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PETITIONER: COMMISSIONER OF GIFT TAX, MADRAS

       Vs.

RESPONDENT: N.   S.  GETTY CHETTIAR

DATE OF JUDGMENT16/09/1971

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N.

CITATION:  1971 AIR 2410            1972 SCR  (1) 736

ACT: Gift  Tax Act, 1958-Section 2(xii)  and  2(xxiv)--Coparcener taking  lesser  share and allotting greater share  to  other members-If   makes   "gift"-Partition,   if   "transfer   of property".

HEADNOTE: In a partition of the properties of a joint Hindu  Undivided Family a coparcener took as his share less than what he  was entitled to and allotted greater share to the other  members of the coparcenery.  On the question whether the  coparcener could  be  held to have made a "gift" of a  portion  of  his share of the property to the other members and was liable to tax under the Gift Tax Act, 1958. HELD:(i)  A coparcener in a Hindu Undivided Family  has no  definite share in the family property.  His  share  gets determined  only  when there is a division of  status  or  a division  by metes and bounds.  It is not necessary that  in every  case of partition in a Hindu Undivided  Family  there should  first  be  a division in  status  and  thereafter  a division by metes and bounds.  In the present case there  is no  material to show that there was any division  of  status before the properties were actually divided.  Therefore,  it is  not necessary to consider what would be the position  in law if there was just a division of status and the same  was followed by a division by metes and bounds. [738 H-739E] (ii)The partition of the joint Hindu Family property is not a transfer Commissioner  of Income-tax, Gujarat v. Keshavlal  Lallubhai Patel, 55 I.T.R. 637, followed. (iii)A  partition is not a  "disposition"  "conveyance" "assignment"  "settlement"  "delivery" "payment"  "or  other alienation of property" within the meaning of those words s. 2(xxiv)  of  the Act.  These words are used as some  of  the modes  of transfer of property and have to be understood  in the  setting in which those terms are used and  the  purpose they are intended to serve. [742-G] It  cannot be considered a "transaction entered into by  any person   with  intent  thereby  to  diminish   directly   or indirectly the value of his own property and to increase the value  of  the  property of any  other  person"  within  the meaning  of  cl. (d) of s. 2(xxiv), because, a member  of  a Hindu  Undivided  Family who has no definite  share  in  the

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family  property before division cannot be said to  diminish directly or indirectly the value of his own property and  to increase  the  value  of the  property  of  another  person. Further,  the  transaction  referred to in  cl.  (d)  of  s. 2(xxiv) takes its colour from the main clause i.e., it  must be transfer of property in some way. [742 H-743 C]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeals Nos.  128  of 1968 and 1341 of 1971. Appeals  by certificate/special leave from the judgment  and order  dated December 10, 1965 of the Madras High  Court  in Tax Case No. 65 of 1967 (Reference No. 18 of 1963). 737 Jagadish  Swarup,  Solicitor-General, A. N.  Kirpal,  R.  N. Sachthey  and B. D. Sharma, for the appellant (in  both  the appeals). Uttama  Reddy and D. N. Gupta, for the respondent  (in  both the appeals). The Judgment of the Court was delivered by Hegde, J. Both these appeals by the Commissioner of Gift Tax arise  from the same judgment.  The former one is by  certi- ficate  and the latter by special leave.  Civil  Appeal  No. 1341 ,of 1971 came to be filed because the certificate given by  the  High Court not being supported by any  reason,  the appeal  brought on the strength of that  certificate  (Civil Appeal  No. 128 of 1969) became unsustainable.  That is  why instead  of one appeal, there are two appeals before  us  in respect of the same decision. The decision appealed against was rendered by the High Court of Madras in its advisory jurisdiction, in a reference under s.  26(1)  of  the Gift Tax Act,  1958  (to  be  hereinafter referred  to  as  the  Act).   The  Income  ’Tax   Appellate Tribunal, Madras Bench referred the question a, "Whether  there  was  gift by N. S. Getti  Chettiar  of  Rs. 2,46,377 on which he is liable to pay gift tax" to  the  High  Court seeking its opinion.   The  High  Court answered that question in the negative.  The Commissioner of Gift Tax not being satisfied with that decision has  brought these appeals. The  facts of the case are not many though the  question  of law  arising  for  decision  is  by  no  means  easy.    The respondent,  N. S. Getti Chettiar (who will  hereinafter  be referred  to  as the assessee) was karta  of  his  undivided Hindu  family  consisting of himself,  his  son  Govindaraju Chettiar  and  six sons of the  asid  Govindaraju  Chettiar. There  was  a partition of the immovable properties  of  the family  through  a registered deed executed on  January  17, 1958  and the movable properties were divided on  April  13, 1958  on  which date the necessary entries  in  the  account books  were made.  The assessee claimed recognition of  that partition under s. 25A of the Act.  That was granted by  the Department  on  November 29, 1958.  The total value  of  the properties  so  divided was Rs. 8,51,440/-  but  under  that partition  the  assessee  took  properties  worth  only  Rs. 1,78,343/-.   The remaining properties were allotted to  his son and grandsons. The  Gift  Tax  Officer  overruling  the  objection  of  the assessee,  came  to  the conclusion  that  the  assessee  by allotting  greater  share  to  the  other  members  of   the coparcenary than to which 738 they were entitled, must be held to have made a ’gift’ of  a

