to remain joint and continue to hold property jointly with the other members of the family. When the sole male coparcener has full right to alienate the property, it does not stand to reason that he cannot divide the property amongst the members of the family for the purpose of maintaining peace and harmony in the family.

28. In Ram Kishan's case (supra) the karta of an HUF executed six different documents called deeds of gift in favour of each of his five sons and the widow of a predeceased son and as a result a major part of the agricultural land belonging to the family was apportioned amongst them. It was held by the High Court that the transaction was one of family settlement and that the transfer could not. be treated as deeds of gift. In this case also the transaction which was held to be a family arrangement was effected only by the karta of the HUF and not by the coparceners and so this authority also supports the view canvassed before us that the karta of an HUF can unilaterally effect a partition through family arrangement. So the ground pressed into service by the Commissioner (Appeals) while rejecting the contention that the declaration executed by the sole surviving coparcener is a family arrangement is clearly untenable.

29. The parties in this case have joined issue on the question whether after coming into force of the Hindu Adoptions and Maintenance Act, an unmarried daughter has a right to claim maintenance out of the family properties belonging to the HUF of which she is a member. As has already been pointed out above, according to the learned departmental representative, after the enforcement of the aforesaid Act daughter's right to claim maintenance out of the joint family property was lost in view of Section 4 of the said Act and for this proposition reliance has been placed on the decision of the Madras High Court in the case of Karuppana Gounder (supra). On behalf of the assessee it has been contended that the right of a daughter for maintenance out of the joint family property remained intact even after coming into force of the Hindu Adoptions and Maintenance Act. Under Section 20 of the said Act a Hindu is bound to maintain his/her legitimate or illegitimate children.

This obligation is personal and legal and arises from the existence of the relationship between the parties. Section 4, inter alia, lays down that any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of that Act shall cease to have effect with respect to any matter for which provision is made in this regard and further, that any other law in force immediately before the commencement of that Act shall cease to apply to Hindus insofar as it is inconsistent with any of the provisions contained in that Act. Now under the Hindu law a daughter has a right to claim maintenance out of the joint family property. The Hindu Adoptions and Maintenance Act gives statutory form to the legal obligation of a Hindu father in his personal capacity to maintain his minor children. So the scope of Section 20 is limited to the personal and legal obligation of a Hindu father to maintain his legitimate or illegitimate children, there is nothing in this section or in any other provision contained in that Act which relates to maintenance of unmarried daughters who are members of an HUF out of the family properties. As the provision of Section 20 relates only to the personal and legal obligation of a Hindu father to maintain, inter alia, his unmarried minor daughters, this provision cannot have the effect of abrogating the text of Hindu law provided for maintenance of an unmarried daughter out of the joint family properties. Also the Hindu law on the subject of maintenance of an unmarried daughter out of the joint family properties is in no way inconsistent with the provisions of Section 20. It is open to the daughter of a Hindu father to claim maintenance from him under Section 20 and at the same time she retains her right available to her under the Hindu law to claim maintenance out of the joint family properties. The two rights, one flowing from Section 20 and the other out of the text of Hindu law, are neither conflicting nor inconsistent with each other. It is in addition to maintenance out of the joint family properties that a Hindu daughter is also entitled to be maintained by her father in his personal capacity.

We are, therefore, clearly of the view that in spite of the coming into force of the Hindu Adoptions and Maintenance Act, an unmarried Hindu daughter has a right to claim maintenance out of the joint family properties.

30. In Karuppana Gounder's case (supra), cited on behalf of the department, one Kandasami Gounder, who died on 26-9-1964 was karta of a Hindu joint family. He left behind his widow and five daughters apart from his son Karuppana. Under Section 6 of the Hindu Succession Act the interest of Kandasami in the joint family properties devolved on his widow, son and daughters. It was held by their Lordships of the Madras High Court that the maintenance is a matter for which provision is made in the Hindu Adoptions and Maintenance Act, and, therefore, anyone claiming maintenance which takes in the marriage expenses of an unmarried daughter would have to work, his/her rights only under the provisions of the said Act and the text of the Hindu law cannot be invoked at all. This authority no doubt supports the view that after enforcement of the said Act, an unmarried daughter cannot claim maintenance under the Hindu law.

