Reasonable gift by karta of ancestral movable property upheld, excluding dividend income from family assessment.

A karta may make a valid gift of ancestral movable property to his wife within reasonable limits, even without express consent of another adult coparcener, where the transaction is not repudiated and the surrounding facts show a real intention to divest title. Under Punjab law, an unauthorised alienation by a coparcener is voidable rather than void, and assent may be inferred from knowledge without objection. The reasonableness of the gift depends on the size of the estate, its income, the number of family members, and the surrounding circumstances. On the facts, the gift was upheld, the family was divested of title to the shares, and the dividend income was not taxable in the hands of the Hindu undivided family.

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Issues: Whether a karta of a Hindu undivided family could validly gift joint family movable property to his wife without the consent of the other adult coparcener, and whether such gift, if made, was so unreasonable or colourable as to leave the income from the gifted shares taxable in the hands of the family.

Analysis: A gift under Hindu law requires intention, delivery and acceptance. In the context of coparcenary property, an unauthorised alienation is not necessarily void in Punjab law, but is voidable at the instance of the other coparceners. The evidence showed knowledge of the transaction by the son and no steps taken by him to repudiate it, from which assent could be inferred. The transfer was also supported by the donor's acts and declarations showing a present intention to divest the family of title and confer ownership on the wife. The Court further held that a father may make gifts of ancestral movable property to his wife within reasonable limits, and the reasonableness of the gift must be judged by the size of the estate, its income, the number of family members and the surrounding circumstances. On the facts, the family estate was large and the gift represented only a small fraction of its value.

Conclusion: The gift was valid and effective, the family was divested of title to the shares, and the dividend income from those shares could not be assessed in the hands of the Hindu undivided family.

Final Conclusion: The reference was answered in favour of the assessee by holding that the impugned transfer took effect as a lawful family gift and excluded the resulting income from the family assessment.

Ratio Decidendi: A gift by a karta of reasonable ancestral movable property to his wife is valid even without express consent of another coparcener if the transaction is not repudiated and the surrounding facts show a real intention to divest title.

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