Decided on October 30,1979


Cited Judgements :-



Nagendra Prasad Singh, J. - (1.)ON applications being filed on behalf of the Commissioner of Income-tax, Bihar, for stating the case and making reference to this court, the Tribunal, in exercise of the power conferred on it by Sub-section (1) of Section 256 of the I.T. Act, has referred the following questions of law arising out of its order :
" (1) Whether, on the facts and in the circumstances of the case, there was a valid gift of 35 shares by the assessee to his minor son, Vijoy Kumar Rajgarhia ?

(2) If the answer to question No. (1) be in the negative, whether, on the facts and in the circumstances of the case, the dividend income on 35 gifted shares could be included in the assessment of the assessee ? "

(2.)THE assessee-opposite party is an HUF which derives income from interest, dividend, etc. It appears that one Jhohar Mull had two sons, Rai Saheb Sundar Mull and Ram Kumar. Rai Saheb Sundar Mull had six sons. Partition took place in the family of Rai Saheb Sundar Mull. THE assessee, Ram Gopal Rajgarhia, who is one of the sons of the said Rai Saheb Sundar Mull, apart from other properties, received 62 shares of India Mica Supply Company Ltd. In 1951, he purchased three further shares, and, as such, he held 65 shares in the aforesaid company. In the year 1952, he gifted 35 shares out of the aforesaid 65 shares to his minor son, Vijoy Kumar Rajgarhia. For the assessment years after 1953-54, the assessee returned the dividend on 30 shares only and assessment orders were passed. But, subsequently, the ITO initiated a proceeding under Section 147(a) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), on the ground that the asses-see as the karta of the HUF, could not have made a gift in favour of his minor son. On that view, he included the dividend received by Vijoy Kumar Rajgarhia on the basis of the gift aforesaid, in the total income of the assessee. THE action of the ITO was questioned in appeals but the AAC affirmed the same. THEreafter, appeals were preferred before the Income-tax Appellate Tribunal, THE Tribunal came to the conclusion that the gift of 35 shares by the assessee in favour of his minor son was a valid one, and the dividends received on the gifted shares could not be included in the total income of the assessee. THE five taxation cases relate to five assessment years beginning from 1959-60 and ending with 1963-64 and as common questions of law and facts are involved they were heard together and are being disposed of by a common judgment.
It cannot be disputed that once question No. (1) is answered in the negative, question No. (2) has to be answered in the affirmative. As such, the main question which is to be considered by this court is as to whether in the facts and circumstances of the present case the gift of 35 shares by the assessee to his minor son was permissible in law. I may point out at the outset that the gift in question is being impeached only on legal grounds and not on the ground that it was a fraudulent device on the part of the assessee to escape the assessment over the dividends received against 35 shares.

Learned standing counsel appearing for the department submitted that a coparcener cannot make a gift of his undivided interest in the family property, movable or immovable. In support of this contention, he made reference to Article 258 of Malta's Principles of Hindu Law and to the cases of Baba v. Timma [1883] ILR 7 Mad 357 [FB], R. Runganatham Chetty v. Ramasami Chetti [1903] ILR 27 Mad 162 [FB], Venkatappayya v. Raghavayya, AIR 1951 Mad 318 and Sripati Panditharadhyulu Saraba Salvalingam v. Mudigonda Lingamurthy, AIR 1962 AP 173. In the case of Baba [1883] ILR 7 Mad 357 [FB], after referring to different scriptures, it was held that a Hindu father while joint with his sons has no power, except for purposes warranted by special texts, to alienate his undivided share in the ancestral estate. In the case of R. Runganatham Chetty [1903] ILR 27 Mad 162 [FB], the Madras High Court again took the same view saying that it was incompetent to an undivided member of a Hindu family to alienate by way of gift his undivided share. In the case of Venkatappayya v. Raghavayya, AIR 1951 Mad 318, it was observed that except in special cases recognised by Hindu Law text and judicial authority, a coparcener in a Mitakshara family cannot convey by gift his undivided share and any such alienation is invalid. However, a Full Bench of five judges of that very court in the case of K. Peramanayakam Pillai v. S. T. Sivaraman, AIR 1952 Mad 419 [FB] again reconsidered the question about the alienation of undivided interest by a member of the family and it was held that a coparcener of a joint Hindu family governed by the Mitakshara law was entitled to alienate his undivided share either in the whole of the property or in part; in all such cases the only right which the alienee acquires " is to stand in the shoes of his vendor and to work out his rights by a suit for partition and in such a suit, if without prejudice to the rights of the other members of the family, it is possible to have the share alienated allotted to the alienor, it may be allotted to the alienee in the right of the alienor. If, however, the alienation is made by a father or manager which is supported by legal necessity such alienation has to be upheld."

