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Nattuswamy and anr. Vs. Gift-tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 3535 of 1968
Judge
Reported in[1973]91ITR142(Mad)
ActsGift Tax Act
AppellantNattuswamy and anr.
RespondentGift-tax Officer and anr.
Appellant AdvocateK. Chandramouli, Adv.
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Excerpt:
- - if he had duly considered the recital in the settlement deed that the properties covered thereby are ancestral properties, he would not have come to the conclusion that the settlement deed was a gift deed, for it is well-settled that under the hindu law even the karta of a hindu undivided family has no power to convey the properties by way of either settlement or gift......and their father, even in his capacity as the karta, could not execute a settlement deed or a gift deed in relation to the same. the settlement deed refers to the properties covered thereby as ancestral properties. the gift-tax officer while considering the question of the taxability of the transaction under the gift-tax act has presumably overlooked the recitals regarding the nature of the properties. if he had duly considered the recital in the settlement deed that the properties covered thereby are ancestral properties, he would not have come to the conclusion that the settlement deed was a gift deed, for it is well-settled that under the hindu law even the karta of a hindu undivided family has no power to convey the properties by way of either settlement or gift. this legal.....
Judgment:

Ramanujam, J.

1. This matter arises under the Gift-tax Act. The petitioners' father purported to execute a settlement deed dated April 25, 1963, in their favour. Several items of properties in two different villages were given to the petitioners. This settlement was treated by the Gift-tax Officer as a gift coming within the purview of the Gift-tax Act and an order of assessment was passed after giving notice to the petitioners' father as donor. It appears that the petitioners' father did not appear in pursuance of the notice issued to him and the Gift-tax Officer passed an order of assessment holding that the settlement executed by the father of the petitioners on April 25, 1963, was a taxable gift. On that basis he levied a gift-tax of Rs. 6,025. Subsequently efforts were made to recover the taxfrom the donor, but, as the amount could not be recovered from him, proceedings were initiated by the Tax Recovery Officer against the petitioners as donees.

2. At this stage the petitioners have come up to this court seeking for a writ of prohibition restraining the Tax Recovery Officer from continuing the recovery proceedings on the ground that the settlement deed executed by their father is invalid in law and that no rights could flow from the father to the petitioners under that document. According to them the properties covered by the settlement deed are all ancestral properties and their father, even in his capacity as the karta, could not execute a settlement deed or a gift deed in relation to the same. The settlement deed refers to the properties covered thereby as ancestral properties. The Gift-tax Officer while considering the question of the taxability of the transaction under the Gift-tax Act has presumably overlooked the recitals regarding the nature of the properties. If he had duly considered the recital in the settlement deed that the properties covered thereby are ancestral properties, he would not have come to the conclusion that the settlement deed was a gift deed, for it is well-settled that under the Hindu law even the karta of a Hindu undivided family has no power to convey the properties by way of either settlement or gift. This legal position is conceded by the learned counsel for the revenue but what he submits is that if all the facts in relation to the nature of the properties had been placed before the Gift-tax Officer either by the petitioners or by their father, the matter would have been investigated in full and appropriate orders would have been passed. It is true the father of the petitioners had remained silent and inactive at the stage of the assessment proceedings but the assessment order passed by the Gift-tax Officer could be sustained only if the properties dealt with under the settlement deed are the self-acquired properties of the settlor. In view of the fact that the properties covered by the settlement deed are described as ancestral properties and that there is no other evidence to show that the properties are the self-acquisitions of the settlor, the levy of gift-tax on the said transaction is not valid and the subsequent recovery proceedings to recover the tax on the basis of the settlement deed being treated as a gift deed cannot also be sustained. This position is conceded by the learned counsel for the revenue.

3. This writ petition is, therefore, allowed, but, under the circumstances of the case, there will be no order as to costs.


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