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Issues: (i) Whether the adoption of the minor divested the donor of her absolute ownership so as to invalidate the gift and defeat the gift-tax levy; (ii) Whether the gift was incomplete for want of acceptance on behalf of the minor-donee.
Issue (i): Whether the adoption of the minor divested the donor of her absolute ownership so as to invalidate the gift and defeat the gift-tax levy.
Analysis: The donor had inherited the property after the Hindu Succession Act, 1956 had come into force and therefore held it as full owner under section 14. The adoption was subsequent, and section 13 of the Hindu Adoptions and Maintenance Act, 1956 preserves the power of a Hindu parent to dispose of property by transfer inter vivos or by will, subject to any agreement to the contrary. The doctrine of relation back no longer operated to divest a vested estate in such circumstances. The adopted son therefore acquired no present interest in the property during the donor's lifetime.
Conclusion: The adoption did not divest the donor of ownership, and the gift was valid; this issue was decided against the assessee and in favour of the Revenue.
Issue (ii): Whether the gift was incomplete for want of acceptance on behalf of the minor-donee.
Analysis: A gift requires acceptance under general law, and a transaction lacking acceptance is incomplete. On the facts, the registered gift deed itself showed acceptance: possession was handed over, patta was changed, and the donor's brother was appointed to hold and administer the property for the minor. In these circumstances, acceptance on behalf of the minor was implied, and there was no factual basis to treat the gift as incomplete.
Conclusion: The gift was complete and validly accepted on behalf of the minor; this issue was decided against the assessee and in favour of the Revenue.
Final Conclusion: The levy of gift-tax was upheld because the donor retained full power of disposal and the settlement in favour of the minor was a valid completed gift.
Ratio Decidendi: After the Hindu Succession Act, 1956, a Hindu female who has become full owner of inherited property is not divested of that ownership by a subsequent adoption, and a gift is complete for tax purposes when acceptance on behalf of the minor-donee is established by the surrounding circumstances and the instrument itself.
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