Spousal gift exemption under Gift-tax law fails where coparcenary property is transferred by the karta as a colourable device.

Exemption under section 5(1)(viii) of the Gift-tax Act was not defeated merely because the return was filed in the status of a Hindu undivided family, since the status alone did not control entitlement if the statutory conditions were otherwise met. The decisive issue was the true character of the transfer: reading the gift deed as a whole, the property was coparcenary property and the donor acted as karta with family consent, so the transaction was not an individual gift by a husband to his spouse. The arrangement was treated as a colourable device to bypass gift-tax, and the claimed exemption was denied.

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Issues: (i) Whether exemption under section 5(1)(viii) of the Gift-tax Act, 1958 was available where the return was filed in the status of a Hindu undivided family. (ii) Whether the impugned transfer was a gift by an individual to his spouse or a gift by the karta of the family out of coparcenary property to a female member of the family, and whether the transaction was a device to avoid gift-tax.

Issue (i): Whether exemption under section 5(1)(viii) of the Gift-tax Act, 1958 was available where the return was filed in the status of a Hindu undivided family.

Analysis: The status in which the return was filed did not, by itself, defeat the claim for exemption. The Court treated an individual and a Hindu undivided family as distinct taxable units, but followed the authorities recognising that the benefit of the provision could still be considered where the return was in the status of a Hindu undivided family, if the transaction otherwise satisfied the statutory requirement.

Conclusion: The exemption was not excluded merely because the return was filed by the Hindu undivided family.

Issue (ii): Whether the impugned transfer was a gift by an individual to his spouse or a gift by the karta of the family out of coparcenary property to a female member of the family, and whether the transaction was a device to avoid gift-tax.

Analysis: Reading the memorandum of gift as a whole, the operative recitals showed that the donor acted as karta, the property was described as coparcenary property, and the gift was made with the consent of the major male members of the family. On that construction, the transfer was not a gift by a husband in his individual capacity to his spouse. The Court further held that the arrangement was designed to bypass the taxing provision by clothing a family transfer as a spousal gift, which attracted the principle that colourable devices cannot be accepted as legitimate tax planning.

Conclusion: Section 5(1)(viii) was inapplicable, and the assessee was not entitled to exemption.

Final Conclusion: The appeal failed because the transfer was treated as a family transaction made by the karta out of coparcenary property, not as an exempt gift by an individual to his spouse, and the attempt to avoid tax by that form was rejected.

Ratio Decidendi: Exemption for gifts to a spouse is available only where the gift is made by an individual in that capacity, and a transaction structured as a karta's gift out of coparcenary property to a family member cannot be treated as such or used as a colourable device to avoid tax.

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