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C.I.T., Lucknow v. Raja Sharda Narain Singh, Lucknow - INCOME TAX REFERENCE No. 9 of 1986 [2004] RD-AH 944 (29 September 2004)


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Court No.37

Income Tax Reference No.9 of  1986

The Commissioner of Income Tax, Lucknow  Vs. Raja Sharda Narain Singh.

Hon'ble R.K. Agrawal, J

Hon'ble Prakash Krishna, J

The Income Tax Appellate Tribunal, Allahabad has referred the following two questions of law under Section256 (1) of the Income Tax Act, 1961, hereinafter referred to as the Act, for opinion to this Court:-

" (1) Whether, on the facts and in the circumstances of this case, the gifts to minor daughters could be said to be valid gifts in the eye of law ?  and

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income derived from those properties, which had been gifted to the daughters should be excluded from the assessment of the family,"

Briefly stating the facts giving rise to the present reference are as follows:-

The respondent assessee is HUF. There was a partial partition in the family on 30th September, 1977 which has been accepted by the Income Tax Officer by the order dated 25th March, 1980 passed under section  171 of the Act. The respondent assessee holds several properties. It filed its return of the income for the assessment year 1977-78 declaring an income of Rs.1,384/- from the house property and Rs.12,030/- from Bazar. Subsequently, in the revised return  filed by it, income from residential house was also disclosed.  For the assessment year 1978-79, the return was filed showing an income of  Rs.21,030/-.

During the course of assessment proceeding  it was claimed by the respondent that certain properties had been gifted to the daughters namely  Chandra Prabha and Kiran Prabha by the Karta of HUF Raja Sharda Narain Singh. It was also claimed that some other properties had been gifted to his son Digvijai Narain Singh. The Income Tax Officer did not accept the gift made to the daughters on the ground that the Karta of the assessee of HUF was not competent to make such gift to the members of the HUF. He held that the income from the gifted properties required to be included in the assessment of the HUF.

Feeling aggrieved the respondent assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner while allowing the appeal directed the Income Tax Officer to exclude the income of the properties gifted to the daughters from the assessment. The appeal before the Tribunal has failed.

We have heard Shri A.N. Mahajan, the learned  standing counsel for the Revenue. The Apex Court in the case of Commissioner of Wealth Tax/Income Tax  Vs. K.N. Shanmugasundaram 1998  (232) I.T.R. 354 has held that the Karta is entitled to make the gift to the minor daughters upto a reasonable limit.

In view of the decision of the Apex Court we answer both the questions of law in affirmative i.e. in favour of respondent- assessee and against the Revenue. However, there shall be no order as to costs.

Dt. 29.9.2004



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