1. These are ten departmental appeals directed against the orders passed by the AAC in respect of the wealth-tax assessments of the assessee for the assessment years 1969-70 to 1978-79. The main grounds in these appeals are common. All these appeals have been heard together and they are disposed of by this common order.
2. In order to understand the issue involved in these appeals, we may take the appeal for the assessment year 1969-70 and then consider the appeals for later years. In this year there is only one ground of appeal and it reads as under : On the facts and in the circumstances of the case, the AAC, Range 'A', New Delhi was not justified in holding that wealth amounting to Rs. 2,10,640 should be excluded from the wealth of the assessee as the property had been validly transferred to the HUF in October 1978.
The assessee is an individual. While filing the return for the assessment year 1969-70, the assessee had explained that he had gifted certain shares belonging to him and certain deposits standing in various concerns, to the HUF consisting of himself, his wife and his son. The value of these shares and deposits was taken at Rs. 2,10,640 and in the original assessment made by the WTO, he had Included it in the wealth of the assessee. That assessment has been set aside by the AAC, who had directed that the assessee should be given an opportunity to substantiate his claim of the alleged gift of certain shares and fixed deposits and loans, vide his declaration dated 30-10-1968. The present assessment order for this year was passed as per directions of the AAC in his set aside order.
3. The assessee's claim of gift of the above shares, deposits and loans in favour of the HUF was based on an affidavit which reads as under: I, Kuldip Raj Narang, son of Dr. Dev Raj Narang, resident of 5-Cavalry Lines, Delhi-7, take oath and solemnly affirm as under : 1. That the shares of different companies and fixed deposits and loans more particularly described in the schedule I annexed hereto are my personal properties.
2. That out of the shares and 'fixed deposits and loans' mentioned in schedule II have today gifted away irrevocably the shares, 'fixed deposits and loans' more particularly described in schedule II annexed hereto to the HUF. This gift has been accepted by the HUF. 3. That for the next 10 (ten) years the dividends income from such shares and interest on such fixed deposits shall be given to me by HUF and I shall be at liberty to use such sums in any manner I like.
4. That I have no right, title or interest in the shares, fixed deposits and loans mentioned in schedule II annexed hereto except what has been mentioned in para 3 above.
I, the deponent named above, hereby verify that the contents of this affidavit are true to the best of my knowledge and belief.
This affidavit refers to the schedule of shares and deposits belonging to the assessee and schedule of shares and deposits and loans stated to have been gifted away to the HUF. On the basis of this affidavit the assessee had excluded these assets from his own return, as according to him, they belong to the HUF.4. The WTO referred to the reasons given by him in the assessment for the assessment year 1975-76 where the objections raised by the assessee on this issue had been considered. In the assessment order for the assessment year 1975-76 the WTO was of the view that these assets had not been transferred to the HUF and there was no evidence regarding the gift having been given by the assessee. In this connection, the WTO referred to the statements of the secretaries of Basti Sugar Mills Co.
Ltd., Jagatjit Sugar Mills Co. Ltd.., and Saraswati Insurance Co. Ltd., who had been examined while making the income-tax assessment for the year 1971-72. In that assessment order it was mentioned that there were certain contradictions between the affidavit of the assessee and the certificate given by the two companies, namely, Basti Sugar Mills Co.
Ltd. and Jagatjit Sugar Mills Co. Ltd. as the number of shares did not tally. At this stage it may be mentioned that the assets in the shape of shares and deposits which were stated to have been gifted to the HUF were as under :7. Vijoy Steel & General Mills Co. Ltd. 4,730-Ord.
(as per last year)8. Steel & General Mills Co. Ltd. 125-Ord.b. FIXED DEPOSITS AND LOANS General Mills Co. Ltd. 5,000b. Loan to Vijoy Steel & General Mills Co. Ltd. 20,000c. Loan to Mrs. Saloni Narang 38,950d. Loan to Shri Piyara Lal Sarin 2,000e. Loan to Shri Dipak Raj Narang 2,000f. Loan to Steel & General Mills Co. Ltd. 11,700.
