Commissioner of Gift Tax, Madras Vs.
N. S. Getty Chettiar [1971] INSC 248 (16 September 1971)
HEGDE, K.S.
HEGDE, K.S.
GROVER, A.N.
CITATION: 1971 AIR 2410 1972 SCR (1) 736
ACT:
Gift Tax Act, 1958-Section 2(xii) and
2(xxiv)--Coparcener taking lesser share and allotting greater share to other
members-If makes "gift"-Partition, if "transfer of
property".
HEADNOTE:
In a partition of the properties of a joint
Hindu Undivided Family a coparcener took as his share less than what he was
entitled to and allotted greater share to the other members of the coparcenery.
On the question whether the coparcener could be held to have made a
"gift" of a portion of his share of the property to the other members
and was liable to tax under the Gift Tax Act, 1958.
HELD:(i) A coparcener in a Hindu Undivided
Family has no definite share in the family property. His share gets determined
only when there is a division of status or a division by metes and bounds. It
is not necessary that in every case of partition in a Hindu Undivided Family
there should first be a division in status and thereafter a division by metes
and bounds. In the present case there is no material to show that there was any
division of status before the properties were actually divided. Therefore, it
is not necessary to consider what would be the position in law if there was
just a division of status and the same was followed by a division by metes and
bounds. [738 H-739E] (ii)The partition of the joint Hindu Family property is
not a transfer Commissioner of Income-tax, Gujarat v. Keshavlal Lallubhai
Patel, 55 I.T.R. 637, followed.
(iii)A partition is not a
"disposition" "conveyance" "assignment"
"settlement" "delivery" "payment" "or other
alienation of property" within the meaning of those words s.
2(xxiv) of the Act. These words are used as
some of the modes of transfer of property and have to be understood in the
setting in which those terms are used and the purpose they are intended to
serve. [742-G] It cannot be considered a "transaction entered into by any
person with intent thereby to diminish directly or indirectly the value of his
own property and to increase the value of the property of any other
person" within the meaning of cl. (d) of s. 2(xxiv), because, a member of
a Hindu Undivided Family who has no definite share in the family property
before division cannot be said to diminish directly or indirectly the value of
his own property and to increase the value of the property of another person.
Further, the transaction referred to in cl.
(d) of s. 2(xxiv) takes its colour from the main clause i.e., it must be
transfer of property in some way. [742 H-743 C]
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 128 of 1968 and 1341 of 1971.
Appeals by certificate/special leave from the
judgment and order dated December 10, 1965 of the Madras High Court in Tax Case
No. 65 of 1967 (Reference No. 18 of 1963).
737 Jagadish Swarup, Solicitor-General, A. N.
Kirpal, R. N. Sachthey and B. D. Sharma, for the appellant (in both the
appeals).
Uttama Reddy and D. N. Gupta, for the
respondent (in both the appeals).
The Judgment of the Court was delivered by
Hegde, J. Both these appeals by the Commissioner of Gift Tax arise from the
same judgment. The former one is by certificate and the latter by special
leave. Civil Appeal No.
1341 ,of 1971 came to be filed because the
certificate given by the High Court not being supported by any reason, the
appeal brought on the strength of that certificate (Civil Appeal No. 128 of
1969) became unsustainable. That is why instead of one appeal, there are two
appeals before us in respect of the same decision.
The decision appealed against was rendered by
the High Court of Madras in its advisory jurisdiction, in a reference under s.
26(1) of the Gift Tax Act, 1958 (to be hereinafter referred to as the Act). The
Income 'Tax Appellate Tribunal, Madras Bench referred the question a,
"Whether there was gift by N. S. Getti Chettiar of Rs. 2,46,377 on which
he is liable to pay gift tax" to the High Court seeking its opinion. The
High Court answered that question in the negative. The Commissioner of Gift Tax
not being satisfied with that decision has brought these appeals.
The facts of the case are not many though the
question of law arising for decision is by no means easy. The respondent, N. S.
