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Commissioner of Income-tax Vs. K.N. Shanmuga Sundaram - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 189 of 1973 and 113 of 1974 (Reference Nos. 15 of 1973 and 6 of 1974)
Judge
Reported in[1978]115ITR178(Mad)
ActsHindu Law
AppellantCommissioner of Income-tax
RespondentK.N. Shanmuga Sundaram
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateS. Padmanabhan and ;S.V. Subramaniam, Advs. of ;Subbaraya Aiyar, Padmanabhan and Ramamani
Cases ReferredGuramma v. Mallappa
Excerpt:
direct taxation - gift - hindu law - whether tribunal rightly held that gifts of immovable properties belonging to joint family made by its karta to his minor daughters were not invalid and income from settled properties should not be included in assessment of assessee-family - gift was of reasonable portion of joint family properties belonging to family of assessee and could not be void - immaterial that gifts have been made to his minor daughters before marriage or after marriage - question answered in affirmative. - - raghunath, air1963ori50 ) that he can make a gift of a small portion of ancestral immovable property to his daughter at or after her marriage if the extent of the gift is reasonable and particularly if she is in poor circumstances. saraswathi air1954mad307 ,thus i it.....varadarajan, j. 1. these tax cases arise out of references made at the instance of the revenue by the income-tax appellate tribunal, madras bench--t.c. no. 189 of 1973 under section 256(1) of the income-tax act, 1961, and t.c. no. 113 of 1974 under section 27(1) of the wealth-tax act, 1957.2. the assessee in both the cases is one k.n. shanmuga sundaram. the assessment years in both the cases are 1965-66 to 1968-69. the assessee had gifted premises bearing door nos. 8, 9 and 12, karpagambal nagar, mylapore, madras, to his three minor daughters, padmalochani, hamsa and usha, respectively, by three separate documents. the recital in the gift deeds is that the gifts have been made on account of the affection which the assessee has for his minor daughters and also the duty which the assessee.....
Judgment:

Varadarajan, J.

1. These tax cases arise out of references made at the instance of the revenue by the Income-tax Appellate Tribunal, Madras Bench--T.C. No. 189 of 1973 under Section 256(1) of the Income-tax Act, 1961, and T.C. No. 113 of 1974 under Section 27(1) of the Wealth-tax Act, 1957.

2. The assessee in both the cases is one K.N. Shanmuga Sundaram. The assessment years in both the cases are 1965-66 to 1968-69. The assessee had gifted premises bearing door Nos. 8, 9 and 12, Karpagambal Nagar, Mylapore, Madras, to his three minor daughters, Padmalochani, Hamsa and Usha, respectively, by three separate documents. The recital in the gift deeds is that the gifts have been made on account of the affection which the assessee has for his minor daughters and also the duty which the assessee and his minor son owed to maintain the donees in future in conformity with their family status and dignity and also to give the minor daughters necessary marriage presents and streedhanam at the time of their marriage. The total value of the properties gifted to the three minor daughters is stated to be about Rs. 90,000. For the assessment year 1965-66, the Gift-tax Officer made a protective assessment accepting the assessee's contention that the gifts were valid. On appeal also the Appellate Assistant Commissioner held that they were valid gifts and the gift-tax had to be charged on them. There was no appeal to the Tribunal against the said order of the Appellate Assistant Commissioner. But in the income-tax assessments of the assessee, the incomes from the properties were assessed in the hands of the assessee. On appeal, the Appellate Assistant Commissioner directed the Income-tax Officer to exclude the income from the properties in view of his earlier decision about the validity of the gifts made by the assessee. The revenue took the matter in appeal before the Income-tax Appellate Tribunal and contended that the gifts to unmarried daughters were void and that the finding of the Appellate Assistant Commissioner that the income from the properties was not liable for assessment at the hands of the assessee was unsustainable. The Tribunal held that the gifts are not invalid and that their income cannot be assessed in the hands of the assessee. Hence, the reference in T.C. No. 189 of 1973 at the instance of the revenue.

