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TMI Blog1973 (7) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, 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 holding that the Appellate Assistant Commissioner of Income-tax was justified in reducing the interest income from Rs. 13,352 to Rs. 6,157 ? " In Wealth-tax Reference No. 2 of 1972, the following questions were referred under section 27(1) of the Wealth-tax Act, 1957 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 774 shares of M/s. Instalment Supply Co. (P.) Ltd. belonged to the Hindu undivided family and in excluding the value thereof from the individual asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adur), 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 hand and of taking back by the other the same cheques duly endorsed by the shareholder in its favour towards allotment money of the newly issued right shares. Krishan Bans Bahadur used to show the dividend on the shares and the interest on the accumulated dividends deposited with the company, in his individual income-tax returns till the birth of his son, Siddhartha, on October 23, 1959. There was no occasion, then, for any controversy about the ownership of these shares between him and his Hindu undivided family, as he had no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 he had not treated the shares received from his uncle as property of his undivided family. Under these circumstances, the Tribunal was satisfied that the gifts were not personal to the assessee but in favour of his branch of the family ; and that the 452 right shares were mere accretion to the original 208 shares received in gift and, therefore, belonged to the joint family. Mr. B. N. Kirpal, appearing on behalf of the revenue, submitted that the approach of the Tribunal was completely erroneous as there could be no question of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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, there is, strictly speaking, no presumption that he intended either the one or the other." Surrounding circumstances, thus have to be examined to ascertain the real intention of the donor, as express mention about the nature of the gifts is nowhere available. The grandfather had seven grandsons. In the absence of any indication to the contrary, it is safe to assume that he had the same love and affection for each of them. If, therefore, the gifts were intended to be made personally to the grandsons, the distribution of the shares wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 joint family. Mr. Kirpal referred to Gowli Buddanna v. Commissioner of Income-tax, where the Supreme Court observed that there need not be more than one male member to form a Hindu undivided family as a taxable entity under the Income-tax Act. Joint family was distinguished from a Hindu coparcenary, which is a much narrower body including only those who acquire an interest by birth in the joint or coparcenary property. Reference was also made by him to the decision of the Mysore High Court in this very case, reported as [1963] 50 I.T.R. 467, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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