This was stated to be schedule II attached with the affidavit but the ITO had held that the schedules were not the part of the affidavit as they were not affirmed in the same manner as the affidavit itself. The ITO had also referred that no action was taken either by the companies concerned or by the assessee to show that there had been an actual gift of these shares to the HUF. It was pointed out that the intimation regarding this gift was only given on telephone orally and there was nothing in the records of the companies concerned to indicate the transfer or the gift.
5. Besides holding that there was no valid transfer of these assets to the HUF, it was stated by the ITO that such a transfer could not be accepted as the assessee had reserved to himself the right to receive the dividends and interest from the HUF for a period of ten years from the date of transfer. He, therefore, found that the HUF at no point of time exercised the rights of ownership over these assets. It may be mentioned that in the original assessment made the WTO had also held that these proceedings, if any, were revocable transfers. The assessee had, however, relied on certain case laws urging that it was open to a member of an HUF to throw his property into family hotchpot and for this purpose it was contended. that the affidavit was sufficient evidence. Regarding reservation in respect of income and dividend it was contended on behalf of the assessee that there was no prohibition in law to make a conditional gift or a gift with reservation. The WTO referred to a finding given in the assessment year 1971-72 in the income-tax proceedings and held that the assets could not be taken to have been thrown into common hotchpot of the HUF. Following the above reasoning in the assessment year 1969-70 also the WTO included the value of those assets which were taken to have been transferred to the HUF by way of gift.
6. When the matter came before the AAC, it was pointed out by the assessee that there was no contradiction between the statements of the secretaries of the companies and the affidavit filed by the assessee.
It was also contended that as the assessee in his individual capacity continued to be entitled to the dividends and interest on the shares and deposits for the next ten years, it was not necessary to show any change in the shareholdings and the shares and deposits continued to be in the name of the assessee, though the beneficial ownership was passed on to the HUF. It was also pointed out that the HUF cannot be as such a registered shareholder of the shares and the shares can stand only in the name of an individual. It was also contended that as for the next ten years the income was to go to the assessee as an individual, there was no question of mixing up of the individual funds with the HUF's funds. According to the assessee, it was not necessary to give any intimation in writing to the companies for such a gift and only what was necessary was the intention of volition to transfer the shares. The assessee contended that there could be conditional gift and there was no invalidity in it. It should have been treated as a gift with a condition. The A AC held that a Hindu could impress the property with the character of an HUF and, therefore, the property should be taken to be thrown in the common hotchpot. For this the AAC considered the affidavit to be sufficient. It was also held by the AAC that there was no necessity of transferring the names of the shares and the dividends and the interest was to continue to be given to the assessee as in the past. According to the AAC, there was no prohibition or a conditional transfer and in view of this the shares could be taken as being properly transferred to the HUF and should be excluded from the assessment of the assessee. The AAC, however, included the value of the right to receive income in the next ten years as the assets in the hands of the assessee.
7. The departmental "representative submitted that the AAC has not appreciated the factual legal proposition correctly. He contended that the claim of the assessee was about the gift of these assets in the form of shares and deposits and it was only later on in the course of arguments that the assessee started showing that it should be taken as the throwing of these properties into the common hotchpot of the HUF.In respect of the claim of the gift the learned departmental representative submitted that firstly there was no gift as there was no material on the basis of which it could be held that there was an actual transfer of these shares and deposits to the HUF. For this he relied on the reasons given by the ITO in his order for the assessment year 1971-72 in the income-tax proceedings and in the assessment year 1975-76 in the wealth-tax proceedings. He also submitted that the schedules to the affidavit could not be considered as a part of the affidavit as they were not separately sworn as the assessee's affidavit.