3. The Wealth-tax Officer sought to include the value of the properties gifted by the assessee, K.N. Shanrnuga Sundaram, to his three minor daughters. The Appellate Assistant Commissioner directed the exclusion of the value of those properties in view of his finding that the gifts were valid, attracting liability to the tax. That finding was confirmed by the Income-tax Appellate Tribunal in I.T.A. Nos. 10 to 13 (Madras) of 1970-71. In view of the judgments in those tax appeals, the Tribunal confirmed the finding of the Appellate Assistant Commissioner that the value of the properties forming the subject-matter of the gift should be excluded. Hence, the reference in T.C. No. 113 of 1974.

4. The question referred in T.C. No. 189 of 1973 is this :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the gifts of immovable properties belonging to the joint family made by its karta to his minordaughters were not invalid and that, therefore, the income from the settled properties should not be included in the assessment of the assessee-family ?'

5. The question referred in T.C. No. 113 of 1974 is this :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the gifts of immovable properties belonging to the joint family made by its karta to his minor daughters were not invalid and that, therefore, the value of the settled properties should not be included in the assessment of the assessee-family '

6. The learned counsel for the revenue relied upon the decisions in Rathinasabapathi v. Saraswathi [1953] 2 MLJ 459 , Palwanna Nadar v. Annamalai Ammal [1957] 1 MLJ 238 (Mad), A. Basaviah Gowder v. Commissioner of Gift-tax : [1963]49ITR817(Mad) , Commissioner of Gift-tax v. Tej and Chandrasekaran v. Valli Ammal [1973] TLNJ 389, and contended that the gifts are void. On the other hand, the learned counsel for the assessee invited our attention to the decision of a Bench of the Andhra Pradesh High Court in Commissioner of Gift-tax v. Bhupathiraju Venkata Narasimharaju : [1975]101ITR74(AP) and strongly relied upon the decision of the Supreme Court in Guramma v. Mallappa, : [1964]4SCR497 , which has been referred to in the judgment of the Tribunal and contended that the gifts are not invalid.

7. Before referring to the decisions relied upon by learned counsel for the parties, it is necessary to see what the texts say regarding the validity or otherwise of the gifts made by the karta of a Hindu undivided family or manager of a joint Hindu family to his minor daughter. We find the following passage at pages 472 and 473 of Mayne's Hindu Law and Usage, eleventh edition:

'Gifts to brides on occasions of marriage are very common and various Hindu texts impose a moral obligation on the father or other relatives to make them......It has been held that a gift, by a father to hisdaughter or to her husband for the benefit of both on the occasion of her marriage, of a small portion of ancestral immovable property is valid. As Subrahmanya Aiyar J. says a gift of a small extent of land (Bhudanam) on such an occasion is a customary indispensable duty where the family can afford it'. Even after marriage, a gift can be made to a daughter by way of marriage portion either by her father or, after him, by her brother......Where the gift is in discharge of the moral obligation to provide a marriage portion as in the Madras cases, it would come under the Mitakshara 1, 1, 29 as a gift in discharge of an indispensable duty. In Ramalinga Annavi v. Narayana Annavi ILR [1922] Mad 489 , the Judicial Committeeevidently regarded the gift of a small share of immovable property to a daughter as within the authority of a karta.'

8. In Mulla's Principles of Hindu Law (fourteenth edition) it is stated at page 276 thus :

'It has been held by the High Court of Madras that a father has no power to make a gift of ancestral immovable property to his wife to the prejudice of his minor sons (Rayakkal v. Subbanna ILR [1892] Mad 84. But it has been held by the same court (Sundararamayya v. Silamma ILR [1912] Mad 628 and the High Court of Orissa (Tara Sahuani v. Raghunath, : AIR1963Ori50 ) that he can make a gift of a small portion of ancestral immovable property to his daughter at or after her marriage if the extent of the gift is reasonable and particularly if she is in poor circumstances.'

9. The texts referred to above show that a father or after him her brother has the power to make a gift of a small portion of ancestral immovable property to his daughter or sister, as the case may be, at or after the marriage if the extent of the gift bears a small and reasonable proportion to the properties owned by the family at the time of the gift.

