Gift by sole surviving coparcener from HUF funds qualifies for exemption when treated as separate property for alienation.

A gift by a sole surviving coparcener out of Hindu undivided family funds to his wife was treated as an alienation by him in his individual capacity because, under Mitakshara law, the joint family property is regarded as his separate property for that purpose. On that basis, the transfer was considered eligible for exemption under section 5(1)(viii) of the Gift-tax Act, 1958. The revenue's contrary precedents were distinguished on facts, and the addition to taxable gift was found unsustainable.

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Issues: Whether a gift made out of Hindu undivided family funds by a sole surviving coparcener, as manager of the HUF, to his wife was exempt under section 5(1)(viii) of the Gift-tax Act, 1958.

Analysis: The gift was made by the assessee out of joint family funds to his spouse. Under Mitakshara Hindu law, a sole surviving coparcener is entitled to deal with coparcenary property as if it were his separate property, and the legal fiction treating the joint family property as his own separate property must be carried to its logical conclusion. On that basis, the alienation by way of gift was treated as a gift by the assessee in his individual capacity and not merely as a gift by the HUF. The precedents relied upon by the revenue were distinguished on facts, and the Tribunal also found support in its own earlier orders on identical facts.

Conclusion: The gift was held to qualify for exemption under section 5(1)(viii) of the Gift-tax Act, 1958 and the addition to taxable gift was not sustainable.

Ratio Decidendi: Where a sole surviving coparcener makes a gift out of coparcenary property, the property is treated as his separate property for the purpose of the alienation, and a gift to his spouse can fall within the statutory exemption from gift-tax.

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