Getti Chettiar (who will hereinafter be referred to as the assessee) was karta
of his undivided Hindu family consisting of himself, his son Govindaraju
Chettiar and six sons of the asid Govindaraju Chettiar.
There was a partition of the immovable
properties of the family through a registered deed executed on January 17, 1958
and the movable properties were divided on April 13, 1958 on which date the
necessary entries in the account books were made. The assessee claimed
recognition of that partition under s. 25A of the Act. That was granted by the
Department on November 29, 1958. The total value of the properties so divided
was Rs. 8,51,440/but under that partition the assessee took properties worth
only Rs.
1,78,343/-. The remaining properties were
allotted to his son and grandsons.
The Gift Tax Officer overruling the objection
of the assessee, came to the conclusion that the assessee by allotting greater
share to the other members of the coparcenary than to which 738 they were
entitled, must be held to have made a 'gift' of a portion of his share of the
property to the other members and hence was liable to be taxed under the Act.
He, opined that the partition in question is a transaction entered into between
the assessee and the members of his family with intent thereby to diminish the
value of assessee's own property and increase the value of the property of his
son and grandsons.
Aggrieved by that order, the assessee went up
in appeal to the Appellate Assistant Commissioner. The Appellate Assistant
Commissioner held that as no member of an undivided Hindu Family had a definite
share in the family assets, on partition, when the joint enjoyment came to an
end, there was no need to have arithmetical equality between the shares of the
various coparceners. He accordingly held that the assessee was not liable to
pay any gift tax in respect of the properties that fell to the shares of his
son and grandsons. The Department appealed against this decision to the
Tribunal. It was contended before the Tribunal 'that the transaction in
question came within s. 2 (xii) and s. (xxiv), in particular it came within cl.
(d) of s. 2 (xxiv), as property included any interest in property and partition
constituted a transaction; the assessee had, by relinquishing a portion of what
was his due, transferred such interest and properties in favour of the other
members of the family for no consideration and consequently the Gift Tax was
properly leviable. This contention was not accepted by the Tribunal. It held
that the interest that the assessee had in his Hindu Undivided Family property
was not definable, and therefore s. 2(xxiv) was not attracted to the facts of
the case.
The High Court agreed with the conclusions
reached by the Assistant Appellate Commissioner and the Tribunal. It came to the
conclusion that the partition in the family of the assessee did not come within
the mischief either of s. 2(xii) or s. 2(xxiv). It also opined that under the
partition, there was no deemed 'gift' as contemplated by s. 4 of the Act.
Mr. Solicitor-General appearing for the
Commissioner of Gift Tax did not place any reliance before us on s. 4 of the
Act.
Therefore we need not consider the scope of
s. 4 of the Act.
All that Mr. Solicitor General contended was
that the case came either under s. 2(xii) or under s. 2(xxiv). He built up his
arguments thus A partition in a H.U.F. invariably involves two steps, first
there is a division of status and thereafter there is a division by metes and
bounds. A coparcener's share is fixed according to law as soon as there is a
division of status.
Therefore, if at the time of division by
metes and bounds he chooses to take a share 739 less than to which he is
entitled to under law, then the same: would amount to a 'gift' of the balance
of property to which he was entitled, to the other coparceners. We are unable
to agree with Mr. Solicitor General that in every case of partition in a H.U.F.
there' should first be a division of a status and thereafter a division by
metes and bounds. There are innumerable cases where a partition takes place
without there being earlier any division of status.
Coming to the facts of the case, there is no,
material before us to show that there was any division of status before the
properties were actually divided. The Tribunal has, not found that there was
any division of status amongst the members of the family before they divided
the properties. The partition deed is not before us nor are the account books
showing the division of the movable properties is before us. It is not known
whether under the registered partition deed, there was only a partial partition
or a complete disruption of the family. That being so, we have to proceed on
the basis of the facts found by the Tribunal and apply the law to the facts so
found. The argument that there was first a division of status and the same was
followed up by a division by metes and bounds does not appear to have been
urged before the Tribunal. Under these circumstances, it is not necessary for
us to consider what would be the position in law if there was first a division
of status in a H.U.F. and the same was followed up by division by metes and
bounds in which division one of the coparceners takes properties, less than to
what he is entitled to under law.
