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Issues: Whether a Hindu coparcener who, by a unilateral act, throws his separate property into the common hotchpot of the joint family and impresses it with the character of joint family property thereby makes a gift within the meaning of the Gift-tax Act, 1958.
Analysis: The definition of gift under the Act requires a transfer of property by one person to another, voluntarily and without consideration. The doctrine of blending operates by the coparcener's intentional abandonment of separate rights and conversion of the property into joint family property, but the coparcener does not cease to retain an interest in the whole of that property; the change is in juridical character, not in the sense of an extinguishment of his title in favour of another distinct person. A Hindu undivided family is not a corporate entity separate from its coparceners, and the interest of a coparcener in joint family property is not a definite, separately valued interest capable of being treated as passing from one person to another in the ordinary sense. The extended definition of transfer in section 2(xxiv) also contemplates transactions of a bilateral character, and a unilateral act of blending does not amount to entering into a transaction with another person. The Court further held that the Act should not be construed to impose a gift-tax on a transaction in invitum where the alleged donee has no choice to accept or refuse the property.
Conclusion: The act of impressing separate property with the character of joint family property does not constitute a gift within the meaning of section 2(xii) of the Gift-tax Act, 1958, and the question was answered in the negative, in favour of the assessee.
Ratio Decidendi: A unilateral blending of separate property into joint family property by a coparcener does not amount to a gift or a taxable transfer under the Gift-tax Act, 1958, because it involves no passing of ownership or bilateral transaction from one person to another.
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