Gift-tax assessment fails where transfer is made from a karta's separate property, not from the Hindu undivided family.

A transfer made from a karta's separate and exclusive property after a partial partition could not be assessed as a gift in the hands of the Hindu undivided family. The family had not been disrupted, but the partition deed showed that the capital allotted to the karta became his absolute property, and the later transfer to the daughters was made from that separate fund. Gift-tax assessment on the HUF was therefore made in the wrong hands and was unsustainable. The alternate plea of consideration was unnecessary to decide once the assessment itself failed on this ground.

---

---

Issues: Whether the sum transferred to the two daughters was assessable as a gift in the hands of the Hindu undivided family.

Analysis: The family had not been disrupted and the partial partition related only to the capital invested in the firm. Under the partition deed, the amount allotted to the karta became his absolute property, and the later transfer to the daughters was made out of that separate and exclusive fund. The assessment was therefore made on a Hindu undivided family which was not the transferor and the status adopted for gift-tax purposes was not sustainable. The alternate contention that the transfer was supported by consideration was not required to be decided once the assessment itself was held to be in the wrong hands.

Conclusion: The transfer could not be assessed as a gift in the hands of the Hindu undivided family and the assessee succeeded.

Final Conclusion: The departmental appeal failed and the cancellation of the gift-tax assessment was upheld.

Ratio Decidendi: A transfer made from an individual's separate and exclusive property cannot be assessed as a gift in the hands of a Hindu undivided family that is not the transferor.

---