8. An alternative argument of the departmental representative was that assuming that there was a gift or a transfer as claimed by the assessee, such a transfer would be hit by the provisions of Section 4(1)(a)(iv) of the Wealth-tax Act, 1957 ('the Act'). According to this provision, in computing the net wealth of an individual, there shall be included as belonging to that individual, the value of the assets which on the valuation date are held by a person or an AOP to whom such assets shall be transferred by the individual otherwise than under an irrevocable transfer. In this connection, he referred to the Explanation under Section 4 whereby in Clause (b) the expression 'irrevocable transfer" has been defined to include transfer of assets which by the terms of the instrument effecting it is not revocable for a period exceeding six years and under which the transferor derives no direct or indirect benefit. It is further provided that irrevocable transfer does not include a transfer of assets if such instrument in any way gives the transferor a right to resume power, directly or indirectly, over the whole or any part of the assets or income therefrom. It was contended by the learned departmental representative that assuming a transfer to be there it was not irrevocable as the transferor derived a direct benefit in the instrument itself by providing that for a period of ten years the dividend and interest income could be given to the assessee. He submitted that as far as the companies were concerned, the assessee continued to be the owner of these shares and deposits. The income was to continue to be given to the assessee for a period of ten years though the provision was that the income should be given by the HUF to the assessee. He, therefore, contended that it was clearly a irrevocable transfer and this aspect has not been appreciated by the AAC.9. The learned counsel for the assessee contended that in this case the affidavit was a clear evidence of the intention of the assessee to gift these shares and deposits to the HUF, and as the assessee was the karta of an HUF, he has accepted the gift in" his capacity as karta. He, therefore, submitted that the gift was clear and unequivocal as well as valid. It was also contended that schedule II was a part of the affidavit and it was not necessary to separately get the signature of the assessee or the Oath Commissioner on the schedule also. In respect of the transfer of shares, it was contended that there was no necessity in law to get any change made in the companies' records or the records of the parties where the deposits were made. For these ten years the dividend and income was continued to be given to the assessee and, therefore, there was no question of intimating to the company or the concerns that the income should be given to the HUF.10. Regarding the submission of the departmental representative that the transfer, if any, was revocable, it was submitted that the transfer of the shares and the deposits was subject to the condition that the income would be given to the assessee as an individual and it was subject to this condition that the gift had been made, and, therefore, the gift could not be considered to be revocable gift even if such income was to be given for a period of ten years. He relied on the observations made by the Supreme Court in the case of Goli Eswariah v.CGT  76 ITR 675. He submitted that after the affidavit the property belonged to the HUF as the intention of the assessee was made clear. It was, therefore, contended that the AAC was justified in excluding the value of these assets from the assessment of the assessee.
11. We have carefully considered the facts of the case and the rival arguments. There has been some confusion in some of the orders under consideration as well as in some of the grounds of appeal on the question whether by the affidavit of 30-10-1968 the assessee had gifted certain assets to the HUF or he had impressed those assets with the character of a HUF. There is certainly a shade of difference between two types of transactions. That there can be a gift by an individual to the HUF cannot be doubted. Whereas the act of impressing some individual assets with the character of a HUF is a unilateral act, the act of gift is not a unilateral act and under general law it involves a donor and a donee and also requires acceptance of the gift. It has been held that wherever a person throws a property into a common hotchpot there is no transfer involved. On the other hand, a gift is basically a transfer without consideration. It is necessary to determine the nature of the claim of the assessee and what according to him has actually happened. Only then the legal effects of that can be taken into consideration. We have reproduced the affidavit above and it clearly speaks of the assessee having gifted away the shares, the fixed deposits and loans to the HUF and it also speaks of this gift having been accepted by the HUF. This is the basic document on which the assessee has relied. The assessee's case also has been that the assets had been gifted away to the HUF. For impressing an individual property with the HUF character there should be an unequivocal declaration on the part of the individual. In this connection, it may be mentioned that Section 4(1 )(a) was inserted in order to bring under the wealth-tax 'net, the unilateral action of impressing an individual property with the HUF character. Later on it was also clarified that it applied to the properties gifted to the HUF. We are mentioning this to show that the law has made a distinction between the act of throwing a property into a common hotchpot and the act of gifting it away to the HUF. The assessee's letters have also claimed it to be a gift. Thus, on the basis of the documents and the intention as indicated in the letters, it is clear that the assessee had gifted the shares and the fixed deposits and the loans to the HUF. At least that was the assessee's intention when that affidavit was sworn in.
