Gift-tax does not apply to HUF property transfers treated as partition rather than a taxable gift.

A karta of a Hindu undivided family cannot validly gift joint family property except within the limits recognised by Hindu law, and a partition is not a transfer in the strict sense. On that reasoning, gifts of immovable property by the karta and another family member to their sons did not satisfy the essential ingredients of a taxable gift under the Gift-tax Act, 1958, and were therefore not liable to tax. The referred question was answered against the department.

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Issues: Whether the gifts of immovable property made by the karta and another member of a Hindu undivided family in favour of their sons were liable to be taxed under the Gift-tax Act, 1958.

Analysis: A karta of a Hindu undivided family cannot validly gift or alienate joint family property except to the extent recognised by Hindu law, such as for legal necessity, pious purposes, or in favour of female members within reasonable limits. The transaction in substance was also akin to a partition of joint family property, and partition does not amount to a transfer in the strict sense. Since a gift requires a transfer, the transactions did not satisfy the essential ingredients of a taxable gift.

Conclusion: The gifts were not liable to be taxed under the Gift-tax Act, 1958, and the answer to the referred question was against the department.

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