GHASIRAM AGARWALLA Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THE following questions have been referred to us by the Tribunal, "A" Bench, Calcutta, namely : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of Rs. 91,668 inherited by Ghasiram Agarwalla from his deceased father under s. 8 of the Hindu Succession Act, 1956, was his absolute property ? (2) Whether, on the division of the aforesaid amount of Rs. 91,668 between Ghasiram Agarwalla and his three sons, there was a gift of Rs. 68,751 by Ghasiram Agarwalla to his three sons which was assessable to gift -tax -

(2.) THE facts of the case which are beyond doubt may be briefly stated. The rice mill called Sagarmal Ghasiram Rice Mill of Ramgiya was owned by an HUF governed by the Mitakshara school of Hindu law of which Sagarmal Agarwalla was the karta. Subsequently, there was a partial partition in this family as a result of which the rice mill was taken out of the joint family assets and a partnership firm consisting of Sagarmal Agarwalla, his son, Sri Ghasiram Agarwalla, and three sons of Ghasiram Agarwalla as partners took over the mill. These partners owned different shares as are set out in the statement of the case. Sagarmal died on 1st June, 1960, and at the time of his death, in the firm's book there was an account of Rs. 91,668 standing to his credit. This account in the name of Sagarmal continued in the firm's books up to 24th March, 1961, the last day of the accounting year, and thereafter it was shown as equally divided between Ghasiram and his three sons and the amount was transferred accordingly to the individual accounts.

(3.) THE GTO held that on the death of Sagarmal the entire amount of Rs. 91,668 devolved on Ghasiram as the sole heir, and since Ghasiram allowed three -fourths of this amount to be credited to his three sons, he had made a gift of Rs. 68,751 to his sons, and on this finding after allowing the statutory exemption of Rs. 10,000, determined the taxable gift at Rs. 58,751. On appeal by the assessee, the AAC held that as Sagarmal died on 1st June, 1960, succession to his estate would be governed by the Hindu Succession Act, 1956. He further held that, as there was a complete partition between Sagarmal and his sons and grandsons in respect of the rice mill, the capital standing in the name of Sagarmal was his separate property and on his death Ghasiram inherited this separate property as his sole heir under s. 8 of the Hindu Succession Act. So holding, the learned AAC found that the transfer by Ghasiram to his three sons was rightly treated as a gift and assessed as such by the GTO. This decision was confirmed by the Tribunal which has made this reference to us in this case. The Tribunal also held that whatever might have been the position under the Hindu law before the enactment of the Hindu Succession Act, after the coming into operation of the said Act, the estate inherited under s. 8 would be absolute property of the inheritor and could not be regarded as ancestral property in his hands. In this view of the matter the Tribunal upheld the decision of the authorities below.