Commissioner of Gift-tax vs Tarlok Singh

Ashok Bhan, J. 1. At the instance of the Commissioner of Gift-tax, Patiala, the following question of law had been referred to this court for its opinion by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") :

" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in affirming the order of the Appellate Assistant Commissioner of Gift-tax cancelling the assessment order passed by the Gift-tax Officer against the assessee ?"

The assessee, an agriculturist, is a Jat Sikh by caste. During the course of the wealth-tax proceedings, it was noticed by the Gift-tax Officer that the assessee had transferred agricultural land measuring 70 kanals 12 marlas to his four major sons ; Sarvshri Gurpal Singh, Rachhpal Singh, Gurdial Singh and Hardial Singh, by virtue of a court decree dated April 16, 1972. Since, the transfer was without consideration, the Gift-tax Officer treated it to be a gift u/s 4 of the Gift-tax Act, 1958 (hereinafter referred to as "the Act"). The assessee pleaded before the Gift-tax Officer that the transfer relates to an ancestral land and that as no valid gift can be made of the ancestral property by a father to his son, the gift being void and there being no gift within the meaning of the Act, the same could not be subjected to gift-tax. The Gift-tax Officer did not accept this plea and took the view that the assessee is a Jat Sikh by caste and is absolute owner of the agricultural land and, therefore, he had a right to make a gift of his property to his sons. Treating the gift to be valid, the Gift-tax Officer levied the tax.

In appeal, the Appellate Assistant Commissioner accepted the contention of the assessee. He concluded that the decision of the Gift-tax Officer was based on a decision of this court in CONTROLLER OF ESTATE DUTY Vs. HARBANS SINGH OVERRULED IN PRITAM SINGH v. ASSISTANT CONTROLLER OF ESTATE DUTY., which was subsequently overruled by a larger Bench in Pritam Singh Vs. Assistant Controller of Estate Duty, . In Pritam Singh Vs. Assistant Controller of Estate Duty, it was held that a Jat Sikh can constitute a joint Hindu family. Further, relying upon COMMISSIONER OF GIFT-TAX, PATIALA Vs. TAJ NATH., that a karta cannot validly gift the ancestral property to the son who is a coparcener, the appeal was allowed and the order of the Gift-tax Officer set aside. The appeal filed by the Revenue before the Tribunal was dismissed.

In Pritam Singh Vs. Assistant Controller of Estate Duty, it has been held that a Jat Sikh is a Hindu for the purposes of the Hindu Succession Act, 1956, and normally a person shall be presumed to be governed by his personal law unless proved to the contrary. A Jat Sikh being a Hindu, is ordinarily governed by his personal law, i.e., the Hindu law, and, therefore, there is a presumption that he constitutes a joint Hindu family. The property being ancestral in nature, the same was Hindu undivided family property. The assessee and his sons formed a coparcenary.

The next question to be examined is whether a karta of a Hindu undivided family can make a valid gift of ancestral property either to a coparcener or a stranger. A coparcener becomes owner of the ancestral property by birth. Under the Hindu law, a karta is not the absolute owner of the property. Each coparcener is the owner of every bit of the property till a partition takes place. The karta of the Hindu undivided family cannot make a gift of a property to another coparcener who is already an owner of that property. One cannot be gifted a property of which he is already the owner.

In COMMISSIONER OF GIFT-TAX, PATIALA Vs. TAJ NATH., a Full Bench of this court held as under (at page 103) :

" The property admittedly is coparcenary property. The three sons of the donor had interest in it by birth. In other words, the donor and his three sons were the owners of every bit of property and none of them could say till there was a partition that any one of them had a specific share in it. The other three donees, i.e., the brother''s widow, the mother and the step-mother are not the members of the coparcenary and, to all intents and purposes, would be strangers. So far as the gift to the three females is concerned, the gift, being to strangers of coparcenary property, would be void. The Rule of Hindu law on this matter is clear and no authority taking a contrary view has been brought to our notice. So far as the three sons are concerned, there would be no transfer of ownership from the donor to the donee, because the donees are themselves also owners of the property. They would not be acquiring any property under the gift. It is not a case where there has been a partition of the property and the father is transferring his share after the partition to the sons by gift. Therefore, in the case of sons, there would be no gift within the meaning of the Gift-tax Act. And if there is no gift, the jurisdiction of the Gift-tax Officer to tax the same does not arise. It was conceded by Mr. Awasthy, learned counsel for the Department, that the factum of the gift has to be proved, i.e., there must be a gift within the meaning of the Gift-tax Act before the gift can be held to be taxable. If there is no gift, the Gift-tax Officer cannot bring it to tax. However, the text of Hindu law is very clear that a father cannot make a gift of the coparcenary property to his minor sons. If he does so, the gift would be void. It appears to me that in view of the provisions of the Gift-tax Act and the provisions of the Hindu law, the gift in question would be void."

The ratio of the aforesaid case is fully applicable to the point involved in the present case. A father, being the karta of a Hindu undivided family, could not make a gift of the ancestral property either to a coparcener or to a stranger. Such a gift would be void per se and, therefore, there would be no gift within the meaning of the Act, which would be liable to gift-tax. The Tribunal was right in law in affirming the order of the Appellate Assistant Commissioner of Gift-tax cancelling the assessment order passed by the Gift-tax Officer against the assessce.

The question referred to us is answered in the affirmative, i.e., against the Revenue and in favour of the assessee. No costs.