Before proceeding to examine the relevant
provisions of the Act, it is necessary to mention that according to the true
notion of an undivided Hindu family, no individual member of that family,
whilst it remains undivided, can predicate of the joint and undivided property,
that he, that particular member, has a certain definite share namely a third or
a fourth. All the coparceners in a Hindu joint family are the joint owners of
the properties of the family. So long as the family remains joint, no
coparcener can predicate what his share in the joint family is. His share gets
determined only when there is a division of status or a division by metes and
bounds. Therefore it is not correct to assume that a coparcener in Hindu joint
family has any definite share in the family property, before its division. Having
stated that much, let us now proceed to consider the relevant provisions of the
Act.
Section 3 of the Act is the charging section.
It says:
"Subject to the other provisions
contained in this Act, there shall be charged for every assessment year commencing
on and from the 1st day of April 1958, a 740 tax (hereinafter referred to as
gift-tax) in respect of the gifts, if any, made by a person during the previous
year (other than gifts made before the 1st day of April 1957) at the rate or
rates specified in the schedule." 'Gift' is defined in S. 2(xii). That subclause
says:
" "gift" means the transfer by
one person to another of any existing movable or immovable property made
voluntarily and without consideration in money or money's worth, and includes
the transfer of any property deemed to be a gift under section 4." The
expression 'transfer of property' is defined in S. 2(xxiv) That provision reads
:
" "transfer of property" means
any disposition, conveyance, assignment, settlement, delivery, payment or other
alienation of property and,' without limiting the generality of the foregoing,
includes(a) the creation of a trust in property;
b) the grant or creation of any lease,
mortgage, charge, easement, licence, power, partnership or interest in
property;
(c) the exercise of a power of appointment of
property vested in any person, not the owner of the property, to determine its
disposition in favour of any person other than donee of the power; and (d) any
transaction entered into by any person with intent thereby to diminish directly
or indirectly the value of his own property and to increase the value of the
property of any other person.' We shall first examine whether the partition
with which we are concerned in these appeals can be considered as transfer of
property under the general law. Thereafter we shall proceed to consider whether
it comes within the extended meaning given to that expression in s. 2(xxiv).
It is now settled by the decision of this
Court in Commissioner of Income-tax, Gujarat v. Keshavlal Lallubhai Patel(1)
that a partition of joint Hindu family property cannot be considered as
transfer in the strict sense-the sense in which all legal expressions are
understood and more particularly in tax (1) 55 I.T.R. 637.
741 laws. In the course of that judgment
Sikri, J. (as he then was) speaking for the Court observed :
"But, is a partition of joint Hindu
family property a transfer in the strict sense? We are of the opinion that it
is not. This was so held in Gutta Radhakrishnavya v. Gutta Sarasamma(1). Subba
Rao, J., (then a judge of the Madras High Court) after examining several
authorities came to the conclusion that " partition is really a process in
and by which a joint enjoyment is transformed into an enjoyment in severalty.
Each one of the shares had an antecedent title and, therefore, no conveyance is
involved in the process, as a conferment of a new title is not necessary."
The Madras High Court again examined the question in M. K. Stremann v.
Commissioner of Income-tax (2) with reference to section 16(3)(a)(iv). It
observed that "obviously no question of transfer of assets can, arise when
all that happens is separation in status, though the result of such severance
in status is that the property hitherto held by the coparcenary is held thereafter
by the separated members as tenants-in common.
Subsequent partition between the divided
members of the family does not amount either to a transfer of assets from that
body of the tenants-incommon to each of such tenants-incommon." The Punjab
High Court came to the same conclusion in Jagan Nath v. State of Punjab (3).
Agreeing with these authorities, we hold that
when the joint Hindu family property was partitioned, there was no transfer of
assets within section 16(3)(a)(iii) and (iv) to the wife or the minor
son." We are bound by the ratio of that decision and if we may say so, we
respectfully agree with the statement of the law quoted above. Hence we hold
that the partition in the family of the assessee did not effect any transfer as
generally understood in law.