31. In a latter decision of the Madras High Court in M. Radhakrishna Gade Rao's case (supra), cited on behalf of the assessee, it has been held that under the Hindu law it is not only customary but also obligatory for joint family members to spend family funds for the marriage of the unmarried daughters. The right is not dependent merely on the legal or moral obligation of the father or karta of the family, as the case may be, but rather on the position of the daughters themselves as members of the family unit. In the event of a partition of the family properties it is a legal requirement to set apart a reasonable portion of the joint family property as provision for meeting the expenses of the marriage of the unmarried daughter. It was further held that this principle of Hindu law will have to be applied to the settlement of properties for marriage expenses under the Act as well. It is noteworthy that in that case the assessee, a Hindu, obtained ancestral properties in a family partition and in January 1970 he settled lands which formed part of the ancestral properties obtained by him on partition in favour of his eldest daughter who had come of age but was yet to be married. The GTO considered that this settlement by the assessee was chargeable under the Act, as a taxable gift. He treated the gift as having been effected by the assessee in his capacity as a karta of a HUF. The assessment was, accordingly, made on the HUF. This case, thus, related to the year 1970 after the Hindu Adoptions and Maintenance Act had already come into force. True, the provisions of the said Act were not considered by their Lordships in that case but the fact remains that in view of the general principles of Hindu law it was held that the settlement of this kind cannot be brought within the mischief of the Act. Another decision which has a bearing on the controversy under consideration is of the Calcutta High Court in Basant Kumar Aditya Vikram Birla's case (supra). In that case the assessee was a HUF and the matter related to the gift-tax assessment for the assessment year 1970-71. The gift made by the assessee-HUF during the previous year included the following amounts given to Smt. Jayashree Mehta, daughter of Shri B.K. Birla, karta of the assessee-family, at the time of her marriage:Jewellery worth 47,000Cash 11,000Fridge 9,474 This amount was claimed as exempt on the ground that these were marriage expenses, the claim was disallowed by the GTO. One of the questions which arose for consideration before their Lordships was that can it be said to be a case of gift in terms of Section 2(xii). It was held that a daughter had a right so long as the family remained joint and had properties to have her marriage expenses met out of the family fund. The karta was meeting the obligation of the family to the daughter and, therefore, there was no question of transferring any amount or making any gift in the strict sense of the term. The daughter had the right under the law to have her marriage expenses met. So this authority also supports the view that under the Hindu law, a HUF is under a legal as well as moral obligation to incur marriage expenses of an unmarried daughter. It must be borne in mind that in this case the gift was made during the previous year relating to the assessment year 1970-71 and even then it was held by the High Court in that case that the karta in making the gift was meeting the obligation of the family to the daughter, though the provisions of the Hindu Adoptions and Maintenance Act were not considered by their Lordships, yet the fact remains that even for the assessment year 1970-71, it was held that a HUF has a legal and moral obligation to incur expenses on the occasion of the marriage of an unmarried daughter and that a daughter has a right as long as family remained joint and have properties to have her marriage expenses met out of the family fund. We are bound by the decision of the Calcutta High Court in the said case and for this reason also we must held that in the instant case the three unmarried daughters of the karta of the assessee-HUF had a right to be maintained out of the family property.

32. The contention of the learned departmental representative is that to constitute a family settlement there must be some antecedent title in favour of the person or persons who are beneficiaries under the family settlement. It was pointed out by the learned departmental representative in the course of arguments that there is nothing in the declaration made by the karta that his three daughters made a claim for maintenance out of family property. Reliance was placed on the decision of the Mysore High Court in Nanjiah Setty's case (supra). In that case the applicant Nanjiah Setty, his son, Gangadhara Setty and the four sons 'through' the latter originally constituted a HUF. By an instrument dated 1-3-1956 the members of the family aforesaid declared their intention to remain divided in status from the joint family. A male child called Lakshmi Narayanan was subsequently bora to Gangadhara Setty on 21-10-1956. On 25-10-1957 a family arrangement was arrived at by which Nanjiah Setty transferred shares worth Rs. 1,46,500 to Lakshminarayanan, the grandson born after the date of partition. In the assessment for the assessment year 1958-59, the GTO considered the transfer of a property of the value of Rs. 1,46,500 by the assessee to Lakshminarayanan as gift. On admitted facts it was found that a share was given to the assessee at partition. That being so, minor Lakshminarayanan could have only claimed his share from the properties allowed to his father, brothers and sisters. It was thus held that no liability was cast on the assessee to make good the share due to Lakshminarayanan. The assessee had given a sum of Rs. 1,46,500 to the aforesaid minor in the form of shares and cash entirely from out of his share for which he (assessee) has not received any consideration. On these facts it was held that transfer of movable properties of the value of Rs. 1,46,500 to Lakshminarayanan under the family arrangement is a taxable gift. The facts of that case being entirely different, the decision given in that case has no application to the facts of the case in hand.

