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Commissioner of Gift-tax Vs. K.V.K. Veerappa Chettiar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 279 of 1975 (Reference No. 237 of 1975)
Judge
Reported in[1980]121ITR854(Mad)
ActsTamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961; Gift Tax Act
AppellantCommissioner of Gift-tax
RespondentK.V.K. Veerappa Chettiar
Appellant AdvocateJ. Jayaraman and ;Nalini Chidambaram, Advs.
Respondent AdvocateNone
Cases ReferredVenkatapathi Raju v. Venkatanarasimha Raju
Excerpt:
direct taxation - settlement - tamil nadu land reforms (fixation of ceiling on land) act, 1961, gift tax act and hindu law - respondent was 'karta' of joint family consisting of himself and son - executed settlement deed in favour of son - assessee contended no liability to gift tax as no gift can be made by 'karta' to his own family members - conduct of assessee clearly indicated that he manifested his status as separate individual - settlement in favor of son cannot be taken to be settlement in favor of coparcener so as to be affected by prohibition under hindu law - held, assessee liable to income tax. - .....by the karta in favour of his son is void ?'2. k. v. k. veerappa chettiar was the karta of a joint family consisting of himself and his son, sundaram. he had also a daughter by name kamalammal. on november 20, 1969, he executed a settlement deed in favour of his daughter, kamalammal, who was already married, and on november 25, 1969, he executed a settlement deed in favour of his son, sundaram. the gto issued a notice to the assessee under section 13(1) of the g.t. act, 1958, and the assessee submitted a return in which he admitted having made a gift of the value of rs. 76,900. however he claimed that the gift was not taxable. the actual figure which should have been shown in the return was rs. 49,370 and the figure rs. 76,900 shown therein appears to be a mistake. the claim pf the.....
Judgment:

Sethuraman, J.

1. The Tribunal has referred the following question at the instance of the CIT :

' Whether, on the facts and in the circumstances of the ease, the Tribunal was right in law in holding that the Hindu undivided family of which Shri K. V. K. Veerappa Chettiar is the karta continued to exist and that, accordingly, the settlement by the karta in favour of his son is void ?'

2. K. V. K. Veerappa Chettiar was the karta of a joint family consisting of himself and his son, Sundaram. He had also a daughter by name Kamalammal. On November 20, 1969, he executed a settlement deed in favour of his daughter, Kamalammal, who was already married, and on November 25, 1969, he executed a settlement deed in favour of his son, Sundaram. The GTO issued a notice to the assessee under Section 13(1) of the G.T. Act, 1958, and the assessee submitted a return in which he admitted having made a gift of the value of Rs. 76,900. However he claimed that the gift was not taxable. The actual figure which should have been shown in the return was Rs. 49,370 and the figure Rs. 76,900 shown therein appears to be a mistake. The claim pf the assessee that there was no liability to gift-tax was based on the ground that there was a joint family of which he was the karta and that no gift could be made by the karta of a joint family to one of its own members. It was also claimed that even the settlement in favour of the married daughter was void.

3. The GTO held that the assessee was liable to pay gift-tax as he had made a declaration before the authorised officer appointed under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, that there was a partition in 1955 and that lands of an extent of 23 acres had been given to his son, Sundaram. The GTO, therefore, car 3 to the conclusion that the donee was not a coparcener and that there was no impediment for making the gift. The assessee's appeal to the AAC was unsuccessful. The assessee appealed to the Tribunal and before the Tribunal it was contended that the AAC was wrong in taking the status of the assessee as ' Individual ' and that if the correct status was taken as ' HUF ' the settlement in favour of another coparcener was void. It was also contended that there could be no gift in favour of a daughter by the joint Hindu family. The Tribunal agreed with the assessee on the contention that the correct status was that of a ' HUF ' and that, therefore, the gilt to a coparcener would be void. However, as regards the gift in favour of the daughter, it was held that it was only a voidable transaction and that so long as it was not avoided it was valid. Thus, the gift in favour of the daughter was held to be taxable. In the present reference, we are, concerned only with the gift in favour of the son.

4. The learned counsel for the revenue submitted that the assessee had made a declaration before the authorised officer appointed under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act and that such a declaration is effective, at any rate, to bring about a disruption in the family. According to the learned counsel, the question whether the authorised officer accepted the assessee's statement was immaterial so far as the gift-tax assessment was concerned, as the GTO was not bound by any order passed by the authorised officer under tne Land Reforms Act.

5. The assessee has been served with notice but is not present and is not represented by any counsel also. The learned counsel for the revenue, Mr. Jayaraman, took us through the records nd placed all the aspects ofthe question before us with his usual fairness.