12. Having held that, according to the assessee, there was a gift and, therefore, a transfer of assets from the individual to the HUF, we proceed to consider the other aspects of the question. The objection raised by the departmental representative to the order of the AAC is two-fold. Firstly, it is said that there was no transfer of the assets at all. Secondly, it is said that even if there was a transfer it was revocable transfer as the affidavit by which this transfer was effected reserved the benefit for the transferor for a period of ten years. We may consider these two arguments one by one.
13. On the first question, it is an admitted position that all what has taken place is the swearing of this affidavit. According to the assessee, no further action was required for completing the gift. It was in this connection that the revenue authorities pointed out that the shares and deposits have not been transferred. The ITO had examined Shri Mohinder Pal Singh, who was the secretary of Basti Sugar Mills Co.
Ltd. on this question. In his statement he had stated that according to his understanding it was not necessary to transfer the shares in the books of the company in the name of the HUF. The secretary of the company had also stated that he had paid separate dividends in respect of the shares which were gifted to the HUF and the shares which were retained by the assessee. He, however, clarified that the dividends were paid on the directions of the assessee, who was a director of the company. He also said that there might have been irregularity in the action of the company. It was explained by the secretary that the shares continued in the individual name of Shri Kuldip Raj Narang and as far as the company was concerned it was never transferred in the name of the HUF. The ITO had also examined Shri Kasturi Lal, who was the secretary of the Saraswati Insurance Co. Ltd. He had stated that in the year 1968 there was no transfer or purchase of the shares and only an oral mention was made that some shares were to .be transferred to the HUF. However, when no formal request was made, the transfer could not be effected. He also said that this was only a talk on telephone and there was no formal request from the assessee. It was also stated that this position continued till the date of giving this statement and the shares continued in the name of the assessee in his individual capacity. Considering that in respect of the other shares also, the position was the same, the ITO had concluded that there was no transfer of the shares. Regarding the deposits or loans also, no document was produced and it was stated that it was not necessary.
14. For the purpose of transferring of a share from one person to another what is required is to give the scrip along with the transfer memo which may later on be registered. Even if the registration takes place later, the transfer can be effective from the date of the handing over of the transfer memo. In this case nothing of this sort has taken place. In fact throughout the WTO and the ITO have been contending that there has been no actual transfer. The assessee has been stating that nothing was necessary as the transferor was individual and the transferee was himself in his capacity as the karta of the HUF. There is not much discussion about the deposits or loans. On the above facts, we can only record that besides the affidavit no other material was brought on record by the assessee to show that there was a transfer of the assets to the HUF. The deposits and the loans were no actionable claims and could be transferred by an instrument in writing. The parties to whom these loans were given could have been informed about it. Nothing of this sort has taken place. In these circumstances, there appears to be no material to support the case of the assessee on the basic issue of the transfer.
15. We may, however, take into consideration the fact that the donor and the donee were closely connected and in fact the donee had accepted the gift in his capacity as karta. If we proceed on the basis of the contention of the assessee that there was a gift as per this affidavit, we find another impediment in the way of the assessee. Paragraph No. 3 of the affidavit clearly provided that for ten years the dividend income and interest on such fixed deposits shall be given to the individual by the HUF and the individual shall be at liberty to use such in any manner he likes. The important thing to note is that this income from dividend and interest was to be paid to the assessee by the HUF. This, according to us, brings the transaction of gift under the definition of revocable transfer as the conditions laid down for irrevocable transfer' have not been satisfied in this case. As already discussed above, the law requires that the instrument effecting the transfer should not contain any provision under which the transferor derives any direct or indirect benefit. Here it is clear that the transferor was deriving, a direct benefit and the whole of the income arising from the assets stated to have been transferred was reserved for the use of the transferor. On these facts, it has to be held that the provisions of Section 4(1)(a)(iv) were clearly applicable and the argument of the learned departmental representative on this point has to be accepted.