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portion  of his share of the property to the  other  members and hence was liable to be taxed under the Act.  He,  opined that the partition in question is a transaction entered into between  the  assessee and the members of  his  family  with intent  thereby  to  diminish the value  of  assessee’s  own property  and increase the value of the property of his  son and grandsons. Aggrieved  by that order, the assessee went up in appeal  to the   Appellate  Assistant  Commissioner.    The   Appellate Assistant  Commissioner  held  that  as  no  member  of   an undivided  Hindu Family had a definite share in  the  family assets,  on partition, when the joint enjoyment came  to  an end, there was no need to have arithmetical equality between the shares of the various coparceners.  He accordingly  held that  the  assessee was not liable to pay any  gift  tax  in respect of the properties that fell to the shares of his son and   grandsons.   The  Department  appealed  against   this decision  to  the  Tribunal.  It was  contended  before  the Tribunal ’that the transaction in question came within s.  2 (xii) and s. (xxiv), in particular it came within cl. (d) of s.  2 (xxiv), as property included any interest in  property and  partition constituted a transaction; the assessee  had, by relinquishing a portion of what was his due,  transferred such interest and properties in favour of the other  members of the family for no consideration and consequently the Gift Tax was properly leviable.  This contention was not accepted by  the  Tribunal.   It  held that  the  interest  that  the assessee had in his Hindu Undivided Family property was  not definable, and therefore s. 2(xxiv) was not attracted to the facts of the case. The  High Court agreed with the conclusions reached  by  the Assistant Appellate Commissioner and the Tribunal.  It  came to  the conclusion that the partition in the family  of  the assessee  did  not  come within the mischief  either  of  s. 2(xii)  or  s.  2(xxiv).   It also  opined  that  under  the partition, there was no deemed ’gift’ as contemplated by  s. 4 of the Act. Mr. Solicitor-General appearing for the Commissioner of Gift Tax did not place any reliance before us on s. 4 of the Act. Therefore we need not consider the scope of s. 4 of the Act. All  that Mr. Solicitor General contended was that the  case came  either under s. 2(xii) or under s. 2(xxiv).  He  built up his arguments thus A partition in a H.U.F. invariably involves two steps, first there  is  a division of status and thereafter  there  is  a division by metes and bounds.  A coparcener’s share is fixed according  to law as soon as there is a division of  status. Therefore, if at the time of division by metes and bounds he chooses to take a share 739 less  than  to which he is entitled to under law,  then  the same: would amount to a ’gift’ of the balance of property to which  he  was entitled, to the other coparceners.   We  are unable  to  agree with Mr. Solicitor General that  in  every case  of  partition  in a H.U.F. there’ should  first  be  a division of a status and thereafter a division by metes  and bounds.  There are innumerable cases where a partition takes place  without there being earlier any division  of  status. Coming  to  the  facts of the case, there  is  no,  material before  us  to show that there was any  division  of  status before  the properties were actually divided.  The  Tribunal has, not found that there was any division of status amongst the   members  of  the  family  before  they   divided   the properties.  The partition deed is not before us nor are the account books showing the division of the movable properties

