JUDGMENT
A.R. Tiwari, J.
1. At the instance of the assessee, the Tribunal has stated the case and referred the undernoted common question of law in both these cases on applications registered as R.A. Nos. 63, 64, 65 and
66/Ind of 1995 arising out of the order passed on February 28, 1995, in L.T.A. Nos. 33, 63, 64 and 65/Ind of 1992 for the assessment years 1987-88 to 1990-91 and R.A. Nos. 67, 68, 69 and 70/Ind of 1995 arising out of the orders passed on February 28, 1995, in W. T. A. Nos. 31, 60, 61 and 62/Ind of 1992 for the assessment years 1987-88 to 1990-91, for consideration :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the gift of Rs. 10,50,000 made by the karta of the assessee-HUF out of the HUF’s funds by delivery of the amount to the donee was void ab initio and the said amount continues to be an asset belonging to the assessee-HUF and the same is includible, while computing the net wealth of the assessee-HUF for wealth-tax purposes ?”
Briefly stated, the facts of the case are that the assessee is a Hindu undivided family. The karta of this family during the year under consideration made a gift of cash amount of Rs. 10,50,000 in favour of one Motilal Sharma of Delhi. The Assessing Officer held that karta of the family had no legal right to make the gift and as such gift made by him was void and that the gifted amount continued to remain the property of the assessee. He, therefore, included the said amount in the net wealth of the assessee. The assessee then filed appeals before the Commissioner of Wealth-tax (Appeals). The assessee won relying on CJT v. Motilal Ramswaroop [1970] 76 ITR 43 (Kaj). The Tribunal vacated the orders of the Commissioner of Wealth-tax (Appeals) and restored the orders passed by the Assessing Officer. Dissatisfied, the assessee filed applications under Section 27(1) of the Wealth-tax Act, 1957. On those applications, the Tribunal stated the case and referred the aforesaid question of law.
2. We have heard Shri Nazir Singh, learned counsel for the applicant/ assessee, and Shri Vivek Sharan, learned counsel for the non-applicant/ Revenue, in both these references.
3. The Assessing Officer negatived the claim based on the linchpin of the alleged gift by the karta of the Hindu undivided family of Rs. 10,50,000 to Shri Motilal Sharma of Delhi. In appeal No. WT-108/90-91/525, the Deputy Commissioner of Wealth-tax (Assessment) on December 4, 1991, dislodged the order of the Assessing Officer placing reliance on Motilal Ramswaroop’s case [1970] 76 ITR 43 (Raj), and decided that addition of this amount for the purpose of wealth-tax was liable to be deleted. The Tribunal, on appeal by the Assistant Commissioner of Income-tax, vacated the order of the Deputy Commissioner of Wealth-tax (Assessment) in Appeals Nos. 31, 60 to 62/Ind of 1992 and Nos. 33, 63 to 65/Ind of 1992 for the assessment years 1987-88 to 1990-91 and restored the one passed by the Assessing Officer. The assessee now seeks opinion via references.
4.
Four factors and features stare in the face :
(i) Gift-tax has been admittedly levied on the aforesaid amount as is clear from the order of gift-tax assessment.
(ii) No coparcener of the Hindu undivided family has oppugned the gift or protested about gift-tax.
(iii) No provision of law is pressed into service which may compel the assessee to suffer double jeopardy of taxation, i.e., payment of gift-tax and then levy of wealth-tax on the same amount.
(iv) levy of gift-tax is stated by the Revenue to be in the status of individual without bothering to appreciate the source of money. There is no material to show that the amount ever belonged to the alleged individual and did not belong to the Hindu undivided family.
As is clear and pointed out above, the Tribunal lightly brushed aside the vital contention on assumption that gift-tax was levied in the status as individual and not as karta of the Hindu undivided family. In this assumption, what is optionally overlooked is that the identity of the amount was not in doubt and as such the same property was not liable to be exposed to double taxation. In our view, when we excorticate the issue we find that such an exercise led to frivolity liable to be incinerated.
5. Counsel for the applicant contended that the amount prior to gift indisputably belonged to the Hindu undivided family. This being so, what is, he argued, meant by status as individual and why should the assessee suffer on account of mistake of label by the Revenue ? The essence is that this is not the way to skip or skirt the issue.
6. Counsel for the non-applicant is unable to satisfy us as to how the amount, which is subjected to gift-tax, which is higher than wealth-tax, can be treated as wealth in the hands of the karta of the Hindu undivided family ? The discordant position is obvious. If this amount is includible as an asset for purposes of wealth tax, then levy of gift-tax was impermissible. Vice versa, when gift-tax is levied, then it would be grotesque to impose liability of wealth-tax too. It is here that the Revenue is purposefully silent, little realising that silence is not always golden.
