My client impressed his self-acquired property with the character of joint family property by a declaration. The department says he has made a gift to the family. Is a declaration of blending a transfer?
No. The Supreme Court held that the declaration by which the assessee impressed the character of joint Hindu family property on his self-acquired properties did not amount to a transfer, and so did not attract the Gift-tax Act, 1958. The act by which a coparcener throws his separate property into the common stock is a unilateral act: there is no question of the family rejecting or accepting it, no donor and no donee, and no gift under Chapter VII of the Transfer of Property Act. "Transaction entered into" in s.2(xxiv)(d) of the Gift-tax Act contemplates an act to which two or more persons are parties and cannot apply to a unilateral act, and "disposition" in the opening words of s.2(xxiv), read with the company it keeps, refers to a bilateral or multilateral act. THE ACT CONSTRUED IS THE GIFT-TAX ACT, 1958.
Decided by the Supreme Court (J.C. Shah J and K.S. Hegde J (judgment delivered by Hegde J)) on 1970-05-05, reported as Civil Appeal No. 695 of 1968; equivalent citations printed on the source page: 1970 AIR 1722, 1971 SCR (1) 522, AIR 1970 SUPREME COURT 1722. No ITR or SCC citation is printed on either the plain or the print rendering of this document; the ITR reference 76 ITR 675 comes only from the Supreme Court's own citation of this decision in Pushpa Devi v. CIT and is recorded on that footing.. It bears on section Gift-tax Act 1958 s.2(xii), section Gift-tax Act 1958 s.2(xxiv), section Gift-tax Act 1958 s.2(xxiv)(d), section Gift-tax Act 1958 s.3, section Gift-tax Act 1958 s.4, section Gift-tax Act 1958 s.26(1), section 64(2) of the Income Tax Act 1961, in Gifts, Shares & Angel Tax, How Tax Law Is Read and Capital Gains matters.
The immediate holding is about gift-tax, but the reason a practitioner needs it in an income-tax file is that it explains the drafting of s.64(2) of the Income-tax Act. If blending were a transfer, the ordinary transfer-based clubbing provisions would have reached it; because it is not, s.64(2) had to be drafted to catch the conversion "through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family" as a separate limb, alongside a transfer to the family otherwise than for adequate consideration. That is an editorial observation of this library, drawn from a comparison of the two texts, and NOT a holding of this judgment: the Court was construing the Gift-tax Act and said nothing about s.64(2). Three further points of the reasoning travel. First, the existence of a coparcenary is absolutely necessary before a coparcener can throw his self-acquired properties into the common stock — the doctrine postulates an owner who is himself a coparcener with an interest in the coparcenary property. Second, the separate property ceases to be separate not by any physical mixing but by the owner's own volition and intention, by his waiving and surrendering his separate rights in it. Third, the change of character is instantaneous: as soon as he declares his intention to treat his self-acquired property as that of the joint family, the property assumes the character of joint family property. The Court also approved the Madras High Court's reasoning in M.K. Stremann that no transfer need precede the change and none ensues either.
Binding on every court and authority in India.
Read aloud by your device. Press again to stop.
The assessee was the karta of his joint family. The assessment year in issue was 1959-60, the previous year running from 23 October 1957 to 10 November 1958. He owned movable and immovable properties that were his self-acquisitions. By a deed dated 9 December 1957 he threw into the common stock two houses at Imamba vidi, Secunderabad and a cash deposit of Rs. 1,50,000 in the firm of M/s. Goli Eswariah, Paper Merchants, Secunderabad, and the necessary entries transferring the amount to the family's account were made in the firm's books. The Gift-tax Officer treated that portion of the value of the blended properties in which the assessee ceased to have a right on partition as having been gifted by him to the family. The Appellate Assistant Commissioner held that as the deed was unregistered there was no transfer of the immovable properties and so no gift of the two houses, but treated the sum of Rs. 1,50,000 as a gift and held three-fourths of it taxable. The Tribunal held by order of 17 November 1961 that the act of throwing the self-acquired properties into the family hotchpot did not amount to a transfer, so that no registered document was needed, and that there was no element of transfer within s.2(xxiv)(d) of the Gift-tax Act. On a reference at the Commissioner's instance under s.26(1) of that Act, the Andhra Pradesh High Court, following its own earlier decision in CIT, Hyderabad v. C. Satyanarayanamurthy, answered the question against the assessee. There was at the time a sharp cleavage of judicial opinion, the Andhra Pradesh and Allahabad High Courts holding such an act to be a gift and the Madras, Gujarat, Kerala and Mysore High Courts holding the contrary.
