TaxTMI 
TaxTMI 
1965 (12) TMI 149
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....o his son and grandsons. The Gift-tax Officer held that no reasons were advanced by the assessee for allotting a share far in excess of half share to the other members of the family and that, therefore, there had been a gift within the meaning of the Gift-tax Act, and assessed the tax on a sum of ₹ 2,36,377, which was the excess allotment to the other sharers. On appeal, the Appellate Assistant Commissioner held that there was no transfer of property in the case of partition when the joint enjoyment came to an end and, therefore, the transaction did not involve any gift exigible to tax. The Income-tax Appellate Tribunal agreed with the view of the Appellate Assistant Commissioner and held that no gift was made by one coparcener to another when a partition took place between the members of a Hindu undivided family. On the application of the Commissioner of Gift-tax, Madras, the Income-tax Appellate Tribunal has referred the question of law to this court for decision under section 26(1) of the Gift-tax Act. The admitted facts are that the assets of the joint family were worth ₹ 8,51,440. Though Getti Chettiar was entitled to a half share, viz., ₹ 4,25,720, he took....
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....e, in whom it resides, to another receiving it without any title. As every one of the coparceners has title to the entire joint family properties, there is no transfer involved in a partition. The contention of the learned counsel for the revenue that immediately after the severance in status is effected, the share of each of the coparceners becomes ascertained, and thereafter, when he deals with his share in such a manner as to reduce the value of his share and increases the share of another coparcener, it would amount to a transfer amounting to a gift, is not supported by any authority. At this stage, as already stated, we are not dealing with the extended meaning of the word "gift" under the Act. In Narasimhulu v. Someswara Rao([1948] 1 M.L.J. 150) it was held that the allotment at a partition of a jyeshtabagam to the eldest brother was no more than giving a larger share than would strictly be due to him and involved no gift by the younger brother or brothers. Dealing with the nature of the partition,the court held that under a partition arrangement each co-owner gets a specific property in lieu of his rights in all joint properties, that is to say, each co-sharer ren....
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.... M.K. Stremann v. Commissioner of Income-tax[1961] 41 ITR 297] was approved by the Supreme Court in Commissioner of Income-tax v. Keshavlal Lallubhai Patel([1965] 55 I.T.R. 637 (S.C.) In Sahu Madho Das v. Mukand Ram([1955] 2 M.L.J. (S.C.) 1; A.I.R. 1955 S.C. 481, 490) Bose J. stated the position thus at page 10: "It is well-settled that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that title is, each party relinquishing all claims to property other than that falling to his share and recognising the right of the others, as they had previously asserted it, to the portions allotted to them respectively. That explains why no conveyance is required in these cases to pass the title from the one in whom it resides to the person receiving it under the family arrangement. It is assumed that the title claimed by the person receiving the property under the arrangement had always resided in him or her so far as the property falling to his or her share is concerned and therefore no conveyance is necessary." In a recent decision of the Supreme Court in Kaloor....
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....decisions of the Supreme Court cited already, it has been clearly laid down that the process of division by metes and bounds, whereunder separate properties are allotted towards the definite shares of individuals, is not a transfer of property. On a consideration of the authorities cited above, it is clear that the partition by metes and bounds between the divided members of the family subsequent to a division in status would not amount to a transfer of property. The next question that has to be considered is whether the transaction in question would come within the extended meaning of the word "gift" under the Gift-tax Act. "Gift" is defined to include the transfer of property deemed to be a gift under section 4. "Transfer of property" is defined in section 2(xxiv) as follows: "'Transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes-- (a) the creation of a trust in property; (b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property; (c....
