Deemed gift under Gift-tax law can arise from HUF property conversion and benefit to co-sharers.

The Gift-tax Act treats certain transactions as deemed gifts where property is converted into joint family property or thrown into common stock, and the transferor is treated as making a gift of the share beneficially attributable to other members. In the stated HUF context, renovation expenditure on an ancestral house was treated as conferring a benefit on the brothers to the extent of their shares, bringing the amount within the statutory deeming provision. The operative principle is that tax liability can arise by legal fiction even without a conventional transfer for consideration when the statute expressly deems the transaction to be a gift.

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Issues: Whether renovation expenses incurred by a coparcener on an ancestral house, to the extent of the brothers' shares, gave rise to a deemed gift under the Gift-tax Act, 1958.

Analysis: The definition of gift under section 2(xii) is wide enough to include transactions deemed to be gifts under section 4. The amended scheme introduced by section 37 of the Finance (No. 2) Act, 1971 expressly covers situations where separate property is converted into joint family property or is thrown into the common stock, and deems the transferor to have made a gift of the share beneficially attributable to the other members. On the facts found, the house was treated as ancestral and the expenditure resulted in a benefit to the co-owners to the extent of their shares, bringing the case within the deeming provision.

Conclusion: The question is answered in the affirmative and in favour of the Revenue. The Tribunal was not right in holding that there was no element of deemed gift, and the amount attributable to the brothers' shares was liable to gift-tax.

Final Conclusion: The reference was answered by applying the statutory deeming fiction for gifts arising from conversion or appropriation of property within a Hindu undivided family context.

Ratio Decidendi: Where the statute deems a transfer or conversion of property to be a gift, the taxable incidence is attracted by the legal fiction even if the transaction does not amount to a conventional transfer for consideration.

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