6. Paragraph 6 of the order of the Tribunal is the only paragraph which contains the reasons for its conclusion. The relevant portion runs as follows :

' We have carefully considered the matter. There is no evidence of any partition in 1955. We agree with the finding recorded by the authorised officer in the land ceiling proceedings that the evidence ler in were not sufficient to hold that there was a partition. In the circumstances, we hold that the status of the assessee is that, of ' Hindu undivided family '. If so, it follows that a gift to another-coparcener is a void transaction. In view of this, the settlement deed in favour of the son is void and to that extent there can be no gift at all. '

7. From the above extract, it would be seen that the finding of the Tribunal was based on the finding recorded by the authorised officer in the land ceiling proceedings. The copy of the order passed by the authorised officer is not before us. The Tribunal has not, also, set out the reasonscontained in the said order so as to enable us to consider the question as to why the authorised officer did not accept the statement of the assessee before him that there was a partition in 1955 and whether his view was proper.

8. It is an elementary proposition of law, as far as Hindu law is concerned, that partition is a severence of joint status and as such is a matter of individual volition. All that is necessary to constitute a partition is the definite and unequivocal inaication of the intention by a member of a joint family to separate himself from the family and enjoy his share in severalty. There should be an intimation or indication or manifestation of such intention, and in what form the intimation or indication should takeplace would depend upon the circumstances of each case. The manifesta tion or declaration of intention should, however, be to the knowledge of the person affected, for a mere uncommunicated declaration may amount to nomore than harbouring an intention to separate. The assent of the other member is not necessary (See para. 325 of Mulla's Principles of Hindu law,14th edn., p. 410).

9. The above propositions are noticed in the decision in Raghavamma v. Chenchamma : [1964]2SCR933 . The earlier authoritieson the point were considered, and it was held therein that a member .of a joint family seeking to separate himself from others will have to make known his intention to the other members of the family from whom he seeks to separate. Dealing with the position where there are no more thantwo members of a joint family, the Supreme Court pointed out, at 967 as follows (See AIR 1964 SC 151) :

' Granting that a declaration will be effective only when it is brought to the knowledge of the other members affected, three questions arise, namely, (i) how should the intention be conveyed to the other member or members ; (ii) when it should be deemed to have been brought to the notice of the other member or members ; and (iii) when it was brought to their notice, would it be the date of the expression of the intention or that of knowledge that would be crucial to fix the date of severance. The questions posed raise difficult problems in a fast changing society. What was adequate in a village polity when the doctrine was conceived and evolved can no longer meet the demands of a modern society. Difficult questions, such as the mode of service and its sufficiency, whether a service on a manner would be enough, whether service on the major members or a substantial body of them would suffice, whether notice should go to each one of them, how to give notice to minor members of the family, may arise for consideration. But we need not express our opinion on the said questions, as nothing turns upon them, for, in this appeal, there are only two members in the joint family and it is not suggested that Subba Rao did not have the knowledge of the terms of the will after the death of Chimpirayya.'

10. In a later case in Puttrangamma v. Ranganna : [1968]3SCR119 , dealing with the same point, after referring to the original texts, the Supreme Court pointed out (p. 673) :

' The correct legal position, therefore, is that in a case of a joint Hindu family subject to Mitakshara law, severance of status is effected by an unequivocal declaration on the part of one of the joint holders of his intention to hold the share separately. It is, however, necessary that the member of the joint Hindu family seeking to separate himself must make knownhis intention to other members of the family from whom he seeks to separate. The process of communication may, however, vary in the circumstances of each particular case. It is not necessary that there should be a formal despatch to, or receipt by other members of the family of the communication announcing the intention to divide on the part of one member of the joint family. The proof of such a despatch or receipt of the communication is not essential, nor its absence fatal to the severance, of the status. It is, of course, necessary that the declaration to be effective should reach the person or persons affected by some process appropriate to the given situation and circumstances of the particular case.'

11. In the present case, there are only two members and they were living together as is shown by the document itself. Therefore, there is no question of lack of knowledge on the part of the son. Further, the settlement deed itself is in favour of the son and the execution of the settlement deed would itself be consistent only with the position that there has been a division in the joint family and the son is sought to be made the beneficiary of the property held by the father. The Tribunal has pointed out that the authorised officer had stated that the evidence let in was not sufficient to hold that there was a partition. As indicated earlier, we do not have a copy of the order of the authorised officer and we do not, therefore, know as to what kind of evidence was let in before him. However, on the question of intention to divide or the declaration of unilateral intention to divide, no better evidence is necessary than that of the person who made the declaration. In effect, it is an admission or declaration which is the best evidence that can be expected especially when it was made before a public authority, affecting the status of the person concerned. Whether that authority accepted that declaration or not is of no consequence as the status of a person in a matter like this is governed by his intention and not by its acceptance by someone else.

12. As pointed out by the Privy Council in Venkatapathi Raju v. Venkatanarasimha Raju , it sometimes happens that persons make statements which serve their purpose, or proceed upon ignorance of the true position ; and it is not their statements, but their relations with the estate which should be taken into consideration in determining the issue. Even if we take the conduct of the assessee here, it would be clear that he has manifested his status as a separated ' individual ' by executing a document of settlement in favour of his son and daughter. He has not stopped with merely making a statement before the authorised officer but has acted in pursuance thereof. The result is, there has been a division of the joint family, and the settlement in favour of the son cannot be taken to be a settlement in favour of a coparcener, so as tobe affected by any prohibition under the Hindu law. The question is, therefore, answered in the negative and in favour of the revenue. No costs.


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