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...."include" so and so, the definition is extensive. Therefore, the meaning of the term "transfer of property" is extended to include the transactions in the four sub-clauses. But the question is whether the phrase" without limiting the generality of the foregoing" would make any difference. Learned counsel for the revenue relied on a decision reported as Grimwade v. Federal Commissioner of Taxation* for the interpretation of this phrase. Section 4 of the Gift Duty Assessment Act, 1941-42, is the same as section 2(xxiv) of the Gift-tax Act. The phrase "without limiting the generality of the foregoing" is used in section 4 of the Gift Duty Assessment Act. The case cited, Grimwade v. Federal Commissioner of Taxation(78 Commonwealth Law Reports 199), was disposed of on the ground that the assessee did not enter into a transaction constituting disposition of property within the meaning of paragraph (f) (similar to sub-clause (d) of clause (xxiv) of section 2) and, therefore, there was no gift upon which duty became chargeable. The effect of the phrase in question was not considered by the Full Court on appeal. But Williams J., whose decision was ap....
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....increase the value of the other members of the family. The intention cannot also be denied. But the question is whether the allotment of a greater share in the course of a partition by metes and bounds would be a transaction entered into by a person resulting in the diminishing of the value of his own property. In Grimwade v. Federal Commissioner of Taxation(78 Commonwealth Law Reports 199), while considering clause (f) of section 4 of the Gift Duty Assessment Act, 1941-42, which is similar to sub-clause (d) of clause (xxiv) of section 2 of the Gift-tax Act, the purport of the words "entering into transaction" was dealt with. In the case cited, E.M. Grimwade voted for a resolution of a company, which had the effect of reducing the value of his shares and increasing the value of the other sharers, who happened to be his sons. Rich J., after referring to the dictionary meaning of the word "transaction", viz., "negotiation: dealing between man and man, management: affairs, things managed", observed as follows: "Whatever may be the precise meaning of the word in section 4(f), it should, in my opinion, be construed as meaning some act, doing, negotiat....
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....rtition by metes and bounds and recognition by the tax authorities. If the joint family continued till the division by metes and bounds was complete, there could not be any transaction by a sharer diminishing the value of his own property. We will advert to this aspect again a little later. In construing a taxing statute, which professes to impose a charge upon a subject, the intention must be shown by clear and unambiguous language. A tax should not be imposed without a plain declaration of the legislature to impose it. It has been held that, if a provision is capable of two alternative meanings, the courts will prefer the meaning more favourable to the subject. If a particular case does not fall within the words of the statute, the words cannot be construed benevolently in favour of the State. It is well established in law that the process of division by metes and bounds is not a transfer of property. If it is intended to alter the well-established position of law, a distinct and positive legislative enactment is necessary. In the absence of express declaration, there can be no presumption that any alteration of law was intended. The words in sub-clause (d) of clause (xxiv) of s....
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....erson responsible for the release, discharge, surrender, forfeiture or abandonment. Clause (d) of section 4 provides that, when a person absolutely entitled to the property causes the same to be vested in himself and any other person jointly without adequate consideration and when such other person makes an appropriation out of the said property, the amount of the appropriation used for the benefit of the person making the appropriation or for the benefit of any other person shall be deemed to be a gift. Clauses (c) and (d) can have no application. Clause (c) relates to a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, and the value of such transactions, which is found to the satisfaction of the Gift-tax Officer to be not bona fide, shall be deemed to be a gift. The transactions as such are not taxable but only to the extent to which it has been found to be not bona fide. In this case, it is not disputed that the partition is bona fide, and, even if the transaction is considered to be a release or abandonment of interest in the property, as there is no lack of bona fides, the tran....
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....n clause should be used for the purpose of interpreting the words which are ambiguous or equivocal, and not to disturb the meaning of such as are plain or as to prevent the operation of a word in its primary and obvious sense. To read the term "transfer of property" to include the transaction in question does not appear to be natural. Sub- section (a) of section 4 deals with transfer of property without adequate consideration, and sub-section (b) deals with transfer of property for consideration which is not passed or not intended to pass either in full or in part. Obviously even if the transaction in question is held to be a transfer, it cannot be read into section 4(a) or section 4(b) without straining the language considerably. This fact also supports our view that the transaction in question was not intended to be brought within the ambit of section 2(xxiv)(d). The intention of enacting section 20 of the Gift-tax Act is to enable the collection of the tax on gifts made by the joint family after the joint family had ceased to exist. The Gift-tax Officer is required to record an order that there had been a partition between the various members in definite portions. Unt....