10. A Bench of this court has observed in Rathinasabapathi v. Saraswathi : AIR1954Mad307 , thus I

'It is now well establised that a Hindu father has no power to gift away ancestral and joint family property in part or in whole except for the special purposes laid down in the text which are limited and circumscribed and that too of small portions of movable and immovable property, mostly to discharge a necessary moral obligation cast on a Hindu father or manager of the family. A gift otherwise is void in its inception and a document evidencing such a gift does not convey any interest to the donee. The gift can, therefore, be ignored and persons entitled to the property can treat the property so gifted as continuing to vest in the joint family and not having been transferred to the donee notwithstanding even that possession of the property may have passed to the donee. It is not necessary for a coparcener or any other member of the joint family who claims to have a right or interest in the property to interdict a gift as an alienation not binding on the family but to ignore the transaction and sue to enforce his or her rights to the said property.'

11. Another Bench of this court consisting of Rajamannar C.J. and Ramaswami J. has observed in Palwanna Nadar v. Annamalai Ammal : AIR1957Mad330 , thus:

'The special powers of a father do not extend beyond purposes warranted by special texts. It is settled law that a father has special powers over the movable properties for indispensable acts of duty and over immovable properties for pious purposes. Since indispensable acts of duty mean and include pious purposes, a father has no larger power overmovable properties than over immovable properties except in the matter of gifts through affection in spite of the difference in the terminology used by the texts. A gift to a daughter or any other relation is not for pious purposes; and though a gift through affection may be made of movable property, a gift of immovable property cannot be supported as one made through affection. But it has been held by this court that a father can make a gift of a small portion of his immovable property to his daughter at or after marriage, such gift being customary ia this Presidency. Therefore, looked at as a gift of immovable property in favour of the second wife and as marriage provision for her daughter the settlement is invalid.'

12. The learned judges have stated thus at the end of the judgment in that case:

'To sum up though a father of an undivided Mitakshara joint family has full power of dispositions over his self-acquired properties, he has no such power in respect of the joint family properties, but he can make within reasonable limits by custom in this Presidency gifts of immovable properties of the joint family to his daughter on the occasion of her marriage and when she is departing from her parental home; and this customary obligation can be fulfilled later if not fulfilled at the time of the marriage without point of time, not only by the father but also by his widow, or son taking over the estate from the father. These limits cannot be exceeded by purporting to make settlements for the fulfilment of an obligation which had not arisen and which obligation might not even arise to be fulfilled since the daughter may die unmarried or remain a spinster as it is probable that while a vast majority of women prefer a married life, some of them either by choice or by necessity may lead a life of celibacy.'

13. The learned judges in their judgment reversed the view of Chandra Reddi J., as he then was, that it was competent for an undivided Hindu father governed by the Mitakshara system of law to make a valid gift of a reasonable portion of joint family property as a future marriage portion of a daughter. The learned counsel for the revenue relied strongly upon this decision and particularly on the observation of the learned judges that it has been held by this court that a father can make a gift of a small portion of his immovable property to his daughter at or after marriage, and also that a father can make within reasonable limits by custom in this Presidency gifts of immovable properties of the joint family to his daughter on the occasion of her marriage and when she is departing from her parental home, and this customary obligation can be fulfilled later if not fulfilled at the time of the marriage without point of time. Reliance was placed on these observations of the learned judges by, the Teamed counsel for the revenue, having regard to the fact that the gifts in the present case have been made to minor unmarried daughters of the assesseeand not on the occasion of their marriage or when they were departing from their parental home or later, but during their minority and when they still remained unmarried. Reference has been made to the said decision in Palwanna Nadar v. Annamalai Ammal : AIR1957Mad330 , in a decision of another Bench of this court in A. Basaviah Gowder v. Commissioner of Gift-tax : [1963]49ITR817(Mad) , where the learned judges have observed thus (page 821):

'In the case of the gift to the daughter, it is not contended that the gift was at or about the time of her marriage. Learned counsel for the assessee concedes that on the date of the gift the daughter was a minor of about 9 years of age. The gift to the daughter cannot, therefore, be regarded as valid, as having been made for a purpose countenanced by the Hindu law. In the case of the gift to the brother, a divided brother, he stands in no better position than a stranger. It follows on the basis of the above decisions that the gift in so far as these persons are concerned is wholly void. '

14. The learned counsel for the revenue relies strongly even upon this decision, in view of the fact that the gifts in the present case also are to minor daughters.

