Absolute ownership under gift deeds defeats HUF status and leaves subsequent transfers taxable as gifts.

Self-acquired property gifted by a father to named sons was construed, on the wording of the 1932 deeds and surrounding conduct, as passing absolutely to the sons and not to their Hindu undivided family branches. The reference to heirs, executors, administrators and assignees supported heritable and alienable ownership, while the absence of language confining the transfer to family units defeated the claim to HUF assessment for income-tax and wealth-tax purposes. Because the property was held absolutely by the sons, later transfers could not be treated as a partial partition of joint family property, and the sums retained their character as taxable gifts rather than a family partition.

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Issues: (i) Whether the properties gifted by the father to his sons in 1932 were taken by the sons absolutely or by their respective Hindu undivided family branches, so as to justify assessment in the status of a Hindu undivided family for income-tax and wealth-tax purposes; (ii) Whether the sums transferred to the sons were liable to gift-tax as gifts, or whether they amounted to a partial partition of Hindu undivided family property.

Issue (i): Whether the properties gifted by the father to his sons in 1932 were taken by the sons absolutely or by their respective Hindu undivided family branches, so as to justify assessment in the status of a Hindu undivided family for income-tax and wealth-tax purposes.

Analysis: The governing question was the construction of the two deeds executed in 1932, read with the surrounding circumstances. The properties transferred were the donor's self-acquired properties, not ancestral property. The deeds identified the sons by name as the donees and transferred the properties to them and to their heirs, executors, administrators and assignees. Nothing in the language indicated that the gifts were intended for the sons as heads of family units or that the interest conveyed was limited. The reference to heirs, executors, administrators and assignees pointed to heritable and alienable ownership. The surrounding conduct also supported this construction, because the assessee had filed returns for years in an individual capacity and only later claimed HUF status.

Conclusion: The gift was to the sons absolutely, not to their Hindu undivided families. The claim to assessment in HUF status failed and was against the assessee.

Issue (ii): Whether the sums transferred to the sons were liable to gift-tax as gifts, or whether they amounted to a partial partition of Hindu undivided family property.

Analysis: Since the property received under the deeds was held to belong absolutely to the sons and not to any Hindu undivided family, the subsequent transfers to the sons could not be treated as a partition of joint family property. The plea of blending into common stock was also unsupported by evidence and could not alter the character of the transfers. The amounts transferred therefore retained their character as gifts.

Conclusion: The transferred sums were liable to gift-tax as gifts. This issue was decided against the assessee.

Final Conclusion: The appeals were unsuccessful because the deeds conveyed absolute ownership to the sons, so the assessees could not claim Hindu undivided family status and the transfers remained taxable gifts.

Ratio Decidendi: Where self-acquired property is gifted to named sons without language limiting the transfer to family branches, the donees take absolutely and the property is not impressed with the character of Hindu undivided family property merely because the donors are sons of a common ancestor.

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