1971 (5) TMI 16 - HC - Income Tax

Gift Tax Act 1958 - unilateral declaration of a Hindu coparcener threw his individual property into common stock of joint family - transfer of property taxability as gift

Summary

Issues:
1. Whether the act of declaring separate property as joint family property amounts to a gift liable for gift-tax under the Gift-tax Act, 1958 for the assessment year 1964-65Rs.

Analysis:
The judgment pertains to a reference under section 26(1) of the Gift-tax Act, 1958, involving a Hindu undivided family member who declared his self-acquired properties as joint family properties. The Gift-tax Officer assessed tax based on the unilateral declaration, considering it a transfer attracting the Act's provisions, citing a decision of the Andhra Pradesh High Court. However, the Appellate Assistant Commissioner ruled no tax was leviable, referencing a local court decision declaring the Gift-tax Act unconstitutional for taxing gifts of immovable properties. The Tribunal, on appeal, referred the question of tax liability, assuming the declaration as a gift. The High Court recast the question to focus on whether there was a gift of movable and immovable properties liable to gift-tax for the assessment year 1964-65.

The High Court considered relevant precedents, including the Supreme Court's reversal of a decision in Nazareth's case and the affirmation of the local court's decision in Nerlekar's case. The Supreme Court's decision in Goli Eswariah's case was pivotal, overturning the Andhra Pradesh High Court's decision relied upon by the Gift-tax Officer, and affirming the local court's stance. The High Court, aligning with the Supreme Court's interpretation, held that the act of a coparcener declaring self-acquired property as joint family property does not constitute a transfer under the Act, thus not attracting gift-tax liability. Consequently, the Court ruled in favor of the assessee, stating that there was no gift of movable and immovable properties liable to gift-tax for the assessment year 1964-65. The assessee was awarded costs for the reference, including advocate's fee.