15. In Commissioner of Gift-tax v. Tej Nath , a Full Bench of the Punjab and Haryana High Court considered various decisions, one of them being that of the Lahore High Court in Imperial Bank of India v. Maya Devi, AIR 1935 Lah 867, where it was held that a gift by a manager of a joint family was voidable at the instance of the other coparceners only. The Full Bench has observed about that decision of the Lahore High Court thus (page 106) :

'It may be mentioned that in this case the gift was sought to be attacked by a stranger to the family and the observations that were made in this decision must be restricted to the facts of that case. This authority is no proposition for the view that inter se the members of a joint Hindu family the gift would be voidable.'

16. The learned judges of the Full Bench have extracted the following portion of paragraph 226 of Mulla's Principles of Hindu Law in their judgment:

'A Hindu father or other managing member has power to make a gift within reasonable limits of ancestral immovable property for 'pious purposes'. But the alienation must be by an act inter vivos, and not by will.'

17. They have observed in their judgment (page 102) :

'It will appear from the combined reading of these paragraphs that the position in Hindu law is that whereas the father has the power to gift ancestral movables within reasonable limits, he has no such power withregard to ancestral immovable property or coparcenary property. He can, however, make a gift within reasonable limits of ancestral immovable property for pious purposes. The Supreme Court has extended the rule in paragraph 226 to enable a gift of ancestral immovable property to a daughter if the gift is to a reasonable extent (see Guramma v. Mallappa, : [1964]4SCR497 ). But the rule seems to be firmly settled that a father has no power to make a gift of ancestral immovable property to his wife to the prejudice of his minor sons. So also is the rule that a gift to a stranger is equally invalid and the other members of the family need not sue to set it aside. '

18. The gift in that case was to the mother, step-mother, wife and three minor sons by Tej Nath, the karta of a Hindu undivided family, and it has been held by the Full Bench that the gift was void and not voidable.

19. Ismail J. has observed in the decision in Chandrasekaran v. Valli Ammal [1973] TLNJ 389, thus :

'The argument is that the rule of Hindu law imposing a restriction on the power of alienation of a manager of a joint Hindu family by way of making a gift of joint family property was enunciated for the benefit of the coparceners since they had acquired a right by birth in the joint family property and consequently such gifts can be challenged only by a coparcener, but cannot be challenged by a person like the plaintiff who is only an heir of the manager of the family. Mr. Srinivasan wanted to substantiate this point by referring to certain texts of Hindu law as well as certain decisions of the courts. In my opinion, as far as this court is concerned, the matter has been settled by holding that such a gift is void ab initio and the donor had no power to make the gift at all and consequently that gift had no existence in the eye of law, with the result that it can be ignored by any person interested in the estate. '

20. With respect to the learned judge, we are of the opinion that this observation is too broad and does not appear to take note of the earlier decisions of this court which have laid down that the father can make a gift of a small portion of his immovable property to his daughter at or after the marriage, such being customary in this Presidency. Even the learned judge has observed in the later portion of his judgment thus :

'The same view was reiterated by another Division Bench of this court in Rathinasabapathi v. Saraswathi Ammal : AIR1954Mad307 . The Bench stated that 'It is now well established that a Hindu father has no power to gift away ancestral and joint family property in part or in whole except for the special purposes laid down in the text, which are limited and circumscribed and that too of small portions of movable and immovable property, mostly to discharge a necessarymoral obligation cast on a Hindu father or manager of the family. A gift otherwise is void in its inception and a document evidencing such a gift does not convey any interest to the donee'. '

21. One of the gifts made by the assessee, the karta of a Hindu undivided family consisting of his wife, minor daughters and minor sons, involved in Commissioner of Gift-tax v. Bhupathiraju Venkata Narasimharaju : [1975]101ITR74(AP) was of 17.681/2 acres of land to his three minor daughters and the other gift was of 7'46 acres in favour of the fourth minor daughter. Those gifts were held by the Gift-tax Officer to be chargeable to gift-tax. But the assessee contended that there were no valid gifts. A Bench of the Andhra Pradesh High Court, which decided that case, has observed (page 78):

