Ancestral family property cannot be taxed as a gift unless self-acquisition is proved; recovery proceedings fail too.

An ancestral Hindu family property transferred by a karta cannot be treated as a taxable gift unless the Revenue establishes that the property was the settlor's self-acquired property. On the facts stated, the settlement deed referred to ancestral properties and there was no material to prove self-acquisition, so the Gift-tax Act could not be invoked on a gift basis. Because the levy failed, the consequential recovery proceedings against the donees also had no legal foundation and were unsustainable.

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Issues: Whether the settlement deed executed by the petitioners' father in respect of ancestral properties could be treated as a taxable gift under the Gift-tax Act, and whether recovery proceedings against the donees could be sustained on that basis.

Analysis: The properties dealt with in the settlement deed were described as ancestral properties, and there was no material to show that they were the settlor's self-acquisitions. Under Hindu law, a karta has no power to convey ancestral family properties by way of settlement or gift. The assessment on the footing that the transaction was a gift could stand only if the properties were the settlor's own properties. Since that basis was not established, the levy of gift-tax on the transaction failed, and the consequential recovery proceedings also lacked support.

Conclusion: The transaction could not validly be assessed as a gift, and the recovery proceedings against the petitioners were unsustainable.

Final Conclusion: The writ petition succeeded and the recovery action was quashed, with no order as to costs.

Ratio Decidendi: A transfer of ancestral Hindu family property by a karta cannot be taxed as a gift unless the Revenue establishes that the property was the settlor's self-acquired property.

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