Learned standing counsel urged that neither there is any evidence that the gift was made with the consent of other coparceners nor is there any question of its having been made for any legal necessity. According to him, this cannot be for pious purpose as well. In support of this contention, he placed reliance on the judgment of the Supreme Court in the case of Ammathayee alias Perumalakkal v. Kumaresan alias Balakrisknan, AIR 1967 SC 569, where it was held that a gift in respect of ancestral property by the husband to his wife or by a father-in-law to his daughter-in-law cannot be held to have been made for pious purposes. In that very judgment, it was pointed out that any gift in favour of the daughter may be and has been held by different courts to be for pious purposes, because it was the pious duty of the father to marry his daughter.

In the case of Guramma Bhratar Chanbasappa Deshmukh v. Mallappa Chanbasappa, AIR 1964 SC 510, it was observed (p. 519):

" The legal position may be summarized thus : The Hindu law texts conferred a right upon a daughter or a sister, as the case may be, to have a share in the family property at the time of partition. That right was lost by efflux of time. But it became crystallized into a moral obligation. The father or his representative can, make a valid gift, by way of reasonable provision for the maintenance of the daughter, regard being had to the financial and other relevant circumstances of the family. By custom or by convenience, such gifts are made at the time of marriage, but the right of the father or his representative to make such a gift is not confined to the marriage occasion. It is a normal (moral) obligation and it continues to subsist till it is discharged. Marriage is only a customary occasion for such a gift. But the obligation can be discharged at any time, either during the lifetime of the father or thereafter. It is not possible to lay down a hard and fast rule, prescribing the quantitative limits of such a gift as that would depend on the facts of each case and it can only be decided by courts, regard being had to the overall picture of the extent of the family estate, the number of daughters to be provided for and other paramount charge and other similar circumstances."

(3.)ON that view, the gift made in that case was upheld because it was within a reasonable limit and for a pious purpose. From the judgment it appears that the gift was also in respect of immovable property and perhaps because of that test about the pious purpose had to be fulfilled.
Now, it is almost settled that a father can make a gift of ancestral movable property within reasonable limits for purposes which have been recognised under Mitakshara law as pious or permissible in law. A father can make a gift of ancestral movable property without the consent of his sons within reasonable limits for the purpose of performing " indispensable acts of duty, and for purposes prescribed by texts of law, as gifts through affection, support of the family, relief from distress and so forth ". Similarly, a Hindu father or other managing member has power to make a gift within reasonable limits of ancestral immovable property for " pious purposes ". Whereas in cases of movable property it can be out of affection, so far as immovable property is concerned it has to be for pious purposes. This distinction has been also pointed out in Mulla's Hindu Law (Articles 225 and 226). Learned standing counsel has referred to cases which had to consider the validity of gifts in respect of immovable properties and for that purpose it was tested as to whether they were for one of pious purpose or not. That consideration is not a must for gift in respect of movable properties. In the aforesaid judgment of the Supreme Court in Ammathayee alias Perumalakkal v. Kumaresan alias Balakrishnan, AIR 1967 SC 569, itself when it was urged on behalf of the donee that the gift can be upheld is having been made in token of love by a father-in-law to the daughter-in-law, it was observed that gifts which are made in token of love in respect of undivided shares, " generally such gifts are of movable property ".

The case with which we are concerned, the gift related to movable property. If it is held to be within reasonable limit then certainly the assessee could have made the gift in question in favour of his son out of love and affection. In the case of S. Raghbir Singh Sandhawalia v. CIT [1958] 34 ITR 719 (Punj), a Bench of the Punjab High Court upheld a gift of sum of Rs. 2,40,000 representing the paid up value of 300 shares in favour of the wife of the assessee as a gift of movable property out of love and affection. It was also held to be within reasonable limits because the assessee possessed properties of several millions of rupees. Similar view was expressed by a Bench of the Allahabad High Court in the case of Jugal Kishore Jai Prakash v. CIT [1971] 79 ITR 598 (All). It was observed that the karta of an HUF may gift a portion of the ancestral movable property to a member of the family within reasonable limits. From the statement of facts, if appears that the total wealth of the assessee had been computed for the purpose of wealth-tax in the year 1957-58 at more than rupees seven lakhs, out of which even allowing a deduction for the liability of rupees four lakhs, his total wealth was above rupees three lakhs. In such a situation, the gift of 35 shares, the total value whereof being Rs. 35,000 only, cannot be held to be beyond the reasonable limits. In such a situation, I am of the view that the gift of 35 shares by the assessee to his minor son cannot be held to be invalid in law.

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