Deemed gift on blending separate property into HUF hotchpot attracted gift-tax under amended law for the assessment year.

Blending separate property into the common hotchpot of a Hindu undivided family was treated as a deemed gift under the Gift-tax Act, because section 4(2), inserted by the Finance (No. 2) Act, 1971, expressly brought such conversion within the definition of gift to the extent of the other members' share on partition. The charging provision applied for the assessment year on the basis of the law in force on the first day of that year, so the amended provisions governed assessment year 1972-73. The transaction was therefore chargeable to gift-tax under sections 2(xii), 3 and 4(2).

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Issues: Whether the blending of separate property into the common hotchpot of a Hindu undivided family on 31 March 1972 constituted a gift liable to gift-tax for the assessment year 1972-73 under the Gift-tax Act, 1958, in view of the amendment introduced by the Finance (No. 2) Act, 1971.

Analysis: The definition of "gift" in section 2(xii) of the Gift-tax Act, 1958, was amended with effect from 1 April 1972 to include property deemed to be a gift under section 4. Section 4(2), inserted by the same amendment, expressly deemed conversion of separate property into family property by throwing it into the common stock of the family to be a gift to the extent of the other members' share on a partition. The charging provision in section 3 levies gift-tax for the assessment year in respect of gifts made during the previous year, and the statutory scheme makes the law applicable for the assessment year the law in force on the first day of that year. Since the amendment was in force from 1 April 1972 and the transaction related to the previous year ending on 31 March 1972, the amended provisions governed the assessment year 1972-73.

Conclusion: The transaction was rightly treated as a gift chargeable to tax under sections 2(xii), 3 and 4(2) of the Gift-tax Act, 1958, and the answer was against the assessee and in favour of the Revenue.

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