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is before us.  It is not known whether under the  registered partition  deed,  there was only a partial  partition  or  a complete  disruption of the family.  That being so, we  have to  proceed on the basis of the facts found by the  Tribunal and apply the law to the facts so found.  The argument  that there  was  first  a division of status  and  the  same  was followed  up  by  a division by metes and  bounds  does  not appear to have been urged before the Tribunal.  Under  these circumstances,  it is not necessary for us to consider  what would  be the position in law if there was first a  division of  status  in  a H.U.F. and the same  was  followed  up  by division  by metes and bounds in which division one  of  the coparceners  takes  properties,  less than  to  what  he  is entitled to under law. Before proceeding to examine the relevant provisions of  the Act,  it is necessary to mention that according to the  true notion of an undivided Hindu family, no individual member of that  family, whilst it remains undivided, can predicate  of the  joint and undivided property, that he, that  particular member,  has  a certain definite share namely a third  or  a fourth.  All the coparceners in a Hindu joint family are the joint  owners of the properties of the family.  So  long  as the  family remains joint, no coparcener can predicate  what his share in the joint family is.  His share gets determined only  when  there is a division of status or a  division  by metes  and  bounds.  Therefore it is not correct  to  assume that  a  coparcener in Hindu joint family has  any  definite share  in the family property, before its division.   Having stated  that  much,  let  us now  proceed  to  consider  the relevant provisions of the Act. Section 3 of the Act is the charging section.  It says:               "Subject to the other provisions contained  in               this  Act,  there shall be charged  for  every               assessment year commencing on and from the 1st               day of April 1958, a               740               tax  (hereinafter referred to as gift-tax)  in               respect of the gifts, if any, made by a person               during  the  previous year (other  than  gifts               made before the 1st day of April 1957) at  the               rate or rates specified in the schedule."               ’Gift’  is  defined in S. 2(xii).   That  sub-               clause says:               "  "gift" means the transfer by one person  to               another  of any existing movable or  immovable               property   made   voluntarily   and    without               consideration  in money or money’s worth,  and               includes  the transfer of any property  deemed               to be a gift under section 4."               The  expression  ’transfer  of  property’   is               defined in S. 2(xxiv) That provision reads :               "    "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)   the  exercise of a power of  appointment               of  property  vested in any  person,  not  the               owner  of  the  property,  to  determine   its               disposition in favour of any person other than               donee of the power; and

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             (d)   any  transaction  entered  into  by  any               person   with  intent  thereby   to   diminish               directly  or indirectly the value of  his  own               property  and  to increase the  value  of  the               property of any other person.’ We  shall first examine whether the partition with which  we are concerned in these appeals can be considered as transfer of  property  under the general law.   Thereafter  we  shall proceed  to  consider whether it comes within  the  extended meaning given to that expression in s. 2(xxiv). It  is now settled by the decision of this Court in  Commis- sioner   of  Income-tax,  Gujarat  v.  Keshavlal   Lallubhai Patel(1)  that  a partition of joint Hindu  family  property cannot  be  considered as transfer in the  strict  sense-the sense in which all legal expressions are understood and more particularly in tax (1)  55 I.T.R. 637. 741 laws.  In the course of that judgment Sikri, J. (as he  then was) speaking for the Court observed :               "But,  is  a partition of joint  Hindu  family               property  a transfer in the strict sense?   We               are  of the opinion that it is not.  This  was               so  held  in Gutta  Radhakrishnavya  v.  Gutta               Sarasamma(1).  Subba Rao, J., (then a judge of               the Madras High Court) after examining several               authorities  came  to the  conclusion  that  "               partition is really a process in and by  which               a  joint  enjoyment  is  transformed  into  an               enjoyment  in  severalty.   Each  one  of  the               shares had an antecedent title and, therefore,               no conveyance is involved in the process, as a               conferment  of a new title is not  necessary."               The  Madras  High  Court  again  examined  the               question in M. K. Stremann v. Commissioner  of               Income-tax  (2)  with  reference  to   section               16(3)(a)(iv).  It observed that "obviously  no               question of transfer of assets can, arise when               all  that  happens is  separation  in  status,               though the result of such severance in  status               is  that  the property hitherto  held  by  the               coparcenary   is   held  thereafter   by   the               separated    members   as    tenants-incommon.               Subsequent   partition  between  the   divided               members  of the family does not amount  either               to a transfer of assets from that body of  the               tenants-incommon  to each of such  tenants-in-               common."               The Punjab High Court came to the same conclu-               sion  in  Jagan Nath v.  State  of  Punjab(3).               Agreeing with these authorities, we hold  that               when  the  joint  Hindu  family  property  was               partitioned, there was no   transfer of assets               within  section 16(3)(a)(iii) and (iv) to  the               wife or the minor son." We are bound by the ratio of that decision and if we may say so,  we  respectfully agree with the statement  of  the  law quoted  above.   Hence  we hold that the  partition  in  the family  of  the  assessee did not  effect  any  transfer  as generally understood in law. This  takes us to to s. 2 (xxiv).  The opening words of  the provision  refer  to ’transfer of  property’.   That  clause enumerates  several types of transfers and not to any  other transactions.   It is also necessary to attach  significance to  the words "or other alienation of property"  immediately