33. The case of Ram Charan Das (supra), cited on behalf of the assessee, lays down the proposition that in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other parties. It is not necessary that every party taking benefit under a family settlement must necessarily be shown to have under the law, a claim to a share in the property. All that is necessary is that the parties must be related to one another in some way and have a possible claim to the property or a claim or even a semblance of a claim on some other ground as say 'affection'. This ratio laid down by the Supreme Court was followed by the Gauhati High Court in Ziauddin Ahmed's case (supra).

34. Now, as has already been held above, the three daughters of the karta of the assessee-HUF had a right to be maintained from out of the family properties. It cannot be disputed that maintenance of an unmarried daughter includes her education also. In this connection it may be pointed out that even according to the definition of the word 'maintenance' as given in Section 3(b), maintenance, inter alia, includes provision for education.

35. Since the sum of Rs. 3 lakhs was set apart by the karta under the declaration executed by him on 11-10-1974 for the education of his three daughters the settlement of the sum of Rs. 3 lakhs in favour of the unmarried daughters must be said to be in discharge of the legal obligation of the HUF to maintain the unmarried daughters. By setting apart the sum of Rs. 3 lakhs out of family property, the karta only made a provision for the education of his three unmarried daughters. As the unmarried daughters had a claim for maintenance including the provision for their education, the karta was within his legal right to set apart the aforesaid sum for their education and, therefore, the transaction evidenced by the declaration executed by the karta amounts to a partial partition through family settlement. The provision for education can hardly be regarded as a gift.

36. The case of Bandlamudi Subbaiah (supra) decided by the Andhra Pradesh High Court lays down the proposition that a Hindu joint family has an obligation to maintain and get an unmarried daughter married.

That right of the unmarried daughter to be maintained and to get married and the obligation of the family to do this may be inchoate, in the sense, that these rights and obligations do not attach to any specific property. It was further held that once under a partition deed or a family settlement or a gift or other instrument certain properties are set apart for the maintenance and marriage of the unmarried daughters, then the right of the unmarried daughters and the corresponding obligations of the family gain a coherent and concrete form. They immediately attach to the property thus allotted under the instrument. Since the property is given to the unmarried daughter in recognition of her right, in discharge of the obligation of the family, by no stretch of imagination it could be treated as a gift. This ratio laid down by the Andhra Pradesh High Court is fully applicable to the facts of the instant case. Here in recognition of the right of the unmarried daughters the sum of Rs. 3 lakhs was set apart for their maintenance (education). This resulted in discharge of the obligation of the family to make a provision for the education of the unmarried daughters. Such a transaction is undoubtedly a family settlement and cannot be regarded as a gift. This view also finds support from the decision of the Madras High Court in M. Radhakrishna Gade Rao's case (supra).

37. The decision of the Bombay High Court in Shardaben Jayantilal Mulji's case (supra), cited on behalf of the department, may now be considered. In that case the assessee created two trusts by entrusting certain shares to the trustees in respect of which the trustees executed two declarations of trust under which the trustees declared that they would hold the shares upon trust to utilise the net income therefrom for the maintenance of the settlor's minor daughters till each of them attained the age of 21 years and thereafter transferred the trust's estate to the said daughters. The question which was referred to the Bombay High Court in that case is as follows: Whether, on the facts and in the circumstances of the case, the sum of Rs. 53,549 and Rs. 53,225 or any part thereof, have been rightly included in the 'net wealth' of the applicant under Section 4(1)(a)(iii) of the Wealth-tax Act 38. It was held by their Lordships that there was nothing which the minor daughters had done in return for the creation of the said trust by the assessee nor had they suffered any detriment in return for the same. There was, therefore, no consideration leave alone adequate consideration moving from the minors in return for the creation of the two trusts by the assessee. It was further held that the trust was not for adequate consideration within the term of Section 4(1)(a)(iii) and the property which was the subject matter of the trust was liable to be included in the net wealth of the assessee. The facts of that case were quite different. That case arose under the 1957 Act and one of the contentions raised in that case on behalf of the assessee was that the consideration for the transfer of the shares by the assessee to the trustees was the obligation which the trustees undertook in return to carry out the objects of the trust. It was also contended that at any rate, in view of the provisions of Section 23(2)(d) of the Hindu Adoptions and Maintenance Act, the right of each of the minor daughters to claim maintenance from the settlor stood reduced to the extent of the benefit to which each of them was entitled under their respective trust deeds. The assessee in that case was an individual and not a HUF.So the facts of that case being entirely different, the ratio laid down therein cannot be applied to the facts of the case in hand. On the other hand, the decisions of the Andhra Pradesh High Court in Bandlamudi Subhaiah's case (supra), and of the Madras High Court in M, Radhakrishna Gade Rao's case (supra), which support the view canvassed on behalf of the assessee, fully apply to the facts of the present case.

