Commissioner of Gift-tax vs Gulraj Baboolal

A.K. Mathur, C.J.—This is a reference u/s 26(1) of the Gift-tax Act, 1958 (for short, "the Ad"), at the instance of the Revenue and: the following question has been referred for answer by this court :

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a gift made by the karta of the Hindu undivided family to his wife out of the Hindu undivided family assets is entitled to exemption u/s 5(1)(viii) of the Gift-tax Act ?"

The brief facts giving rise to this reference are these : The assessment year is 1982-83. The assessee is the sole surviving coparcener of the Hindu undivided family which consists of himself and his wife, Smt. Rashma Devi. The assessee gifted Rs. 50,000 to his wife on October 24, 1981, and executed a memorandum of gift in respect of that gift. He claimed exemption u/s 5(1)(viii) of the Act. He contended that being the sole surviving coparcener, he was competent to gift Rs. 50,000 to his wife out of the funds of the Hindu undivided family. The claim was negatived by the Gift-tax Officer on the reasoning that it was a gift by the karta of the Hindu undivided family to one of the members of the Hindu undivided family out of the assets of the Hindu undivided family and, therefore, he is not entitled for exemption u/s 5(1)(viii) of the Act. The assessee went up in appeal and the Appellate Assistant Commissioner following the decision of the Madras High Court in the case of M.S.P. Rajah Vs. Commissioner of Gift-tax, Madras, held that the gift was made by the assessee as karta of the Hindu undivided family which he was competent to do. He, there-'' fore, allowed the exemption. Thereafter, the Department took up the matter in appeal before the Tribunal which affirmed the finding of the appellate authority. Hence, this reference has been made by the Tribunal at the instance of the Department.

We have gone through the record and heard learned counsel for the parties. Baboolal Jain, being the sole surviving coparcener of the Hindu undivided family, was competent to gift away the property to his wife for love and affection and there is no prohibition under the Hindu law. The Gujarat High Court, in the case of Anilkumar B. Laskari Vs. Commissioner of Income Tax, Gujarat, and the Bombay High Court, in the case of Commissioner of Income Tax, Bombay City-V, Bombay Vs. Anil. J. Chinai, , following the view taken by the Madras High Court in M.S.P. Rajah Vs. Commissioner of Gift-tax, Madras, , have successively taken the view that the only male of the Hindu undivided family is competent to alienate the property. The assessee has alienated the property to his wife for love and affection which is not prohibited under the Hindu law.

Therefore, the view taken by the Tribunal is correct. The reference is answered in favour of the assessee and against the Revenue.