'What emerges from a consideration of the decided cases is that the father cannot gift away the properties in favour of his minor dependent children beyond reasonable limits. What are reasonable limits is a question of fact to be decided with respect to the facts of each given case. Judged from the facts of this case it is not possible for us to say that the gifts of about 25 acres and odd in favour of the minor daughters are within the reasonable limits, within which the father can make a valid gift in favour of his minor daughters when the total extent of the immovable property held by the family is only acres 44.44. We, have, therefore, no hesitation in agreeing with the finding of the Tribunal that the gifts made by the father in favour of his minor daughters are beyond reasonable limits. They are extravagant and unreasonable. They are, therefore, void under the personal law.'

22. The learned judges have further observed that those gifts are no doubt voidable at the instance of the coparceners who are affected by those gifts, but still those gifts are void as against all the persons other than the coparceners. In the Full Bench decision of the Punjab and Haryana High Court in Commissioner of Gift'tax v. Ttj NatH referred to above, the Full Bench appears to have been unable to subscribe to the view of the Lahore High Court in Imperial Bank of India v. May a Devi, AIR 1935 Lah 867, where it has been held that a gift by a manager was voidable at the instance of the other coparceners only, for, the learned judges of the Full Bench have observed that 'it may be mentioned that in that case the gift was sought to be attacked by a stranger to the family and the observations that were made in that decision must be restricted to the facts of that case and that this decision was not authority for the proposition that inter se the members of a joint Hindu family the gift would be only voidable'. It is unnecessary, for the purpose of the present case, to go into the question whether when the gift by a father to a daughter is not of a reasonable portion of the joint family property, it was void in toto as regards everyperson concerned or was only voidable at the instance of the coparceners who were affected by those gifts and void as against all the persons other than the coparceners.

23. Subba Rao J., as he then was, speaking for the Supreme Court, has observed in Guramma v. Mallappa, : [1964]4SCR497 , thus:

' The legal position may be summarised thus : The Hindu law texts conferred a right upon a daughter or a sister, as the case may be, to have a share in the family property at the time of partition. That right was lost by efflux of time. But it became crystallised into a moral obligation. The father or his representative can make a valid gift, by way of reasonable provision for the maintenance of the daughter, regard being had to the financial and other relevant circumstances of the family. By custom or by convenience, such gifts are made at the time of marriage, but the right of the father or his representative to make such a gift is not confined to the marriage occasion. It is a moral obligation and it continues to subsist till it is discharged. Marriage is only a customary occasion for such a gift. But the obligation can be discharged at any time, either during the lifetime of the father or thereafter. It is not possible to lay down a hard and fast rule, prescribing the quantitative limits of such a gift as that would depend on the facts of each case and it can only be decided by courts, regard being had to the overall picture of the extent of the family estate, the number of daughters to be provided for and other paramount charges and other similar circumstances. If the father is within his rights to make a gift of a reasonable extent of the family property for the maintenance of a daughter, it cannot be said that the said gift must be made only by one document or only at a single point of time. The validity or the reasonableness of the gift does not depend upon the plurality of documents but on the power of the father to make a gift and the reasonableness of the gift so made. If once the power is granted and the reasonableness of the gift is not disputed, the fact that two gift deeds were executed instead of one, cannot make the gift any the less a valid one.'

24. The Full Bench of the Punjab and Haryana High Court, which had occasion to consider this decision of the Supreme Court in their decision in Commissioner of Gift-tax v. Tej Nath referred to above, has observed that the Supreme Court has extended the rule mentioned in paragraph. 226 of Mulla's Principles of Hindu Law (extracted above) to enable a gift of ancestral immovable property to a daughter if the gift is to a reasonable extent. We are in respectful agreement with this view of those learned judges, for the Supreme Court has observed in that decision that the Hindu law texts conferred a right upon a daughter or a sister, as the case may be, to have a share in the family property at the time of partition. That right was lost by efflux of time. But it became crystallisedinto a moral obligation. The father or his representative can make a valid gift, by way of reasonable provision for the maintenance of the daughter, regard being had to the financial and other relevant circumstances of the family. By custom or by convenience, such gifts are made at the time of marriage, but the right of the father or his representative to make such a gift is not confined to the marriage occasion, It is a moral obligation and it continues to subsist until it is discharged. Marriage is only a customary occasion for such a gift, but the obligation can be discharged at any time, either during the lifetime of the father or thereafter. It is not possible to lay down any hard and fast rule as that would depend on the facts of each case and it can only be decided by courts. We are inclined to think that this observation of the Supreme Court has extended the scope of the principle which had been held earlier to be applicable to such gifts, as set out by the learned judges of this court in Palwanna Nadar v. Anna-malai Ammal : AIR1957Mad330 , where they have observed:

