High Court Of Madhya Pradesh
Commissioner Of Gift Tax vs. Banshilal Narsidas
Section GT 5(1)(viii)
Kumar Rajaratnam, C.J. & Dipak Misra, J.
MCC No. 52 of 1990
28th October, 2003
Rohit Arya, for the Petitioner : None, for the Respondent
Kumar Rajaratnam, C.J. :
The assessee, Banshilal Narsidas, a Hindu undivided family (in short âHUFâ) consisting of Banshilal, his five sons and wife, gifted gold ornaments valued at Rs. 29,075 in favour of his wife, Smt. Venubai, on 5th Nov., 1980, out of the funds and entered the factum of gift in the books of account of HUF. He filed return in respect of the gift- tax in the status of an HUF and claimed exemption under s. 5(1)(viii) of the GT Act, 1958 (hereinafter referred to as âthe Actâ) raising a contention that he, as the âKartaâ of the HUF, had gifted the gold ornaments belonging to the HUF in favour of his wife and he could have done so in law. The claim was negatived by the GTO on the foundation that it was not a gift by an individual to his wife but was a gift by the âKartaâ of the HUF to one of the members of the HUF out of the assets of the HUF and, therefore, exemption under s. 5(1)(viii) of the Act was not permissible.
2. Being grieved by the aforesaid order, the assessee preferred an appeal before the appellate authority under the Act who expressed the view that the âKartaâ of the family was competent to make a gift and, therefore, was entitled to exemption. Grieved by the aforesaid order, the Revenue went up in appeal before the Tribunal highlighting the contention that a gift by the âKartaâ of the HUF to the wife or any member of the HUF from the assets of the HUF would not come under the conception of exemption as postulated under s. 5(1)(viii) of the Act. The Tribunal declined to accept the aforesaid contention raised by the Revenue and dismissed the appeal.
3. After being unsuccessful in the appeal the Department filed an application under s. 26(1) of the Act for drawing of a statement of case and refer the question of law to this Court for answer of the same. Accordingly the Tribunal has drawn up the statement of case and referred the following question of law : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a gift made by the âKartaâ of the HUF to his wife out of the HUF assets is entitled to exemption under s. 5(1)(viii) of the GT Act ?”
4. We have heard Mr. Rohit Arya, learned senior standing counsel for the Revenue. In spite of a lot of effort notice has not been served on the assessee. However, what we were inclined to state at a later stage, we do not think it necessary to wait for the service return.
5. To appreciate the controversy in issue, it is apposite to reproduce the essential part of s. 5(1) (viii) of the Act which is relevant for our purpose. It reads as under : (viii) to his or her spouse subject to a maximum of rupees fifty thousand in value in the aggregate in one or more previous years, the expression âspouseâ in this clause, where there are more wives than one, meaning all the wives together.” “5. Exemption in respect of certain gifts.â (1)** ** ** Submission of Mr. Arya is that if anatomy of the aforesaid provision is scanned in proper perspective, it would ring as a bell that the gift in question has nexus with an individual and by no stretch of imagination it can have any connectivity with the HUF. The aforesaid submission on a first flush appears to be quite attractive as the learned counsel for the Revenue has laid immense emphasis on the words âany personâ âhis or her spouseâ but on a deeper probe and greater scrutiny, in our considered opinion, the said submission has to pale into insignificance inasmuch as what is material in this provision is the maximum amount and further whether the âKartaâ of the HUF can be a donor under the scheme of the Act.
