Commissioner of Gift-tax vs Harbhajan Singh and Sons

J.V. Gupta, J.—The Income Tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law u/s 26(1) of the G.T. Act, 1958 (hereinafter referred to as "the Act"), for the decision of this court :

"Whether, on the facts of this case, the Tribunal was right in law in holding that the gift in favour of the wife of the ''karta'' of the assessee-Hindu undivided family attracted the provisions of Section 5(1)(viii) of the Gift-tax Act ?"

The assessee is a HUF. The year ending 31st March, 1970, was the previous year relevant to the assessment year 1970-71. The assessee furnished to the GTO the statutory return due under the Act. During the said previous year, the assessee-HUF sold out of the agricultural lands owned by it, certain lands totally measuring in area 62,296 sq. yards and out of the sale proceeds thereof, an amount of Rs. 1,05,000 was verbally gifted to Smt. Shavinder Kaur, the wife of the "karta" of the asseasee-family. The GTO by his order dated 14th December, 1971, completed the gift-tax assessment after repelling the assessee''s claim that the said gift was to the extent of Rs. 50,000 exempt from gift-tax by virtue of the provisions of Section 5(1)(viii) of the Act. On appeal, the AAC of Gift-tax by his order dated 16th March, 1972, confirmed the order of the GTO. He found that the gift in question had been made by Shri Harbhajan Singh in his capacity as "karta" of the family and not in his capacity as an "individual ".

On second appeal, the Tribunal accepted the assessee-family''s contention that the gift in question was to the extent of Rs. 50,000 exempt as aforesaid. In coming to the said conclusion, it relied on a case, JANA VEERA BHADRAYYA Vs. COMMISSIONER OF GIFT-TAX, ANDHRA PRADESH., , and also on a judgment of this court in Commissioner of Gift-tax Vs. Hari Chand, .

Earlier this reference came up for hearing before a Division Bench of this court and the Bench, after hearing the parties, vide its order dated 4th October, 1976, directed the Income Tax Appellate Tribunal to submit an additional statement as to whether the gift was made by Shri Harbhajan Singh as individual to individual or as representing a HUF. In the additional statement filed by the Tribunal, it has been stated that Harbhajan Singh made the gift to his wife and daughter simultaneously in his capacity as the karta of his jpint family, and not as individual to individual. In view of this finding of the Tribunal, the authorities relied upon by it are clearly distinguishable. In JANA VEERA BHADRAYYA Vs. COMMISSIONER OF GIFT-TAX, ANDHRA PRADESH., , the Andhra Pradesh High Court expressly stated (p. 177):

"The controversy relates to the capacity, in which he made the gift. It cannot be postulated that he made the gift as the manager of the family, since the words of the document make it abundantly clear that it is in his capacity as the husband that he made the gift."

Similarly, in Commissioner of Gift-tax Vs. Hari Chand, it was stated (p. 312):

"It is significant that before the Tribunal it was not urged by the department that the gift was not made by Hari Chand as Hari Chand but as Hindu undivided family. The description of Hari Chand as karta is, therefore, beside the point."

In both the cases, the finding was that the gift was made by the donor not as karta of the HUF but as individual to individual. In the present case, if the gift was made as karta of the HUF, then the provisions of Section 5(1)(viii) are not attracted, because there cannot be any spouse of the HUF as such as contemplated therein. In this view of the matter, the Tribunal was wrong in law in holding that the gift in favour of the wife by the karta of the assessee-HUF attracted the provisions of Section 5(1)(viii) of the Act. Thus, the question is answered in the negative, i.e., in favour of the revenue. Since there is no representation on behalf of the assessee, there is no order as to costs.

Rajendra Nath Mittal, J.

I agree.