ORDER
Shri C.L. Bokolia, Accountant Member
1. These two appeals are based on identical facts and common grounds of appeal. Both these appeals are, therefore, heard together and disposed of by this common order for the sake of convenience. These appeals are preferred by the revenue against the order passed by the CIT (Appeals) on the ground that the CIT(A) has erred in holding that while valuing the shares rule 1D is applicable and that taxation should be reduced by the amount of advance tax paid and that the CIT(A) should have held that the assessee being a HUF karta, had no powers to gift the shares to a third party and, therefore, the gift was void.
2. Shri Sekaran, the learned Departmental Representative submits that for valuing the unquoted equity shares, held by the assessee of M/s. Metal Powder Company, the provisions of rule 1D are mandatorily applicable and the taxation should not have been reduced by the amount of advance tax paid by the company. This issue stands resolved by the decision of the Supreme Court in the case of CWT v. Bharat Hari Singhania [1994] 207 ITR 1. This being so, the Assessing Officer is directed to re-calculate the value of these shares following the decision of the Apex Court (supra).
3. The next issue relates to gift of shares belonging to the HUF to a third party. The learned Departmental Representative strongly objected to the decision of the CWT (Appeals) on this issue and submits that HUF assets can be gifted to either a member of the HUF or coparcener of the HUF and not to a third party. If any asset is gifted to a third party, it is void. In this connection, it is also submitted that when an asset is gifted, the intention of the donor is required to be looked into. In the instant case, the assessee has gifted the shares which would be revokable after 75 months. This provision in the Gift Deed disproves the intention that the gift is not revokable. Since the gift itself is revokable, the time-limit exceeding six years becomes not very material or important. In this case, therefore, the intention of the karta of making the revokable gift and the fact that the gift itself is void, make if very clear that the amount of gift so made by the karta is includible in the total taxable wealth of the HUF. Hence, it was submitted that the CGT(A) has erred in allowing the appeal of the assessee.
4. On the other hand, Shri Sridhar, the learned counsel for the assessee supports the order of the CWT (Appeals) and submits that the provision of section 4(1)(a) applies to individual and not to the HUF. The assessee being a HUF, these provisions would not be applicable and, hence, the action of the CWT (Appeals) in allowing the appeal is reasonable and justified.
5. We have heard the rival submissions and examined the documents on record. We are of the opinion that the gift of assets of a HUF to the member of the HUF and coparcener of the HUF as well as to a stranger is void. There is no dispute that the property being ancestral in nature, the same was HUF property. The father being the karta of the HUF could not make a gift of the ancestral property, either to a coparcener or to a stranger. Such gift would be void per se and, therefore, there would be no gift within the meaning of the Act. This view is strengthened by the decision of the Punjab & Haryana High Court in the case of CGT v. Tarlok Singh [1997] 223 ITR 51.
6. In the light of the above discussions, the order passed by the CGT (Appeals) on this account is set aside and the order of the Assessing Officer is restored.
7. In the result, the appeals filed by the revenue are allowed.