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Commissioner of Gift-tax Vs. Hari Chand - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberGift-tax Reference No. 2 of 1972
Judge
Reported in[1974]95ITR308(P& H)
ActsGift Tax Act, 1958 - Sections 5(1)
AppellantCommissioner of Gift-tax
RespondentHari Chand
Appellant Advocate D.N. Awasthy and; B.S. Gupta, Advs.
Respondent Advocate K.P. Bhandari and; D.K. Gupta, Advs.
Cases ReferredC) Venkappa Rao v. Commissioner of Gift
Excerpt:
.....passed by the state or regional transport authority should result in commencement of the period of limitation. thus,. in cases where the state or regional transport authority has not communicated the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order......question of law for our opinion :' whether a gift made by a person who is the manager of a joint hindu family to his wife of a portion of the property belonging to the family is a gift by a person to his spouse within the meaning of section 5(1)(viii) of the gift-tax act '2. the facts are simple. the assessee is a hindu undivided family and shri hari chand is its karta. the assessment year in question is 1966-67, the previous year being samvat year 2023. during the assessment year, hari chand made a gift of rs. 49,000 from the funds of the hindu undivided family to his wife, sunder shanta, and a further gift of rs. 4,900 to his minor daughter, miss bina devi. in the gift-tax return filed by the karta of the hindu undivided family for the year in question, exemption under section.....
Judgment:

D.K. Mahajan, J.

1. The Income-tax Appellate Tribunal has stated the following question of law for our opinion :

' Whether a gift made by a person who is the manager of a joint Hindu family to his wife of a portion of the property belonging to the family is a gift by a person to his spouse within the meaning of Section 5(1)(viii) of the Gift-tax Act '

2. The facts are simple. The assessee is a Hindu undivided family and Shri Hari Chand is its karta. The assessment year in question is 1966-67, the previous year being Samvat year 2023. During the assessment year, Hari Chand made a gift of Rs. 49,000 from the funds of the Hindu undivided family to his wife, Sunder Shanta, and a further gift of Rs. 4,900 to his minor daughter, Miss Bina Devi. In the gift-tax return filed by the karta of the Hindu undivided family for the year in question, exemption under Section 5(1)(viii) was claimed in respect of the gift made to Smt. Sunder Shanta. This claim was negatived by the Gift-tax Officer with the following observations :

' Exemption was claimed of the gift made to the wife, but the assessee's status is Hindu undivided family and a Hindu undivided family has no wife. A karta of a Hindu undivided family is not free to gift away the Hindu undivided family property even to his wife and the total amount of Rs. 53,900 is taken as taxable gift. '

3. The assessee then went in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner allowed the appeal and held that the gift by the karta to his wife was exempt under the provisions of Section 5(1)(viii) of the Act. The Appellate Assistant Commissioner observed that ' person ' in Section 5 includes Hindu undivided family. Therefore, he gave effect to Clause (viii) of Section 5(1). Against the order of the Appellate Assistant Commissioner, the department moved the Income-tax Appellate Tribunal, Chandigarh Bench. The Tribunal affirmed the decision of the Appellate Assistant Commissioner. For its opinion, the Tribunal relied on Jana Veera Bhadrayya v. Commissioner of Gift-tax, [1966] 59 I.T.R. 176 (A.P.).. The department being dissatisfied moved the Tribunal under Section 26(1) of the Gift-tax Act, and that is how the question of law already stated has been referred for our opinion.

4. Before I deal with the contention of Mr. Awasthy, it will be proper to set out certain provisions of the Act. Section 2 is the definition section and defines ' assessee ', ' donor ' and ' person '' in the following terms :

'2. (ii) 'assessee' means a person by whom gift-tax or any other sum of money is payable under this Act and includes-

(a) every person in respect of whom any proceeding under this Act has been taken for the determination of gift-tax payable by him or by any other person or the amount of refund due to him or such other person ;

(b) every person who is deemed to be an assessee under this Act;

(c) every person who is deemed to be an assessee in default under this Act. '

' 2. (ix) ' donor ' means any person who makes a gift. ' '

2. (xviii) ' person ' includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not. '

5. Section 5 of the Act is the exemption section in respect of certain gifts and is in the following terms :

'5. (1) Gift-tax shall not be charged under this Act in respect of gifts made by any person-

(i) of immovable property situate outside the territories to which this Act extends;

(ii) of movable property situate outside the said territories unless the person-

(a) being an individual, is a citizen of India and is ordinarily resident in the said territories, or

(b) not being an individual, is resident in the said territories, during the previous year in which the gift is made ;

(iia) being an individual who is not resident in India, to any person resident in India, of foreign currency or other foreign exchange (as defined,respectively, in Clause (c) and Clause (d) of Section 2 of the Foreign Exchange Regulation Act, 1947), remitted from a country outside India in accordance with the provisions of the said Act, and any rules made thereunder, during the period commencing on the 29th day of October, 1965, and ending on the 28th day of February, 1966, or such later date as the Central Government may, by notification in the Official Gazette, specify in this behalf.

Explanation.--For the purposes of this clause, the expression ' resident in India ' shall have the meaning assigned to it in the Income-tax Act.

