Coparcenary property cannot be gifted to defeat HUF rights, and an ineffective transfer leaves income taxable in the family's hands.

Coparcenary property that retains its joint family character cannot be validly gifted by a coparcener to his wife and minor children, and any such deed confers no enforceable rights on the donees. Where the property remains part of the Hindu undivided family, the attempted transfer does not divest the family of title, and the income from the property continues to be assessable in the hands of the HUF. An ineffective gift also cannot create a deductible debt or alter the tax incidence of the property or its sale proceeds.

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Issues: (i) Whether the gift deed executed by the assessee in favour of his wife and minor children was valid and operative. (ii) Whether the value and income of the gifted properties were assessable in the hands of the Hindu undivided family.

Issue (i): Whether the gift deed executed by the assessee in favour of his wife and minor children was valid and operative.

Analysis: The property had devolved on the assessee as sole surviving coparcener and retained its character as coparcenary property. The assessee's marriage under the Special Marriage Act did not, on the facts found, bring about a complete severance from the joint family, because he later solemnised the marriage according to Hindu rites and continued as a coparcener. As coparcenary property could not be gifted away to his wife and minor children, the deed did not confer any enforceable rights on the donees. The contention that the transaction was a family arrangement was not examined because it was not raised before the Tribunal and no supporting findings existed.

Conclusion: The gift deed was invalid and inoperative.

Issue (ii): Whether the value and income of the gifted properties were assessable in the hands of the Hindu undivided family.

Analysis: Since the properties continued to belong to the joint family and the gift was ineffective, the assessee could not treat them as having been divested from the Hindu undivided family. The sons had already acquired rights by birth, and the assessee could not confer any better title on the wife and children through the purported gift. The sale proceeds retained by the assessee were therefore not deductible as debts owed to the alleged donees, and the income from the properties remained attributable to the Hindu undivided family.

Conclusion: The value and income of the properties were assessable in the hands of the Hindu undivided family.

Final Conclusion: The reference was answered entirely against the assessee, and the Revenue's position was upheld on both the validity of the transfer and the taxability of the properties.

Ratio Decidendi: Property which retains its coparcenary character cannot be validly gifted away by a coparcener so as to defeat the rights of the Hindu undivided family, and an ineffective gift cannot alter the tax incidence of the property or its income.

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