Family settlement by partial partition was not a taxable gift where family property was divided among co-sharers.

Transactions executed by a karta in favour of family members were treated as a family settlement by partial partition, not as taxable gifts, because the family had co-sharers and the land was divided by earmarking separate portions for members. Although the documents were described as deeds of gift, the substance of the arrangement showed allotment of shares in family property rather than a real transfer by way of gift. On that basis, the instruments could not be assessed to gift-tax and the reference was answered in favour of the assessee.

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Issues: Whether the transactions executed by the karta in favour of family members constituted taxable gifts, or were in substance a family settlement by partial partition so that no gift-tax was leviable.

Analysis: The relevant assessment year was 1971-72. The karta of a Hindu undivided family executed registered documents described as deeds of gift in favour of his sons and the widow of a pre-deceased son. On the facts, the family had co-sharers and the land was divided by marking different portions for family members. The arrangement was held to be a family settlement by partial partition, under which the co-sharers were given shares in the family property. Since the transaction was not a real transfer by way of gift, the documents could not be treated as deeds of gift for gift-tax purposes.

Conclusion: The transaction was not liable to gift-tax and the reference was answered in favour of the assessee.

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