'This customary obligation can be fulfilled later if not fulfilled at the time of the marriage without point of time, not only by the father but also by his widow or son taking over the estate from the father. These limits cannot be exceeded by purporting to make settlements for the fulfilment of an obligation which had not arisen and which obligation might not even arise to be fulfilled since the daughter may die unmarried or remain a spinster as it is probable that while a vast majority of women prefer a married life, some of them either by choice or by necessify may lead a life of celibacy.'

25. If, as observed by the Supreme Court in the said decision, in Guramma v. Mallappa, : [1964]4SCR497 , the right conferred by Hindu law texts upon a daughter or a sister to have a share in the family property at the time of partition had been lost by efflux of time, but has become crystallised into a moral obligation and the father or his representative can make a valid gift by way of reasonable provision for the maintenance of the daughter, regard being had to the financial and other relevant circumstances of the family, and by custom or convenience such gifts are made at the time of the marriage, but the right of the father or his representative to make such a gift is not confined to the marriage occasion, and marriage is only a customary occasion for such a gift being made, we do not see why a father, as in the present case, should not have the power to make a gift of a reasonable portion of the joint family property to his minor unmarried daughters who might get married or continue to remain spinsters and lead a life of celibacy. The need of a father in a Hindu undivided family to make provision for the future maintenance of his minor unmarried daughters, in our opinion, is greater and more compelling than the one he may have to makeprovision for the maintenance of the daughter at the time of the marriage or thereafter, for, a daughter who gets married or who has already got married, has her husband who may provide for her maintenance in addition to the support which she may derive from her father after the marriage, while there is no such support from a person like the husband or other relation in the case of a minor unmarried daughter of a Hindu father of an undivided family. In the present case, it was submitted by the learned counsel for the assessee that the total assets of the assessee amounted to thirteen lakhs and that the gift which each of the three minor daughters got would bear only 1/39 portion of the total value of the assets of the assessee on one computation and only 1/55 portion of the total value of the property by another computation. The learned counsel for the revenue does not contend that the properties gifted to the minor daughters do not bear a small or reasonable proportion to the total value of the properties owned by the family of which the assessee is the manager. The Tribunal has accepted the contention put forward before it that the assessee has considerable properties, both movable and immovable, including agricultural properties, to the extent of rupees seventeen lakhs, and it has observed in its judgment that the properties gifted to the minor daughters worth about Rs. 90,000 in all, could not be considered as unreasonable in view of the family status and prestige.

26. Having regard to the extent of the properties belonging to the family and the value of the properties gifted to the minor daughters of the assessee, we are of the opinion, having regard to the decision of the Supreme Court in Guramma v. Mallappa, : [1964]4SCR497 , that the gifts in these cases are of a reasonable portion of the joint family properties belonging to the family of the assessee and could not be stated to be void, notwithstanding the fact that they have been made to his minor daughters before their marriage and not at the time of their marriage or thereafter. It would follow that the Tribunal was right in law in holding that the gifts made by the karta to his minor daughters are not invalid and the income from those properties should not be included in the assessment of the assessee-family and that the value of the properties gifted to the minor daughters should not be included in the value of the properties attracting liability to wealth-tax. Accordingly, we answer the questions against the revenue and direct the revenue to pay the costs of these references to the assessee. Advocate's fee Rs. 500 one set. A copy of the judgment in these cases, duly certified by the Registrar and affixed with the seal of the court, shall be forwarded to the Income-tax Tribunal, Madras.


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