(iii) of property in the form of savings certificates issued by the Central Government, which that Government, by notification in the Official Gazette, exempts from gift-tax :

(iiia) of property in the form of National Defence Gold Bonds, 1980, not exceeding the value of such bonds for an aggregate weight of five kilogrammes of gold in any previous year :

Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said bonds;

(iv) to the Government or any local authority ;

(v) to any institution or fund established for a charitable purpose to which the provisions of Section 88 of the Income-tax Act apply ;

(va) (i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of Sub-section(6) of Section 88 of the Income-tax Act, 1961 (43 of 1961); or

(ii) by way of settlement on trust, of property or the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid;

(vi) for any charitable purpose not falling within Clause (v)-

(a) made at any time before the 1st day of April, 1958 ; or

(b) made at any time after that date subject, in respect of each such gift, to a maximum of rupees one hundred in value and, in respect of such gifts in any one previous year to the same donee, to a maximum of rupees five hundred in value in the aggregate;

(vii) to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees ten thousand in value in respect of the marriage of each such relative;

(viii) to his or her spouse, subject to a maximum of rupees fifty thousand in value in the aggregate in one or more previous years, the expression 'spouse' in this clause, where there are more wives than one, meaning all the wives together ;

(ix) of policies of insurance or annuities to any person (other than his wife) who is dependent upon him for support and maintenance, subject to a maximum of rupees ten thousand in value in the aggregate in one or more previous years of the benefits in respect of each such donee;

(x) under a will;

(xi) in contemplation of death ;

(xii) for the education, of his children, to the extent to which the gifts are proved to the satisfaction of the Gift-tax Officer as being reasonable having regard to the circumstances of the case ;

(xiii) being an employer, to any employee by way of bonus, gratuity or pension or to the dependants of a deceased employee, to the extent to which the payment of such bonus, gratuity or pension is proved to the satisfaction of the Gift-tax Officer as being reasonable having regard to the circumstances of the case and is made solely in recognition of the services rendered by the employee ;

(xiv) in the course of carrying on a business, profession Or vocation, to the extent, to which the gift is proved to the satisfaction of the Gift-tax Officer to have been made bona fide for the purpose of such business, profession or vocation ;

(xv) to any person in charge of any such Bhoodan or Sampattidan movement as the Central Government may, by notification in the. Official Gazette, specify;

(xvi) out of the sums, if any, guaranteed or assured by the Central Government as his privy purse, if the gifts are made for-

(a) the maintenance of any relative dependent on him for support and maintenance ; or

(b) for the performance of any official ceremonies : Provided that such gifts are in accordance with the practice, usage or tradition of the family to which the person making the gift belongs.

(1A) Any reference in Clause (v) or Clause (vi) of Sub-section (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.

(2) Without prejudice to the provisions contained in Sub-section (1), gift-tax shall not be charged under this Act in respect of gifts made by any person during the previous year, subject to a maximum of rupees five thousand in value.

(3) Notwithstanding anything contained in Sub-section (1) or Subsection (2), where either spouse makes any gifts out of any such gifts received by that spouse as fall within Clause (viii) of Sub-section (1), the gifts so made shall be deemed to be taxable gifts made by that spouse andnothing contained in Sub-section (1) or Sub-section (2) shall apply in relation to any such gifts.

Explanation.--For the purposes of this section,--

(a) an individual shall be deemed to be ordinarily .resident in the territories to which this Act extends during the previous year in which the gift is made if during that year he is regarded as a resident but not as not ordinarily resident within the meaning of Section 6 of the Income-tax Act. subject to the modification that references in that section to India shall be construed as references to the territories to which this Act extends ;

(b) a Hindu undivided family, firm or other association of persons shall be deemed to be resident in the territories to which this Act extends during any previous year unless, during that year, the control and management of its affairs was situated wholly outside the said territories ;

(c) a company shall be deemed to be resident in the territories to which this Act extends during the previous year, if-

(i) it is a company formed and registered under the Companies Act, 1956 (1 of 1956), or is an existing company within the meaning of that Act; or

(ii) during that year, the control and management of that company was situated wholly in the said territories ;

(d) ' gifts made in contemplation of death' has the same meaning as in Section 191 of the Indian Succession Act, 1925 (39 of 1925).'

6. Mr. D.N. Awasthy, learned counsel for the department, has in the first instance urged that the word ' person ' in Section 5(1) has two shades of meaning. Which shade of meaning is to be given depends upon the content of each of the clauses (i) to (xvi). According to him, the word ' person ', with reference to Clauses (i), (ii), (xiii), (xiv) and (xv) of Section 5, will mean 'person' as defined in Section 2(xviii) of the Act. But with regard to the remaining clauses the word ' person ' would mean a living person in flesh and blood and that too an individual and not a body of persons. The learned counsel in this behalf specifically places reliance upon the following phrase in Section 2 :

' In this Act, unless the context otherwise requires.'

7. It is not necessary for our purposes to go into this question, because in the instant case the gift was made by Hari Chand to his wife, Smt. Sunder Shanta. It may be that Hari Chand is the karta of the Hindu undivided family and is assessed as such. But the fact remains that out of the funds of the Hindu undivided family, he made a gift of Rs. 49,000 to his wife. This is clear from the statement of the case and also from the order of the Tribunal. It is significant that before the Tribunal it was not urged by the department that the gift was not made by Hari Chand as Hari Chand but as Hindu undivided family. The description of Hari Chand as karta is,therefore, beside the point. In any event, the view that the Tribunal took of the matter is fully supported by the two decisions, namely, Jana Veera Bhadrayya v. Commissioner of Gift-tax and (SIC) Venkappa Rao v. Commissioner of Gift-tax, [1966] 59 I.T.R. 176 (A.P.). These decisions fully cover the present case. No decision taking a contrary view has been brought to our notice. In this view of the matter, we see no reason to depart from the view taken by the Tribunal,

8. For the reasons recorded above, the question referred to us must be answered in the affirmative, i.e., in favour of the assessor and against the department. There will be no order as to costs.

C.G. Suri, J.

9. I agree.


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