V.S. Dave, J. - (1.) THIS reference has been sent by the Income-tax Appellate Tribunal along with the statement of the case, dated November 25, 1975, under Section 26(1) of the Gift-tax Act, 1958 (hereinafter referred to as "the Act"). The Tribunal has referred the following questions to this court for its opinion : "1. Whether, on the facts and circumstances of this case and on a correct reading and interpretation of the agreement dated October 21, 1957, and the partnership deed dated November 1, 1957, Smt. Vidyawati Rathi was possessed of any property within the meaning of Section 14 of the Hindu Succession Act, 1956? 2. Whether, on a correct interpretation of the provisions of Section 3(2) and (3) of the Hindu Women's Rights to Property Act, XVIII of 1937 (as amended by XI of 1938) and Sections 4 and 14 of the Hindu Succession Act, the Tribunal was right in holding that on the death of Seth Vithal Das, husband of Smt. Vidyawati Rathi, in the year 1951, the share of Smt. Vidyawati Rathi became fixed, i.e., 1/3rd of the estate left by Seth Vithal Das, and this 1/3rd share was possessed by Smt. Vidyawati Rathi on the date of passing of the Hindu Succession Act, i.e., on June 17, 1956, and this 1/3rd share became her absolute property ? 3. Whether the Tribunal was right in holding that Smt. Ganga Devi, the grandmother, was not entitled to any share either on the death of Seth Vithal Das or on the passing of the Hindu Succession Act, 1956? 4. If the answer to question No. 3 is in the affirmative, what was the share of Smt. Ganga Devi ? 5. Whether, on the facts and circumstances of this case, in determining the share possessed by Smt. Vidyawati Rathi on the coming into force of the Hindu Succession Act, all liabilities including book debts and the properties allotted to Smt. Vidyawati Rathi and Smt. Ganga Devi had to be taken into consideration ? 6. Whether, on the facts arid in the circumstances of the case, the Tribunal was right in holding that the assessee by giving up her share or interest in the joint family property in favour of her two sons transferred the property within the meaning of Section 2(xxiv) of the Gift-tax Act, 1958, and thus made a gift as defined by Section 2(xii) of the Act? 7. Whether, on the facts and in the circumstances of the case, the Tribunal was right in giving a finding in the alternative that the act of the assessee amounts to a deemed gift within the meaning of Section 4(c) of the Act ? 8. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the gift was liable to be assessed in the assessment year 1958-59 and not in 1959-60 ? 9. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the notice dated February 12, 1965, issued by the Gift-tax Officer under Section 16(1)(a) of the Gift-tax Act. 1958, was within time? 10. Whether, on the facts and in the circumstances of the case and also in view of the provisions of the Hindu law, the Hindu Women's Rights to Property Act and the Hindu Succession Act, Smt. Vidyawati Rathi made a gift of the property valued at Rs. 8,01,074 and the same is liable to gift-tax under the Gift-tax Act, 1958 ?"
(2.) THIS reference has been made at the instance of the assessee, Smt. Vidyawati Rathi, and pertains to the assessment year 1958-59. The assessee was assessed under the Gift-tax Act where she was taxed on a sum of Rs. 7,92,074 considering the value of the gift as Rs. 8,01,074. The assessee filed the return of gift as an "individual". The assessee is the widow of Seth Vithaldas Rathi who died in the year 1951. She is the widowed mother of Sarv/Sh. Seth Mukunddas Rathi and Seth Gokuldas Rathi, coparceners of the Hindu undivided family, styled as M/s. Thakurdas Khinvraj, Beawar, which owns movable and immovable properties. After the death of her husband, she inherited the same rights in the Hindu undivided family properties which were possessed by her late husband, namely, Seth Vithaldas Rathi, at the time of his death by virtue of Section 3(2) of the Hindu Womens Rights to Property Act, 1937. It would be pertinent to mention the genealogical table which is given below : JUDGEMENT_708_ITR169_1988Html1.htm Seth Damodardas died in the year 1920 leaving behind his wife, Sethani Gangabai, and son, Seth Vithaldas. After the death of Seth Vithaldas in the year 1951, the family jewellery was divided amongst the members of the family on or about April 9, 1952. On October 21, 1957, an agreement was made between Seth Mukunddas, Seth Gokuldas and Sethani Gangabai and the assessee whereby an arrangement was made in respect of the assets of the family. A copy of this agreement is annexure "A" to the statement of the case. Under this agreement, it was decided that during the lifetime of Sethani Gangabai and the assessee, Seth Mukundas and Seth Gokuldas shall keep a joint mess and shall divide the expenses between themselves every year in equal proportions irrespective of any disparity in the number of the members of the family of either of them. By the said