Portuguese Civil Code property rights: spouses hold fixed half shares, and gift-tax applies only to each spouse's share.

Under the Portuguese Civil Code, spouses in communion property hold a fixed and certain half share each, so the interest is that of tenants-in-common rather than joint tenants with survivorship. On that basis, a gift of such property is taxable only to the extent of each spouse's own ascertained share. The court held that the transaction could not be assessed as a single gift made by a body of individuals; assessment had to be made separately in equal shares in the hands of the two spouses. The reference was answered in favour of the assessees.

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Issues: (i) Whether the husband and wife, who were married under the Portuguese Civil Code, held the gifted properties as tenants-in-common or as joint tenants/body of individuals. (ii) Whether the gifts made by the spouses were assessable in a single assessment in the hands of the body of individuals or separately in equal shares in the hands of each spouse.

Issue (i): The governing provisions of the Portuguese Civil Code show that, during the subsistence of a marriage celebrated according to the custom of Goa, the common estate vests in both spouses, each having a fixed and certain half share. The right is not one of survivorship in the whole property but of equal proprietary interest in the communion property, subject to the incidents of management and partition under the Code.

Conclusion: The spouses held the properties as tenants-in-common, each having a distinct half share.

Issue (ii): Gift-tax is attracted to the property owned by the person making the gift, and the statute does not alter the general law of property rights. Where each spouse owns only an ascertained half share in the communion property, a gift of the entire property through one instrument does not convert the transaction into a single gift by a body of individuals. Each spouse is taxable only on the value of his or her own share.

Conclusion: The gifts could not be assessed as a single gift by a body of individuals and had to be assessed separately in equal shares in the hands of the two spouses.

Final Conclusion: The reference was answered in favour of the assessees, and the assessments made on the footing of a single gift by a body of individuals were held unsustainable.

Ratio Decidendi: Where spouses governed by the Portuguese Civil Code have a fixed half share in communion property, a gift of such property is taxable only to the extent of each spouse's own share and cannot be treated as a single gift by a body of individuals.

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