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First Gift-tax Officer Vs. A.K.C. Natarajan - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1986)16ITD359(Mad.)
AppellantFirst Gift-tax Officer
RespondentA.K.C. Natarajan
Excerpt:
.....such hindu during his or her lifetime and on his or her death against the estate of such deceased hindu. an illegitimate daughter is one of the dependants enumerated under section 21 of the said act. section 22 of the act provides for maintenance of dependants enumerated in section 21 of the said act. the rights created under sections 20 and 22 are only prospective and not retrospective. under the circumstances, the petitioner, who has founded her claim for maintenance by virtue of the provisions contained in section 22 of the said act, is not entitled to claim maintenance from the estate of the said deceased who admittedly died prior to the coming into operation of the said act.7. the facts on records reveal that both the abovesaid two children are studying in secondary school classes......
Judgment:
1. This appeal filed by the department relates to the assessment year 1982-83. According to the facts appearing in this case, while the assessee was already having a legally wedded wife, he went through another form of a valid marriage with one lady called Satya. Through her, he got two female children, namely, N. Bhuvaneswari and N.Rukmani. Thus, these daughters are illegitimate daughters of the assessee herein. He made a gift of Rs. 50,000 to the lady with whom he had undergone a form of valid marriage. He also made a gift of Rs. 25,000 each to his illegitimate daughters, N. Bhuvaneswari and N.Rukmani. Before the GTO, the assessee claimed exemption under Section 5(1 )(xii) of the Gift-tax Act, 1958 'the Act') with regard to the gifts made to his illegitimate daughters. He has not made any claim for exemption under Section 5(1 )(viii) for the gift made to the mother of these two daughters.

2. According to the GTO, the term 'children' mentioned in Section 5(1 )(xii) referred to legitimate children only. Hence, according to him, the exemption under Section 5(1)(xii) is not admissible. Aggrieved, the assessee filed appeal before the AAC. The assessee's representative, relying upon a passage occurring in Law of Maintenance, Hindu Code by H.S. Gour, fifth edn., Vol. 4, p. 15, contended that illegitimate daughters are also entitled to maintenance as contemplated under Sections 20 and 21 of the Hindu Adoptions and Maintenance Act, 1956 and, therefore, the gifts given to them should be exempted under Section 5(1)(xii). The AAC accepted the submissions made by the assessee and directed the GTO to grant exemption as claimed by the assessee under Section 5(1)(xii) with regard to the gifts made to N.Bhuvaneswari and N. Rukmani. Aggrieved by this order, the department is in appeal before us.

3. The learned departmental representative submitted that the AAC erred in holding that exemption under Section 5(1 )(xii) is available in respect of gifts made to the assessee's illegitimate children as well.

He further contended that the AAC failed to note that the word 'child' used in section 5(1)(xii) cannot refer to a illegitimate child. The learned departmental representative relied upon a decision of the Kerala High Court in Executors of the Will of T.V. Krishna Iyer v. CIT [1960] 38 ITR 144. On the other hand, the learned counsel for the assessee supported the order passed by the AAC.4. We have heard the rival submissions made by the parties. The fact remains that the assessee made a gift of Rs. 25,000 to each of his illegitimate daughters. The assessee claimed exemption of these gifts under Section 5(1)(xii). under Section 5(1)(xii), gift-tax shall not be charged in respect of the gifts made by any person for education of his children to the extent to which the gifts are proved to the satisfaction of the GTO as being reasonable having regard to the circumstances of the case. Section 20 runs as under : (1) Subject to the provisions of this section a Hindu is bound, during his or her lifetime, to maintain his or her legitimate or illegitimate children as his or her aged or infirm parents.

(2) A legitimate or illegitimate child may claim maintenance from his or her father or mother so long as the child is a minor.

(3) The obligation of a person to maintain his or her aged or infirm parent or a daughter who is unmarried extends insofar as the parent or the unmarried daughter, as the case may be, is unable to maintain himself or herself out of his or her own earnings or other property.

