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Issues: (i) Whether gifts made by the kartas of the respective Hindu undivided families in favour of their wives were beyond reasonable limits and therefore void at law; (ii) whether the assessee-firm was entitled to deduct interest paid on the amounts deposited with the firm by the wives of the kartas.
Issue (i): Whether gifts made by the kartas of the respective Hindu undivided families in favour of their wives were beyond reasonable limits and therefore void at law.
Analysis: A karta or Hindu father may make a gift of ancestral movable property, but such a gift must remain within reasonable limits. If a gift exceeds those limits, it is not void ab initio; it is only voidable and can be challenged only by the coparceners whose interests are affected. The record contained no material showing that the gifts of Rs. 1,00,000 each were excessive in relation to the total family assets or otherwise beyond reasonable limits. The provisions of sections 6, 8 and 13 of the Hindu Minority and Guardianship Act, 1956 did not assist the Revenue, because a natural guardian has no power over the minor's undivided interest in joint family property and the welfare principle in section 13 had no direct application to such property.
Conclusion: The gifts were not proved to be beyond reasonable limits and were not void; the answer was against the Revenue.
Issue (ii): Whether the assessee-firm was entitled to deduct interest paid on the amounts deposited with the firm by the wives of the kartas.
Analysis: The claimed deduction depended upon the legal efficacy of the underlying gifts and the deposits made by the wives. Since the gifts were not shown to be invalid in law and no material established that the gifts exceeded reasonable limits, the Revenue's challenge to the interest payment could not succeed on the factual record before the Court.
Conclusion: The assessee-firm was not entitled to the deduction; the answer was against the assessee.
Final Conclusion: The reference was answered in favour of the Revenue and against the assessee on all three questions, with costs awarded to the Revenue.
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