1983 (9) TMI 141 - AT - Income Tax

Transfer of shares to HUF deemed invalid under Gift-tax Act, 1958. Department's appeal dismissed.

Gift-Tax Officer. Versus Smt. Anam Saraswati.

The Tribunal upheld the decision of the Appellate Authority Commission (AAC) in a case concerning the validity of a gift made by an assessee to her ... Assessment Year, Deemed Gift Issues:Validity of gift made by the assessee to her husband's HUF under the Gift-tax Act, 1958 for the assessment year 1971-72.Analysis:The case involved a dispute regarding the validity of a gift made by the assessee, who was a director of a company, to her husband's Hindu Undivided Family (HUF) by transferring 100 shares to him. The Gift Tax Officer (GTO) treated this transfer as a gift to her husband under the Gift-tax Act, 1958. The assessee contended that the transfer should not be considered a gift as the husband had no power of disposition over the shares. The AAC held that there was no valid gift made by the assessee to the HUF II and canceled the assessment made by the GTO.The department appealed this decision before the Tribunal, arguing that the AAC erred in canceling the gift-tax assessment and that the transfer should be considered a valid gift. The assessee's counsel argued that the transaction took place before an amendment to the Act, and therefore, it should not be considered a gift. They also contended that the transfer of shares did not clearly demonstrate the intention of the donor to relinquish all rights over the property, as required for a valid gift.The Tribunal examined the facts and legal aspects of the case. The assessee had transferred the shares to the HUF, specifying in a letter that the husband had no power of disposition over the shares and that they would remain her absolute property. The Tribunal noted legal precedents that emphasized the bilateral nature of gift transactions and the requirement of clear intention to relinquish rights over the gifted property. It was also highlighted that a female member of an HUF cannot blend her separate property with joint family property.Considering the legal principles and the specific facts of the case, the Tribunal upheld the AAC's decision, ruling that the transfer of shares to the HUF was not a valid gift. The Tribunal found that the husband did not have the power to dispose of the shares, and the transaction did not meet the criteria for a gift under the relevant legal provisions. Therefore, the appeal by the department was dismissed, confirming the AAC's order canceling the gift-tax assessment for the assessment year 1971-72.