1997 (5) TMI 4 - SC - Income Tax

Whether the 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 should not be included in the assessment of the assessee-family - Since the Revenue has already treated these gifts as valid gifts for the purpose of gift-tax it is not open to the Revenue to assail the said gifts in connection with the income-tax and wealth-tax assessments

Summary

Issues:
Validity of gifts made by the assessee to his minor daughters for income-tax and wealth-tax assessments.

Analysis:
The case involved appeals by certificate of fitness granted under section 261 of the Income-tax Act, 1961, and under section 29 of the Wealth-tax Act, 1957, concerning gifts made by the assessee to his three minor daughters. The gifts were made on account of affection for the daughters and the duty to maintain them in the future. The total value of the properties gifted was about Rs. 90,000, while the assessee's total assets amounted to Rs. 13 lakhs. The Gift-tax Officer and the Appellate Assistant Commissioner accepted the gifts as valid, leading to a protective assessment for the assessment year 1965-66. However, the income from the gifted properties was assessed in the hands of the assessee for subsequent years. The Tribunal upheld the validity of the gifts, prompting references to the High Court for both income-tax and wealth-tax assessments.

The High Court, relying on previous legal precedents, held that under Hindu law, the father can make valid gifts for the maintenance of his daughters, not limited to the time of marriage. The obligation to provide for daughters continues beyond marriage, especially for minor unmarried daughters without external support. Considering the assets of the assessee and the proportion of the gifts to the total family assets, the High Court concluded that the gifts were reasonable and valid. Consequently, the High Court ruled in favor of the assessee against the Revenue in both income-tax and wealth-tax assessments for the relevant years.

In response to the Revenue's argument challenging the extension of legal principles to unmarried daughters, the Supreme Court noted that the gifts had already been accepted as valid for gift-tax purposes. As the Revenue had acknowledged the validity of the gifts in one context, they could not contest them in income-tax and wealth-tax assessments. Therefore, the Supreme Court dismissed the appeals, finding no merit in challenging the validity of the gifts at this stage. The appeals were accordingly dismissed with no order as to costs.