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after setting out the various (1) I.L.R. 1951 Mad. 607.  (2) (1961) 41 I.T.R. 297. (3)  (1962) 64 P.L.R. 22. 742 types  of transfers.  ’If we read the clause as a whole,  it is  clear  that  it deals with  transfer  of  properties  in various ways. As observed in Craies on Statute Law (6th Edn. p. 213)  that an interpretation clause which extends the meaning of a word does not take away its ordinary meaning.  An  interpretation clause  is  not  meant to prevent  the  word  receiving  its ordinary,  popular and natural sense whenever that would  be properly  applicable, but to enable the word as used in  the Act,  when  there is nothing in the context or  the  subject matter to the contrary to be applied to some things to which it would not ordinary be applicable. Bearing  in  mind these principles, let us now  examine  the scope   of   s.   2(xxiv).    That   provision   speaks   of "disposition",  " conveyance",  "assignment",  "settlement", "delivery", " payment" or "other alienation of property". A  reading  of this section clearly goes to  show  that  the words     "disposition",     "conveyance",     "assignment", "settlement",  "delivery" and "payment" are used as some  of the  modes of transfer ,of property.  The  dictionary  gives various  meanings for those words but those meanings do  not help  us.  We have to understand the meaning of those  words in  the context in which they are used.  Words in a  section of a statute are not to be interpreted by having those words in  one hand and the dictionary in the other.   In  spelling out  the  meaning of the words in a section, one  must  take into  consideration  the setting in which those  terms  .are used and the purpose that they are intended to serve.  If so understood,  it is clear that the word "disposition" in  the context  means  giving  away or giving up  by  a  person  of something which was his own, "conveyance" means transfer  of ownership,  "assignment"  means the transfer of  the  claim, right  or property to another, "settlement"  means  settling the  property, right or claim conveyance or  disposition  of property for the benefit of another, "delivery" contemplated therein is the delivery of one’s property to another for  no consideration and "payment" implies gift of money by someone to  another.  We do not think that a partition in  a  H.U.F. can be considered either as "disposition" or "conveyance" or "assignment"  or "settlement" or "delivery" or "payment"  or "alienation"  within  the  meaning of those words  in  s.  2 (xxiv). This leaves us with cl. (d) of S. 2 (xxiv) which speaks of a transaction  entered into by any person with intent  thereby to  diminish  directly or indirectly the value  of  his  own property  and  to  increase the value  of  the  property  of another  person.   A  member of  H.U.F.  who,  as  mentioned earlier, has no definite share in the family property before division, cannot be said to diminish 743 directly  or  indirectly  the value of his  property  or  to increase  the value of the property of any other  coparcener by  agreeing to take a share lesser than what he would  have got  if  he had gone to court to enforce  his  claim.   Till partition,   his   share   in   the   family   property   is indeterminate.  He becomes entitled to a share in the family property  only after the partition.  Therefore there  is  no question  of his either diminishing directly  or  indirectly the value of his own property or of increasing the value  of the property of anyone else.  The "transaction" referred  to in  cl.  (d) of s. 2 (xxiv) takes its colour from  the  main

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clause viz., it must be a transfer of property in some  way. This conclusion of ours gets support from sub-clause (a)  to (c)  of clause (xxiv) of s. 2, each of which deals with  one or  the other mode of transfer.  If the parliament  intended to  bring within the scope of that provision  partitions  of the  type  with which we are concerned, nothing  was  easier than to say 2. In interpreting tax laws, courts merely  look at the works of the section.  If a case clearly comes within the section, the subject is taxed and not otherwise. For these reasons, we agree with the view taken by the  High Court of Madras,, the’ Tribunal and the Assistant  Appellate Commissioner  that  the assessee made no  "gift"  under  the partition deed in question. In the result these appeals fail.  Civil Appeal No. 1341  of 1971 is dismissed on merits and Civil Appeal No. 128 of 1969 is  dismissed  as being not maintainable.  The  assessee  is entitled to his costs-Fee one set. K.B.N.                                               Appeals dismissed. 744