TMI Blog1973 (7) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1969, there is a consolidated statement of case under section 66(2) of the Indian Income-tax Act, 1922, relating to Krishan Bans Bahadur, as individual for the assessment year 1960-61, as Hindu undivided family, also for the assessment year 1960-61, and as Hindu undivided family for the assessment year 1961-62. The common question of law is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 660 shares belonged to the assessee's Hindu undivided family and, therefore, the income therefrom was not taxable in the hands of the assessee in the status of an individual ? " In Income-tax Reference No. 80 of 1971, the following two questions were referred to the High Court under section 256(1) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 774 shares of Instalment Supply Co. (P.) Ltd. belonged to the assessee's Hindu undivided family and, therefore, the income therefrom was not taxable in the hands of the assessee in the status of an individual ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e per stirpes. In other words, two sons of Raj Bans Bahadur (Krishan Bans Bahadur and Brij Bans Bahadur) together received 150 shares equally between themselves, so that each of them got 75 shares. The two sons of Shiv Raj Bahadur likewise got 150 shares divided equally between themselves, so that each of them got 75 shares. The three sons of R. B. Brij Narain in the like manner got 150 shares in all equally divided amongst them, so that each of them got 50 shares. On the said date (February 9, 1949), the father (Raj Bans Bahadur), gifted 100 shares to each of his two sons, viz., the assessee and Brij Bans Bahadur. On December 1, 1950, the father further gifted 33 shares to Krishan Bans Bahadur and 33 shares to his other son, Brij Bans Bahadur. On the original holding of 208 shares, thus received in gift from the father and the grandfather, Krishan Bans Bahadur was allotted by the company from time to time right shares aggregating 452 in all. The entire allotment money for these 452 shares was paid Krishan Bans Bahadur out of the dividends on the original holding of 208 shares. The practice followed by the company, as found by the Tribunal, was of paying dividend cheques by one h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er being personal or being for the donee's branch of the family ; that the manner of distribution of shares among the grandchildren was in the nature of partition of property, indicating the intention of making gift in favour of the branch and not to the donee personally. A regular practice amongst the members of the assessee's family to partition self-acquired property by such gifts not for the individual benefit of the donee, but for the benefit of his branch of the family was also referred to. This practice was said to have been established by an affidavit of Raj Bans Bahadur, which had remained unchallenged. The Tribunal accepted the assessee's arguments and relied on the judgment of the Supreme Court in C. N. Arunachala Mudaliar v. C. A. Muruganatha Mudaliar for the proposition that there could be no initial presumption about the gift being of one category or the other. It was further observed that Krishan Bans Bahadur himself understood and treated the gifts to be in favour of his branch of the family and not to him personally, inasmuch as on the birth of a son he had separately returned the income in the status of undivided family and had opened a separate account and that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, there are no clear words describing the kind of interest which the donee is to take, the question would be one of construction and the court would have to collect the intention of the donor from the language of the document taken along with the surrounding circumstances in accordance with the well-known canons of construction. Stress would certainly have to be laid on the substance of the disposition and not on its mere form. The material question which the court would have to decide in such cases is, whether taking the document and all the relevant facts into consideration, it could be said that the donor intended to confer a bounty upon his son exclusively for his benefit and capable of being dealt with by him at his pleasure or that the apparent gift was an integral part of a scheme for partition and what was given to the son was really the share of the property which would normally be allotted to him and to his branch of the family on partition. In other words, the question would be whether the grantor really wanted to make a gift of his properties or to partition the same. As it is open to the father to make a gift or partition of his properties as he himself chooses, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by him in gift from his uncle in the same manner. These shares were found to have been treated by him as personal gifts. The Tribunal, therefore, was right in holding on the basis of the aforesaid circumstances that the shares in dispute belonged to the joint family of the assessee and not to the assessee personally. So far as 452 right shares are concerned, facts found by the Tribunal conclusively show that payments in respect thereof were made from the dividend income from the shares received in the aforesaid gifts. The same were rightly treated as accretion to the original shares. The answer to the question referred to us in I.T.R. 28 of 1969, therefore, is in the affirmative, i.e., in favour of the assessee and against the revenue. An attempt was made by Mr. Kirpal to distinguish the case of Brij Bans Bahadur, the assessee in I.T.R. No. 80 of 1941, by pointing out that he had not treated the shares as belonging to the Hindu undivided family immediately, when his family had come into being. After the assessee's marriage, he got two daughters, one after the other. The said assessee, said the counsel, could at that time have claimed the shares to be the property of the join ..... X X X X Extracts X X X X X X X X Extracts X X X X
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