16. In this connection, we may refer to the argument advanced by the learned counsel for the assessee that conditional gifts or conditional transfers were not illegal. There is no question of illegality of such transfer, but to the effect of such transfers. For the purpose of this argument we are proceeding on the ground that there has been a transfer of these assets by the assessee individual to the HUF. The other argument was that the assets were gifted with the condition of payment of income and, thus, what was gifted was the value of the assets minus the value of the right to income. This also is an unacceptable contention. As already pointed out above, the affidavit clearly provides that the dividends and interest on these shares and fixed deposits will be given to the assessee by the HUF and it also provides that the transferor will have no right, title or interest in those shares, fixed deposits and loans except the deriving of this income from all the assets for transfer. Thus, the subject-matter of the transfer was the shares and the fixed deposits and the loans themselves. It is also clear that the assessee reserves for himself a direct benefit for a period of ten years. We have no hesitation in holding that the learned AAC has not appreciated this aspect of the matter and has erred in holding that the value of the assets was to be excluded from the assessment of the assessee.
17. The two aspects which have been considered above may appear to be contradictory but as the arguments have been advanced before us, we have dealt with both the aspects and we are of the view that the order of the AAC should be reversed and the order of the WTO should be restored on this point.
18. We may now come to the other years' appeals where this point continues to appear and in addition there are some other issues as well. As far as this issue which does not differ from year to year, we have to decide in favour of the revenue though the figures which appear in different years are different. We may also repeat that according to the claim of the assessee, the assets had not been thrown in the common hotchpot as suggested by the grounds of appeal but had been gifted to the HUF. ' The first ground in the assessment year 1970-71 is, therefore, decided in \ favour of the revenue. The second ground in this year relates to the allowance of liability of Rs. 10,000 on account of loan from one Shri Jage Ram. In respect of this point, it was pointed out that the matter was considered in the income-tax appeals relating to the assessment years 1971-72 to 1975-76 and it was held that the loan was genuine and the claim of interest was also allowed. In view of this finding of the Tribunal on this matter, we decline to interfere with the order of the AAC.19. This question also appears in several years and it is decided in the same manner for all the years concerned. We also hold that the assessee's claim regarding liability for interest has also been rightly accepted by the AAC.20. In the assessment year 1971-72 ground No. 2, which is a new ground, relates to the exclusion of the value of 25,000 shares of Hindustan Garments Ltd. The claim of the assessee was that these shares were purchased on behalf of certain agriculturists from whom the money had been received for this purpose. The assessee had not shown the value of these shares and had also not claimed the liability in respect of the money received from the agriculturists. The ITO had not accepted the genuineness of these loans and the matter had been considered in the income-tax proceedings. In those proceedings it was held that there were advances from agriculturists and the shares in fact were purchased on their behalf or for their benefit in consideration of the money received. The additions made in the income-tax proceedings were deleted. The matter was considered by the order of the Tribunal to which a reference has been made earlier, and this question is considered in paragraph No. 18 onwards of the Tribunal's order. It may also be mentioned that the reference application on this question was also rejected. In this view of the matter the departmental ground relating to these shares in Hindustan Garments Ltd. has to be rejected.
It may be mentioned that these grounds are common in the assessment years 1971-72 to 1978-79. Later on these shares have actually been transferred in the name of those agriculturists through a compromise decree before the High Court. This will cover all the grounds in all the appeals concerned. Thus, on the first issue the matter is decided against the assessee in all the years whereas on the other issues the grounds taken by the department were rejected.
21. In the result, the appeal in IT Appeal No. 1664 (Delhi) of 1983 is allowed and the other appeals are allowed in part.