5. While dealing with the rights of illegitimate daughters, the Madras High Court in the case of Narayani Ammal v. Govindaswami Naidu [1975] 1 MLJ 359 (FB) held as under : 12. On the question which we are called upon to answer where there is no inhibition expressly or impliedly to be found in the original text, Courts connot lose sight of the progressively changing views of social outlook and insist upon only applying time-old notions. We are, with great respect, unable to concur with Seshagiri Aiyar, J., that an illegitimate daughter has no place at all under the Hindu law except in limited cases which he pointed out. The change in the social outlook in respect of succession is reflected in the recent legislations, particularly the Hindu Succession Act, 1956, which has done away with the distinction between legitimacy and illegitimacy within certain limits in the matter of succession either to property of a male or a female, dying intestate. We also note that Section 3(7) which defines the word 'related' has a proviso according to which illegitimate children shall be deemed to be related to their mother and to one another. In fact, it goes further and says that their legitimate descendants shall de deemed to be related to them and to one another and any word expressing relationship or denoting a relative shall be construed accordingly. It seems to us that having regard to this trend of legislation reflecting the changing social approach to succession, we will be justified in interpreting the word 'daughter' in the original text as including an illegitimate daughter as well. We are also of opinion that once an illegitimate daughter is an heir, as we hold she is, to succeed to her mother's stridhana property, so long as she is available, the son, who is not in the nearer line of stridhana heirs, cannot have preference and exclude an illegitimate daughter. On that view, we are of the opinion that Meenakshi v. Muniandi, should be overruled.

(p. 364) 6. Even according to Section 125 of the Code of Criminal Procedure, 1898, if any person having sufficient means neglects or refuses to maintain his legitimate or illegitimate child, a Magistrate of the first class may, upon proof of such neglect or refusal, order such person to make a monthly allowance for the maintenance of his such child, at such monthly rate not exceeding Rs. 500 in the whole as such Magistrate thinks lit and to pay the same to such person as the Magistrate may from time to time direct. While granting exemption under Section 5(1 )(xii) the AAC has also extracted a passage from Law of Maintenance, Hindu Code by H.S. Gour, Fifth edn., Vol. 4, p. 15 which runs as under : Prior to the coming into operation of the Hindu Adoptions and Maintenance Act, 1956, an illegitimate daughter of a Hindu was not entitled to claim any maintenance against such Hindu or against his or her estate. It is only by virtue of the provisions contained in the said Act that the illegitimate daughter of a Hindu has for the first time acquired the right to claim maintenance from such Hindu during his or her lifetime and on his or her death against the estate of such deceased Hindu. An illegitimate daughter is one of the dependants enumerated under Section 21 of the said Act. Section 22 of the Act provides for maintenance of dependants enumerated in Section 21 of the said Act. The rights created under Sections 20 and 22 are only prospective and not retrospective. Under the circumstances, the petitioner, who has founded her claim for maintenance by virtue of the provisions contained in Section 22 of the said Act, is not entitled to claim maintenance from the estate of the said deceased who admittedly died prior to the coming into operation of the said Act.

7. The facts on records reveal that both the abovesaid two children are studying in secondary school classes. The reasonableness of the amounts given by the assessec to the abovesaid minor children was also not doubted by the department. The expression 'children' occurring in Section 5(1 )(xii) is also not defined in the Act. Considering the facts appearing in this case and looking into the assessee's obligation to maintain his illegitimate daughters where a statutory obligation is cast upon him and keeping in mind the judgment of the Madras High Court in Narayani Ammal's. case (supra), we hold that the order passed by the AAC on this point is in order. However, the learned departmental representative drawing our attention to Section 2(15A) of the Income-tax Act, 1961 ('the 1961 Act') submitted that 'child' in relation to an individual, includes a stepchild and an adopted child of that individual. According to him, the illegitimate child is not included under the above definition occurring in the 1961 Act. In order to support his case, he relied upon a decision of the Kerala High Court in the case of Executors of the Will of T. V. Krishna Iyer (supra).

According to the facts appearing in that case, the assessee who was a Brahmin residing in South Travancore, while his marriage to a lady of his own caste was still subsisting, lived with a Nair lady, G, and had through her three sons and a daughter. By a deed of settlement, the assessee settled certain amounts of money to G and each of the four children through her. The trustees of the settlement invested those amounts in shares in companies floated by the assessee. The question was whether the dividend income in respect of those shares could be included in the total income of the assessee under Section 16(3) of the Indian Income-tax Act, 1922. On these facts, the Kerala High Court held that : (i) that as the local statutes prohibited the performance of marriage during the continuance of a prior marriage, G was not the lawful wedded wife of the assessee and their children were not legitimate ; (ii) that 'wife' in Section 16(3)(a)(iii) meant legal wife, and 'child' in Section 16(3)(a)(iv) meant legitimate child ; and (iii) that, therefore, the income derived by G and her children from the assets transferred by the assessee were not covered by Section 16(3)(a)(iii) and (iv) and could not be included in the assessee's total income.

8. But, however, in the absence of any definition given by the Act to the expression 'children' occurring in Section 5(1)(xii), we prefer to follow the interpretation given by the Full Bench decision of the Madras High Court in the case of Narayani Animal (supra) in understanding the word 'children' occurring in Section 5(1)(xii).

Accordingly, we uphold the order passed by the AAC on this point and dismiss the appeal filed by the department.


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