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1961 (7) TMI 89

..... eference by the Income-tax Appellate Tribunal, Delhi Bench, in pursuance of a direction made by a bench of this court under section 66(2) of the Indian Income-tax Act. The material facts are these. The assessee is a Hindu undivided family consisting of two adult members, Braham Dutt Bhargava and Mahesh Dutt Bhargava, being brothers, and of their minor sons, each brother having three sons in number. The assessment year under consideration was 1952-53, the relevant accounting year being 1951-52. The dispute is about certain shares which originally belonged to the assessee family but which were settled in trust by the manager of this Hindu undivided family, Braham Dutt Bhargava, by a trust deed (exhibit A) dated September 3, 1951, to which the other brother, Mahesh Dutt Bhargava, was a consenting party. By this trust deed, the shares in question which were of the face value of ₹ 1,00,068-8-0, and the particulars whereof were given in the schedule annexed to the deed, were set apart by way of trust in pursuance of a declaration to that effect made by the manager, Braham Dutt Bhargava, on the occasion of the "Yagyopavit Sanskar" of the three sons of Braham Dutt Bhargava .....

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..... 954, the Tribunal dismissed the appeal. This order was rather a short one. The learned Members held that the position was that, so far as the assessee family was concerned, the sum of ₹ 1,00,068 no longer belonged to it, and did not belong to it during the relevant year of account. Thereafter, the Commissioner of Income-tax preferred an application under section 66(1) of the Income-tax Act for referring the following two questions of law to the High Court: "(1)Whether on the material before it the Tribunal was entitled to find that the assets comprised in the trust deed dated 3rd September, 1951, no longer belonged to the assessee family? (2)Whether on the facts and in the circumstances of the case the dividend income from the shares purporting to be settled on trust under the deed, dated 3rd September, 1951, is assessable in the hands of the assessee family?" The Tribunal by its order dated May 18, 1956, dismissed this application. It may be pointed out at this stage that in the statement of facts accompanying the application under section 66(1), the Commissioner of Income-tax submitted that the position at which the Tribunal had arrived, namely, that the sum of &# .....

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..... d D.M. Bhandari JJ.) repelled the objection thus: "The grounds of appeal were not restricted to any objection under section 16(3) or that the trust was in any way defective but were wide enough to cover the contention that it was void for other reasons as well. The question as to the validity of the trust must have been agitated before the Income-tax Tribunal and the finding thereon is that so far as the family is concerned the sum of ₹ 1,00,068 no longer belonged to the family. The question whether these shares continued to belong to the family was obviously agitated and the decision was given against the Income-tax Officer. It cannot, therefore, be said that the validity of the trust was not in dispute before the Income-tax Appellate Tribunal." The learned judges further went on to observe as follows: "The point in dispute was whether the trust sought to be created was valid so as to lead to a conclusion that the assets comprised no longer belonged to the assessee family. The Tribunal was quite right when it went on to observe that the trusts are to be regarded as gifts but did not appreciate the contention that a gift could not be made in a joint Hindu famil .....

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..... should direct a case to be stated and referred. But it is important to remember that the question of law on which a reference can be asked for by the aggrieved party or compelled by the High Court must be a question arising out of the Tribunal's order. What is a question of law in this context ? The answer, broadly speaking, is that such a question must have been pleaded before the Tribunal and further it must have been properly before it so that the Tribunal should have been in a position to apply its mind to the question sought to be raised. The position, therefore, must be that where a point of law has not been raised before the Tribunal at the proper stage and in a proper manner, or it was never taken up at all before the income-tax authorities so that the necessary materials for founding a definite conclusion thereon are absent or are available only in an imperfect or incomplete form, such a question cannot be held to arise out of the order of the Tribunal within the meaning of section 66(1) of the Act. And on a rational and harmonious interpretation of section 66(2), it is only to such a question that the provisions of this sub-section could be attracted. The indisputabl .....