agreement, it was also agreed that Seth Mukunddas and Seth Gokuldas shall divide between themselves the net assets of each of the businesses hithertofore carried on by the family determined after taking into account all the back debts due to or by each such business and the assets including stock-in-trade, cash balances at bank and at hand but excluding the immovable properties comprised in the assets thereof and after division of the assets as aforesaid, both the parties named above may carry on the respective business in partnership under the existing or any other names or styles as they may agree. The existing businesses of the family are enumerated in annexure "A" to the said agreement. The said agreement also provided for division in equal proportion between Seth Mukunddas and Seth Gokuldas of the shares and securities mentioned in annexure "B" to the said agreement. As regards the immovable properties belonging to the family, which were mentioned in annexure "C" to the agreement, it was provided that the same shall continue to be the assets of the family so long as Seth Mukunddas and Seth Gokuldas do not agree to partition the same and if and when they decide to partition the same, they may do so and divide the same between themselves in equal proportion. The said agreement further provided that if Seth Mukunddas and Seth Gokuldas abide by the advice tendered in the agreement, the assessee and Sethani Gangabai would not claim any share in the said immovable properties upon such partition or division, nor would they claim any share in the division of the businesses and their assets made in pursuance of the advice and guidance given in the agreement as they were contented with whatever assets they already had. In accordance with the aforesaid agreement dated October 21, 1957, an entry was made in the books of M/s. Thakurdas Khinvraj on October 24, 1957, wherein it was mentioned that after excluding the immovable properties and liabilities to the extent of Rs. 9,93,107.37, the assets of the joint family are Rs. 24,03,221.11 which amount has been divided in equal shares as per agreement dated October 21, 1957, and on that basis Rs. 12,01,610.55 was credited in the name of Seth Mukunddas and Rs. 12,01,610.56 was credited in the name of Seth Gokuldas. A copy of the aforesaid entry in the books of M/s, Thakurdas Khinvraj is annexure "B" to the statement of the case. Seth Mukunddas and Seth Gokuldas entered into partnership to carry on the business in the name of Seth Thakurdas Khinvraj with effect from October 24, 1957. The terms and conditions of the partnership were set out in a partnership deed executed by them on November 1, 1957, a copy of which is annexure "F" to the statement of the case. A copy of the partnership deed was submitted before the Income-tax Officer-cum-Gift-tax Officer on April 18, 1958.
(3.) THE Gift-tax Officer, Beawar, issued a notice dated February 12, 1965, under Section 16(1) of the Act to the assessee wherein it was stated that on partition of the joint family properties, whether partial or complete, the assessee, as a member, was entitled to a share equal to that of her: son and that the assessee was entitled to l/3rd share, viz., Rs. 8,01,073.70 in the assets worth Rs. 24 lakhs odd in respect of which partition was done and since the assessee has not taken her aforesaid share, she has gifted her share to her sons, Seth Mukunddas and Seth Gokuldas. In response to the aforesaid notice, the assessee submitted a return stating that the provisions of the Act were not attracted as she has not made any gift taxable under the Act. The assessee came out with a case of partial partition and submitted that in the agreement itself a decision was taken regarding business assets of the family, jewellery and household belongings having been already divided and that the immovable properties of the family continued to be owned and possessed by the joint family. It was submitted that the family is governed by Mitakshara branch of Hindu law and the object and purpose of the family arrangement was to ensure the maintenance of good relations between the several members of the family. It was further submitted that this was all done with mutual consideration. The Gift-tax Officer, however, did not agree with the contention of the assessee that the provisions of the Gift-tax Act are not applicable and by his order dated December 16, 1965, he held that the only documentary evidence of partition is an entry in the account books of the family whereby Rs. 24,03,221.11 have been equally divided between Seth Mukunddas and Gokuldas and since the assessee was entitled to 1/3rd share in this amount, it shall be considered as if the assessee has relinquished, surrendered, forfeited or abandoned her 1/3rd share valued at Rs. 8,01,073.70 in favour of her two sons which amounts to a gift and hence the provisions of Section 2(xxiv)(d) of the Gift-tax Act read with Section 4(1)(c) of the Act are attracted. ;