39. For the foregoing reasons, we uphold the contention that the transaction effected through the declaration executed by the karta of the assessee-HUF is in fact a family settlement and that in that transaction no element of gift is involved.

40. The third point pressed before us on behalf of the assessee may now be considered. The word 'gift' is defined in Section 2(xii) as 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 transfer or conversion of any property referred to in Section 4 of the Act deemed to be a gift in that section. So in order to constitute a gift a transaction must amount to transfer and should be made voluntarily and without consideration in money or money's worth. In the instant case, it has already been held above that transaction is a family settlement whereunder the sum of Rs. 3 lakhs was set apart for the maintenance (education) of the three daughters of the karta of the asses-see-HUF. In a family settlement no transfer of property is involved. This view finds support from the decision of the Supreme Court in Ram Charan Das's case (supra). No doubt Shri N.K.Poddar did not dispute the fact that the transaction was voluntary. The fact, however, remains that the sum of Rs. 3 lakhs was set apart for the maintenance (education) of the three daughters and that provision for maintenance was made in discharge of the legal obligation. The transaction may be voluntary in the general sense of the term inasmuch as the declaration was executed by the karta of his own free will and volition. But a settlement made in discharge of a legal obligation cannot be said to have been made voluntarily in the proper sense of the term and cannot be considered to be a gift within the meaning of Section 2(xii) or a deemed gift under Section 4(1). The transaction cannot also be said to be without consideration in money or money's worth. There is, therefore, no escape from the conclusion that the transaction in question does not fall within the ambit of Section 2(xii) and cannot, therefore, be regarded as a gift. This view is fully supported by the decision of the Andhra Pradesh High Court in Bandlamudi Subbaiah's case (supra). In that case their Lordships of the Andhra Pradesh High Court considered provisions of Sections 2(xii) and 4. It was held that it cannot be said that when the joint family made a provision for the unmarried daughters, it has made the said provision voluntarily and without consideration in money or money's worth. It was further held that the provision made for the unmarried daughters towards their maintenance and marriage is not a gift within the meaning of Section 2(xii) nor could it be deemed to be a gift under any of the clauses of Section 4. In M. Radhakrishna Gade Rao's case (supra), their Lordships of the Madras High Court, while considering the definition of gift under Section 2(xii), held that a transfer made voluntarily and without consideration in money or money's worth can hardly fit in with the so-called gifts or settlements of ancestral or joint family property in favour of unmarried daughters in Hindu families. It was further held that a settlement in favour of an unmarried daughter of joint family property as a marriage provision can hardly be regarded as a gift since such a provision is compulsory under the Hindu law and by no means voluntary in the proper sense of the term. It was also noted that such a transaction cannot be regarded as one without consideration in money or money's worth since the settlement of the property discharges the obligation of the joint family's estate to meet the expenses of the marriage. We are, therefore, of the view that the transaction in question does not amount to a gift within the meaning of Section 2(xii) and also is not a deemed gift under Clause (a) or (b) of Section 4(1). The question of reasonableness of the amount set apart for the education of the three daughters is not germane to the determination of the question if it is a case of gift, once it is found that the transaction was neither voluntary in the proper sense of the term nor was made without consideration in money or money's worth.

41. The fourth point urged before us by the learned Counsel for the assessee is that in case the transaction is held to be a gift, the assessee is entitled to exemption under Section 5(1)(xii). As we have already held that it is not a case of gift, this point does not arise for our consideration.

42. Ground No. 9 taken up by the assessee in the grounds of appeal reads as under: That without prejudice to the above, the learned Commissioner (Appeals) erred in not adjudicating on ground No. 3 relating to misapplication of Section 6A of the Gift-tax Act, 1958, on the facts and in the circumstances of this case.

The above ground does not arise out of the order of the Commissioner (Appeals). The assessee has not placed before us a copy of the grounds of appeal filed before the Commissioner (Appeals). We are, therefore, unable to ascertain if the point covered under ground No. 9 was raised before the Commissioner (Appeals). As this ground does not arise out of the order of the Commissioner (Appeals), it is rejected.

43. In view of the discussion made above, the assessment is annulled.

The appeal stands allowed.


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