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..... f Property Act, 1916, and this position has not been disputed before us. It was on account of these two reasons-and no other reason has at all been mentioned by him in his order-such as the incompetency of the karta of a joint Hindu family to make a gift under the Hindu law, that the Income-tax Officer came to the conclusion that the trust deed was defective or a sham transaction. The controversy centered around these two reasons and no others before the Appellate Assistant Commissioner also, to whom an appeal was carried on behalf of the assessee from the order of the Income-tax Officer. It seems to us that if the question of the competency of the manager of the assessee family to make a valid trust under the Hindu law had been raised, the learned Appellate Assistant Commissioner should not have failed to mention it in his order. From this order, there was an appeal before the Appellate Tribunal. The ground of appeal was a single one, namely, that in the facts and circumstances of the case, the Appellate Assistant Commissioner was not justified in directing that the dividend income settled in trust by the assessee be excluded from the income of the Hindu undivided family. It is ob .....

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..... which goes to the root of our jurisdiction, was still open before us, we should have had no hesitation in declining to answer the reference on this ground alone. But the question is not free from a certain amount of difficulty as to whether it is permissible to us as matter of law to re-examine and give effect to the objection raised before us in this regard at this stage, unaffected and uninfluenced by what another bench of this court did on the previous occasion when it invited a reference under section 66 (2). This very question was raised by the learned Attorney-General before their Lordships of the Supreme Court in Commissioner of Income-tax v. Arunachalam Chettiar [1953] 23 ITR 180 ; [1953] S.C.R. 463 wherein an analogous situation arose before the Madras High Court, a reference having been compelled from the Appellate Tribunal by a bench of that High Court, but which another bench hearing the reference refused to answer. Their Lordships, however, declined to make any pronouncement on the procedural point raised before them and observed that whether the High Court was precluded or not from answering a reference having directed the Tribunal to state a case under section 66 (2 .....

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..... which arises for determination in these circumstances is, whether a gift made by the karta of a joint Hindu family of the kind we have before us is altogether void. We may make it clear that it was throughout assumed. before us that the same principles would govern the making of a valid trust as are applicable to the making of a gift by a member of a joint Hindu family. Learned counsel for the department placed strong reliance on the following passage from paragraph 258 of Principles of Hindu Law by D.F. Mulla, 12th edition: "According to the Mitakshara law as applied in all the States, no coparcener can dispose of his undivided interest in coparcenary property by gift. Such transaction being void altogether there is no estoppel or other kind of personal bar which precludes the donor from asserting his right to recover the transferred property. He may, however, make a gift of his interest with the consent of the other coparceners." It was, therefore, contended that Braham Dutt Bhargava, the author of the trust, being a member of a Hindu coparcenary, had no authority whatsoever in law to make the impugned gift. We have carefully examined this. argument and have not felt p .....

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..... and was her exclusive property. The executing court overruled the objection. Thereupon, the plaintiff filed a suit for declaration. B resisted the suit both as to the factum and the validity of the gift. The trial court held that the property was ancestral and so it could not be gifted by A. It further held, however, that B being a stranger to the family had no locus standi to object to the validity of the gift and in this view of the matter the suit was decreed. On appeal to the High Court, a strong contention was raised that the property was ancestral and that the gift thereof by A to the plaintiff was absolutely void and not merely voidable at the instance of the minor son, donor. In other words, it was contended that the alienation was a nullity in the eye of law under which no title whatsoever passed to the plaintiff and B could treat it as A's property. This contention was repelled by the High Court and it was held that, under the Mitakshara law, it was true that the manager of a joint Hindu family could not alienate joint family property except for family necessity or with the consent of the coparceners if they were adults, but it was held to be equally well-settled that .....

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..... erty can be avoided by the other members of the family affected thereby would depend upon the surrounding circumstances of the case, such as the total assets of the family, the proportion of the property gifted to the total assets, the manner in which the interest of some of the members of the family may be affected and so on and so forth. It seems to us that it is hardly for the department to question the validity of a transaction like this, which, after all is said and done, may be, and indeed appears to us to be, a transaction which is entirely for the benefit of the other members of the family. It is pertinent to point out at this juncture that, in any view of the matter, there is no information available to us on the record on some of the points to which we have referred above and which would go to establish the voidability of a gift or otherwise. It may also be permissible to point out in this connection that, if the contention as to the validity of the gift had been raised by the department, assuming but not conceding that they could raise it, they should have themselves brought or elicited from the assessee family the requisite information surrounding the impugned transacti .....

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