1989 (3) TMI 179 - AT - Income Tax

HUF transfer to daughters not taxable; based on family arrangement, maintenance rights.

The Tribunal dismissed the appeal, affirming that the transfer of assets to married daughters by the Hindu undivided family (HUF) was not subject to ... Assessment Year, Family Arrangement Issues:- Appeal against cancellation of gift-tax assessment on transfer of shares to married daughters.- Whether transfer of shares to married daughters amounts to gift-tax.- Obligation of Hindu undivided family (HUF) to maintain married daughters.- Consideration for transfer of assets to married daughters.- Applicability of previous legal decisions on similar cases.- Interpretation of Hindu Law on maintenance rights of daughters.- Validity of transfer as a family arrangement.- Reasonableness of transfer amount compared to total wealth of HUF.Analysis:The case involves an appeal against the cancellation of a gift-tax assessment on the transfer of shares by a Hindu undivided family (HUF) to married daughters. The Revenue contended that the daughters, being married, were not entitled to maintenance from the HUF, thus challenging the obligation aspect of the transfer. The assessee argued that the transfer was made in discharge of the HUF's obligation to maintain the daughters. The Tribunal considered legal precedents, including the case of M. Radhakrishna Gade Rao, emphasizing that transfers made in discharge of HUF obligations are not subject to gift-tax. The Tribunal rejected the Revenue's argument that marriage extinguished the daughters' right to maintenance, citing Hindu Law principles that maintenance rights are tied to the daughter's birthright and not affected by marriage.Moreover, the Tribunal highlighted the Supreme Court's stance that the right to maintenance is in lieu of a share in the property and continues even after marriage. The Tribunal reasoned that the transfer could be viewed as a family arrangement to maintain the honor of the family, as recognized in legal precedents. It was noted that the amount transferred was reasonable compared to the HUF's total wealth, especially since the Karta had only two daughters and no son. The Tribunal upheld the decision of the Commissioner of Gift-tax (Appeals) on the basis that the transfer was either in discharge of the HUF's obligation or constituted a family arrangement, thereby not qualifying as a gift for tax purposes.In conclusion, the Tribunal dismissed the appeal, affirming that the transfer of assets to married daughters by the HUF was not subject to gift-tax, considering the legal obligations and family arrangement aspects involved. The judgment provides a detailed analysis of Hindu Law principles, maintenance rights of daughters, and the applicability of previous legal decisions in determining the tax implications of such transfers within an HUF context.