7. In slashing taxes, India is in excellent company. In 1979, Ireland abolished wealth-tax. Germany substantially lowered it. The USA cut capital gains tax and the U. K. reduced its maximum personal rate of personal tax from 83 to 60. After even nine and forty years since independence, India has 15 per cent. of the world’s population, but has only 1.5 per cent. of the world’s income. Today, India, poised to usher in the 21st century, is still the 21st poorest nation on earth. And litigative impulse sights no terminal point, and perhaps refuses to evanesce. Where is the finality ? In Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1
(SC), the apex court, in the context of tax matters, ruled that there has to be finality. There has to be veracity.
8. In the case of Motilal Ramswaroop [1970] 76 ITR 43, the High Court of Rajasthan held that (headnote) :
“Held, in the Wealth-tax Act reference, that the amount of Rs. 4 lakhs, together with the estimated interest thereon, ceased to be an asset of the assessee for wealth-tax purposes whether the gifts were void or voidable and that amount could not be taxed under the Wealth-tax Act. It may be that the transfer by way of gifts was liable to be questioned by members of the assessee-family, but that would not make such transfer a revocable transfer and Section 4(1)(a)(iv) of the Wealth-tax Act has no application to the case.”
In Sunil Kumar v. Ram Parkash [1988] AIR 1988 SC 576, it is held that the rights of a coparcener “are not independent of the control of the karta”. In a Hindu family, the karta or manager occupies a unique position. It would be ludicrous to imagine that one would opt to press the plea of gift to pay more amount by way of gift-tax to save lesser amount by way of wealth-tax and to permit such imagination to prevail.
9. The case on hand thus evidently but elvishly, manifests malady, not melody. Taxation here appears to be vexation.
10. Law is a leveller, not a producer of unmerited adversity. What puzzles is that if a gift by the karta is void ab initio in terms of Section 2(xii) then why was gift-tax imposed ? And after this event treating the gift as valid and levying gift-tax, can the authorities somersault and speak about validity for gift-tax and invalidity for wealth-tax ? This proclivity of plus and minus has to perish. No person or authority should be permitted to slip under the umbrella of inconsistent positions.
11. We are not shown any provision of law which could first permit levy of gift-tax and then levy of wealth-tax on the same property. In fact one is mutually destructive of the other.
12. The New Testament II Corinthians III 6 highlighted that The letter killeth, but the spirit giveth life. It is a case of taking wealth-tax but not returning gift-tax. These are two sides of the same coin. The moment one denies the existence of one side, one loses the coin itself. There has to be rationality. Was Lord Keynes right in his obervation that “Men will do the rational thing, but only after exploring all other alternatives” 1 Where is the necessity to explore ? Indisputably, these two taxes cannot co-exist. It is inutile and futile to foul and flagellate in this manner.
13. In the face of facts and features, we are satisfied that the Tribunal was not right in vacating the order of the first appellate authority and in holding that the gifted amount, subjected to gift-tax and consented to, even if impliedly, by the other coparceners, continued to belong to the
Hindu undivided family for wealth-tax purposes. We are also satisfied that the Tribunal was not right in holding that the gifted amount was assessable to wealth-tax.
14. Ex consequenti, we see the error, vividly visible, and are obligated to demolish it to free the assessee from the pangs of patent illegality in the face of levy of gift-tax on the same amount. It is improper to wrench and wriggle on the fulcrum of supposed status of individual v. Hindu undivided family when money evidently belonged, prior to accepted gift, to the Hindu undivided family. Such a position, as taken by the Tribunal, in reversing the verdict of the first appellate authority, is fittingly frangible. The label is not euonym. May be, we would have felt inclined to agree with the Revenue if there was no levy of gift-tax on the same amount. The Revenue has no solution to this big “if” and remains unable to unknot the conundrum. Law and justice have to be seen to live in harmony.
15. We thus answer the question in both these cases in the negative, i..e, against the Revenue and in favour of the assessee. Strangely enough, the validity of gift was considered in wealth-tax proceedings.
16. These miscellaneous civil cases are thus decided in the terms indicated above but with no orders as to costs. Counsel fee for each side in each case is, however, fixed at Rs. 750 if certified.
17. Transmit a copy of this order to the Tribunal for further action in the light of our answer in conformity with law.
18. Retain this order in Income-tax Reference No. 19 of 1995 and place its copy in the record of Income-tax Reference No. 20 of 1995 for ready reference.