ORDER
Per Shri B. V. Venkataramaiah, Accountant Member – for the the assessment year 1972-73 shri S. V. Kalkundri filed a return of gift declaring taxable gifts of the value of Rs. 1,56,865. The total value of the gift was Rs. 1,61,865 according to the letter dated 22-12-1975 filed by Shri A. S. Kalkundri, son of Shri S. V. Kalkundri. The GTO noticed that properties bearing Nos. 1691 and 1692 at Ramdeo Galli, Balgaum had actually been transferred on 6-4-1973 and the relevant gift was assessable to tax only in the assessment year 1973-74. The donor subsequently died and his legal heir A. S. Kalkundri appears to have challenged the assessment for the year 1972-73. It is noticed that the return filed by the late Shri S. V. Kalkundri is in the status of an HUF.
2. when the gift-tax assessment proceedings started under section 15(3) of the Gift-tax Act, 1958 (the Act), for the assessment year 1973-74, Shri A. S. Kalkundri contended that as the property was that of the HUF no gift could have been made to him and as such his father was not liable to gift-tax. The GTO held as follows :
“… In a sense, the assessee claims that the property gifted was an HUF property, who is having equal right in the same and, therefore, the gift is exempt. The assessees contention cannot be accepted. Late Sri srinivas V. Kalkundri was having 3 daughters and one adopted son, namely, Anand Srinivas Kalkundri. The property gifted to him through a registered deed dated 6-2-1973 was gift to his adopted son. As per section 13 of he Hindu Adoption and Maintenance Act, 1956, adoption does no deprive adoptive father of the power to dispose his or her property by transfer inter verves or by will. This section is having overriding effect on the Hindu law on adoption as per section 4 of the Hindu Adoption and Maintenance Act. In these circumstances, gift given by late Sri S. V. Kalundri is properly made, and there is no question of his adopted son to get equal right, etc., Therefore, the gift of residential house made through registration on 6-2-1973 is assessable for assessment year 1973-74.”
The AAC disposed of the appeal as follows :
“I have carefully gone through the order of the gift-tax Officer. In my opinion the Gift-tax Officer has discussed the case we and that the relevant facts of the case have been properly appreciated. Under the circumstances, I do not see any reason for interfering with the Gift-tax Officers order. The appeal is dismissed.”
The assessee is in appeal.
3. At the outset, it is noticed that the assessment for 1973-74 for wealth-tax has been made in the status of an HUF. We understand that for income-tax also the status was that of an HUF although it is not very clear from the assessment order. The HUF of Shri S. V. Kalkundri consisted of himself and his son A. S. Kulkundri. It appears that three daughters of Shri S. V. Kalkundri have already been married off. The taxing authorities having already granted the status of an HUF in the wealth-tax assessments, cannot easily resale from the stand. Once the status of an HUF is granted, the father will not have the power of gifting away the joint family property except under certain circumstances and to the extent prescribed under the Hindu law. These are dealt with in articles 225 an 226 of Mullas Hindu Law, 15th edition. for our purpose article 226 is important. This runs as follows :
“226. Gift by father or other managing member of ancestral immovable property within reasonable limits – Hindu father or other managing member has power to make a gift within reasonable limits of ancestral immovable property for pious purposes. But the alienation must be an act inter verves, and not by will. A member of a joint family cannot dispose of by will any portion of the property even for charitable purpose and even if the portion bears a small proportion to the entire estate. But now see section 30 of the Hindu Succession Act, 1956.”
It would, therefore, appear that a father cannot gift away his entire immovable property and that too for purpose other thanpious purposes. Viewed at in this light, it appears to us that the father was not competent to gift immovable property to his son. No doubt, in the peculiar circumstances of this case, the property would go from the father to the son as there are no other coparceners, subject, of course, to the proviso to section 6 of the Hindu Succession Act, 1956 and Explanation to section 30.
4. Reliance, however, is placed on section 13 of the Hindu Adoption and Maintenance Act, 1956, which reads as follows :
“13. Right of adoptive parents to dispose of their properties – Subject to any agreement to the contrary, an adoption does not deprive the adoptive father or mother of the power to dispose of his or her property by transfer inter verves or by will.”
The commentary by the learned author Shri Mulla is as follows :
“Right of adoptive parents to dispose of their properties – Under the law as provisos applied a Hindu adopting a son did not thereby deprive him-self of the power he had to dispose of his separate property by gift or will. There was no implied contract on the part of the adoptive father, in consideration of the gift of his son by the natural father or mother, that he would not dispose of his property by gift or will. When, however an adoption was made by a member of a joint family governed by the Mitakshara law, the adopted son became a member of the corparcenary from the moment of his adoption, and the adoptive father had no power either by deed or will to interfere with the rights of survivorship of the adopted son in the coparcenary property. The same principle applied where an adoption was made by a sole surviving coparcener. it must have been noticed from section 30 of the Hindu Succession Act, 1956, that the interest of a coparcener in a Mitakshara coparcenary property can now be disposed of by him by will notwithstanding the law relating to joint family and joint family property although it is not competent to a coparcener even now to dispose of by gift his interest in the coparcenary property so as to defeat the right of survivorship.
The property envisaged by the section is, of course, property over which the adoptive father or motherland had vested in him or her the power of disposal and not property over which the adoptive parent had no such right. Thus for instance a gift of coparceners property by an adoptive father would be void and can be challenged by the adopted son.
The present section is in accordance with the law as it previously stop and as altered by section 30 of the Hindu Succession Act, 1956. The rule is simple and lays down that an adoption of a son or a daughter does not deprive the adoptive father or mother of the power to dispose of his or her (disposable) property by transfer inter verves or by will. The rule does not ideal with the nature of the rights of disposal of his or her property by an adoptive father or adoptive Mother which must be regulated by other provisions and rules of law. It only lays down that the adoption of a son or daughter is nor per se to have the effect of depriving the adopting father or adoptive mother of the rights to dispose of his or her property.” (p. 1110)
5. It is, therefore, obvious that the power given to the adoptive father to dispose of the property is as regards his separate property and not joint family property. The moment a son is adopted, he becomes a member of the family and will have the rights of a coparcener in the joint family property. The case of the revenue would have been quite different if the status of S. V. Kalkundri had been taken as that of an individual and the properties in question belonged to him in his individual capacity. Having once granted the statues of an HUF the complexion of the problem, changes. The revenues reliance on the narration in the gift deed, which point out that the assessee was the absolute owner of the property, will not be of any help in the light of the taxing authorities acquiescence in the status issue. We understand that the appeal for the assessment year 1972-73 is still pending before the ACC but the question of immovable properties is not involved therein and the appeal for that year has to be decided independently. From the facts stated above, we conclude that Shri S. V. Kalkundri transferred the joint family properties to his son, whilch is void in law. The order of the AAC is set aside.
6. The appeal is allowed.