In this context we may refer with profit to the definition clause to understand the essential concept of donor. It reads as under : “2. Definitions.â** ** ** (ix) âdonorâ means any person who makes a gift;” According to us, the aforesaid definition is quite broad, all-engulfing and encapsulating one. There is no reason or base to give a narrow meaning to the term âdonorâ. What the aforesaid term conveys is that a person who makes a gift is a donor. It is not necessary that he should be the owner of the property but he must be competent to transfer. If the aforesaid concept is read into it there would be no scintilla of doubt that a person who is competent to transfer the property in whole or part and absolutely or with attachment of conditions, he can be a donor. As per Hindu law the âKartaâ of the Hindu family has a right to dispose of the property by way of gift under certain circumstances. If circumstances or conditions precedent are satisfied, the âKartaâ-donor is competent to transfer. This being the centripodal issue and the core question, it is necessitous to understand the basic concept of an HUF. If it is held that an HUF can consist of a single member, his wife and his unmarried daughter, in that context a male member is entitled to deal with his coparcenary property as if it were his separate property. In this regard we may refer with profit to the case of Jana Veera Bhadrayya vs. CGT (1966) 59 ITR 176 (AP) wherein the High Court of Andhra Pradesh accepted the proposition that the âKartaâ of an HUF can make a gift of certain joint family property to his wife and that there is no obstacle or impediment in the way of applicability of s. 5(1)(viii) of the Act. Similar view was expressed by the Punjab & Haryana High Court in the case of CGT vs. Hari Chand (1974) 95 ITR 308 (P&H).
In this context, we may profitably refer to certain passages from the decision rendered in the case of M.S.P. Rajah vs. CGT (1981) 20 CTR (Mad) 336 : (1982) 134 ITR 1 (Mad) wherein the Bench expressed the view as under : “It may be seen from the facts as found by the Tribunal that the jewellery, which were the subject-matter of gift, were owned by the HUF of which M.S.P. Rajah, the father, was the Karta and he gifted them to his wife. The AAC held that having regard to the total wealth of the HUF, the value of the jewels gifted to the wife of the Karta who was a member of the family was within reasonable limits and within the powers of the father-Karta of an HUF. On these facts, therefore, the question for consideration is, whether the donor can be considered to be HUF and not the father-coparcener in favour of his wife in his individual capacity. A mitakshara HUF is purely a creature of law. It cannot be created by the act of parties, except insofar as adoption is concerned, as, by such adoption, a stranger may be introduced as a member thereof. Though a female can be a member of an HUF, she cannot be a coparcener. A joint or undivided Hindu family may consist of a single male member, his wife and his unmarried daughters. In a case, where an HUF consisted of only one male member and the other members were females or the only male member was the sole surviving coparcener, the said male member is entitled to dispose of the coparcenary or an HUF property as if it were his separate property. He may sell, mortgage or he may make a gift of it. These propositions are well-settled and quoting any decision would be pedantic. In this case, therefore, when the father, a sole member, gifted the property in favour of his wife, it could not but be only in his character as an individual with all the powers vested in him in the disposition of joint family property, as if it were his separate property. Since at the time he was the sole surviving member, he had not been fettered by any of the conditions imposed on the Karta of a HUF or a coparcenary and he shall be deemed to have acted in his individual capacity while making the gift in favour of his wife.”
We have referred to the aforesaid passages in extenso to highlight that if the âKartaâ has gifted jewellery to his wife from the HUF and he is competent to do so under the obtaining circumstances, there is no reason to throw the claim of the assessee overboard and deny him the benefit under s. 5(1)(viii) of the Act. In the case at hand, nothing has been brought on record by the Revenue that the husband as the âKartaâ of the family was not entitled because of existence of certain circumstances to make a gift. It is well-settled in law the âKartaâ can make out a gift within reasonable limits and without the consent of the other coparceners. This is a power vested in him in his individual capacity. He does not enjoy the status where the law prohibits or does not authorise him to give individually. Then the matter would be different and the validity of the gift may be called in question. But in the present case the material clearly shows that gift was given by the âKartaâ out of affection and there was no circumstance brought out by the Revenue to invalidate the aforesaid act.
In view of our preceding analysis, we respectfully concur with the view expressed by the Madras High Court in the case of M.S.P. Rajah (supra) and answer the reference in the affirmative in favour of the assessee and against Revenue holding that in the facts and circumstances of the case the Tribunal was right in holding that the gift made by the âKartaâ of the HUF to his wife out of the HUF assets, is entitled to exemption under s. 5(1)(viii) of the Act. The reference is answered accordingly.
[Citation : 270 ITR 231]