COMMISSIONER OF GIFT TAX Vs. RAMACHANDRA BHAT V

JUDGEMENT

(1.) THIS is a reference under section 26(1) of the Gift-tax Act, 1958, hereinafter called "the Act". The assessee was a member of a Hindu undivided family. He had acquired by his personal exertions a good deal of property both movable and immovable. By a deed dated November 16, 1963, the assessee declared two of his self-acquired properties to the properties of the Hindu undivided family consisting of himself, his three sons and his wife and by the same deed one of the properties known as "Ashok Hotel" was partitioned among the members of the family. The Gift-tax Officer, Hubli, called upon the assessee to file a return under the Act. The assessee filed a return showing nil gift but declared Rs. 86,953 in Annexure "I". The assessee contended before the Gift-tax Officer that the unilateral declaration of a Hindu coparcener, whereby he throws his self-acquired property into the common stock of joint family property does not amount to a transfer so as to attract the provisions of the Act. The Gift-tax Officer overruled the contention of the assessee and assessed tax following the decision of the Andhra Pradesh High Court in Commissioner of Gift-tax v. C. Satyanarayanamurthy.

(2.) ON appeal preferred by the assessee, the Appellate Assistant Commissioner held that no tax was leviable under the Act, following the decision of this court in D. H. Nazareth v. Gift-tax Officer, wherein this court has held that the Gift-tax Act is unconstitutional so far as it purports to impose tax on gifts of immovable properties. Against the said order of the Appellate Assistant Commissioner, the department preferred an appeal to the Income-tax Appellate Tribunal, Bombay Bench "C". Before the Tribunal, the assessee relied on the decision in Nazareth's case and also the decision in Laxmibai Narayanarao Nerlekar v. Commissioner of Gift-tax delivered on January 12, 1967, in T. R. C. No. 3 of 1963. That is a decision of this court wherein it was held that the act of throwing the self-acquired property by a member of a Hindu undivided family into the common hotchpot does not amount to a transfer so as to attract tax under the Act. Thereafter, on the application made by the revenue, the Tribunal has referred the following question for our opinion :

(3.) IN view of the decision of the Supreme Court in Goli Eswariah's case, it is clear that the unilateral declaration of a Hindu coparcener, whereby he throws his self-acquired property into the common stock of joint family property, does not amount to a transfer so as to attract the provisions of the Act. Therefore, we answer the question in favour of the assessee and against the department as follows :