This takes us to s. 2 (xxiv). The opening
words of the provision refer to 'transfer of property'. That clause enumerates
several types of transfers and not to any other transactions. It is also
necessary to attach significance to the words "or other alienation of
property" immediately after setting out the various (1) I.L.R. 1951 Mad.
607. (2) (1961) 41 I.T.R. 297.
(3) (1962) 64 P.L.R. 22.
742 types of transfers. 'If we read the
clause as a whole, it is clear that it deals with transfer of properties in
various ways.
As observed in Craies on Statute Law (6th
Edn. p. 213) that an interpretation clause which extends the meaning of a word
does not take away its ordinary meaning. An interpretation clause is not meant
to prevent the word receiving its ordinary, popular and natural sense whenever
that would be properly applicable, but to enable the word as used in the Act,
when there is nothing in the context or the subject matter to the contrary to
be applied to some things to which it would not ordinary be applicable.
Bearing in mind these principles, let us now
examine the scope of s. 2(xxiv). That provision speaks of
"disposition", " conveyance", "assignment",
"settlement", "delivery", " payment" or "other
alienation of property".
A reading of this section clearly goes to
show that the words "disposition", "conveyance",
"assignment", "settlement", "delivery" and
"payment" are used as some of the modes of transfer ,of property. The
dictionary gives various meanings for those words but those meanings do not
help us. We have to understand the meaning of those words in the context in
which they are used. Words in a section of a statute are not to be interpreted
by having those words in one hand and the dictionary in the other. In spelling
out the meaning of the words in a section, one must take into consideration the
setting in which those terms .are used and the purpose that they are intended
to serve. If so understood, it is clear that the word "disposition"
in the context means giving away or giving up by a person of something which
was his own, "conveyance" means transfer of ownership,
"assignment" means the transfer of the claim, right or property to
another, "settlement" means settling the property, right or claim conveyance
or disposition of property for the benefit of another, "delivery"
contemplated therein is the delivery of one's property to another for no
consideration and "payment" implies gift of money by someone to
another. We do not think that a partition in a H.U.F.
can be considered either as
"disposition" or "conveyance" or "assignment" or
"settlement" or "delivery" or "payment" or
"alienation" within the meaning of those words in s. 2 (xxiv).
This leaves us with cl. (d) of S. 2 (xxiv)
which speaks of a transaction entered into by any person with intent thereby to
diminish directly or indirectly the value of his own property and to increase
the value of the property of another person. A member of H.U.F. who, as
mentioned earlier, has no definite share in the family property before division,
cannot be said to diminish 743 directly or indirectly the value of his property
or to increase the value of the property of any other coparcener by agreeing to
take a share lesser than what he would have got if he had gone to court to
enforce his claim. Till partition, his share in the family property is
indeterminate. He becomes entitled to a share in the family property only after
the partition. Therefore there is no question of his either diminishing
directly or indirectly the value of his own property or of increasing the value
of the property of anyone else. The "transaction" referred to in cl.
(d) of s. 2 (xxiv) takes its colour from the main clause viz., it must be a
transfer of property in some way.
This conclusion of ours gets support from
sub-clause (a) to (c) of clause (xxiv) of s. 2, each of which deals with one or
the other mode of transfer. If the parliament intended to bring within the
scope of that provision partitions of the type with which we are concerned,
nothing was easier than to say 2. In interpreting tax laws, courts merely look
at the works of the section. If a case clearly comes within the section, the
subject is taxed and not otherwise.
For these reasons, we agree with the view
taken by the High Court of Madras,, the' Tribunal and the Assistant Appellate
Commissioner that the assessee made no "gift" under the partition
deed in question.
In the result these appeals fail. Civil
Appeal No. 1341 of 1971 is dismissed on merits and Civil Appeal No. 128 of 1969
is dismissed as being not maintainable. The assessee is entitled to his
costs-Fee one set.
K.B.N. Appeals dismissed.
Back