The appeal was allowed, the judgment of the High Court set aside, and the question answered thus: the declaration by which the assessee has impressed the character of joint Hindu family property on the self-acquired properties owned by him did not amount to a transfer so as to attract the provisions of the Act. The Revenue was directed to pay the appellant's costs. The act of a coparcener throwing his separate property into the common stock is a unilateral act; he makes no gift under Chapter VII of the Transfer of Property Act; there is no donor or donee and no question of acceptance arises. Clause (d) of s.2(xxiv) of the Gift-tax Act contemplates a "transaction entered into" by one person with another, must be an act to which two or more persons are parties, and cannot apply to a unilateral act — the assessee did not enter into any transaction with his family even though for the purposes of that Act a Hindu undivided family can be considered a "person". Nor was the act a "disposition" under the main part of s.2(xxiv): the word has no precise meaning, cannot mean "dispose of" (else abandoning or destroying property would be a gift), and, used alongside "conveyance, assignment, settlement, delivery, payment or other alienation of property", refers to a bilateral or multilateral act.
The Court began with the true scope of the doctrine of throwing into the common stock. A Hindu family is not a creature of contract; as held in Mallesappa Bandeppa Desai v. Desai Mallappa, the doctrine postulates that the owner of the separate property is himself a coparcener who has an interest in the coparcenary property and desires to blend his separate property with it, and the existence of a coparcenary is absolutely necessary before a coparcener can blend. The separate property ceases to be separate and acquires the character of joint family property not by any physical mixing but by the owner's own volition and intention, by his waiving and surrendering his separate rights in it. The act is unilateral: there is no question of the family rejecting or accepting it, and as soon as the coparcener declares his intention the property assumes the character of joint family property. Turning to the Act, the Court took s.3 as the charging section, "gift" as defined in s.2(xii) to require a transfer by one person to another, and "transfer of property" as defined in s.2(xxiv). It held that it was unnecessary to decide whether the assessee's act diminished the value of his own property and increased that of the family, because the act was not a "transaction entered into" at all — that expression contemplates two or more parties. The Court drew support from the High Court of Australia's construction in Grimwade v. Federal Commissioner of Taxation of the similar paragraph (f) of s.4 of the Australian Gift Duty Assessment Act, 1941-42, that such a transaction must be with some other person and cannot be a unilateral act. On "disposition" it applied the company the word keeps in s.2(xxiv). Finally it approved the Madras High Court's statement in M.K. Stremann v. CIT that when the separate property of a coparcener becomes impressed with the character of coparcenary property there is no transfer from the coparcener to the coparcenary — it becomes joint family property by the exercise of his volition — and that no transfer need precede the change and none ensues either.
There is no question of either the family rejecting or accepting it. By his individual volition he renounces his individual right in that property and treats it as a property of the family.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court held that the declaration by which the assessee impressed the character of joint Hindu family property on his self-acquired properties did not amount to a transfer, and so did not attract the Gift-tax Act, 1958. The act by which a coparcener throws his separate property into the common stock is a unilateral act: there is no question of the family rejecting or accepting it, no donor and no donee, and no gift under Chapter VII of the Transfer of Property Act. "Transaction entered into" in s.2(xxiv)(d) of the Gift-tax Act contemplates an act to which two or more persons are parties and cannot apply to a unilateral act, and "disposition" in the opening words of s.2(xxiv), read with the company it keeps, refers to a bilateral or multilateral act. THE ACT CONSTRUED IS THE GIFT-TAX ACT, 1958. This was decided by the Supreme Court (J.C. Shah J and K.S. Hegde J (judgment delivered by Hegde J)) and bears on section Gift-tax Act 1958 s.2(xii), section Gift-tax Act 1958 s.2(xxiv), section Gift-tax Act 1958 s.2(xxiv)(d), section Gift-tax Act 1958 s.3, section Gift-tax Act 1958 s.4, section Gift-tax Act 1958 s.26(1), section 64(2) of the Income Tax Act 1961. It is reported as Civil Appeal No. 695 of 1968; equivalent citations printed on the source page: 1970 AIR 1722, 1971 SCR (1) 522, AIR 1970 SUPREME COURT 1722. No ITR or SCC citation is printed on either the plain or the print rendering of this document; the ITR reference 76 ITR 675 comes only from the Supreme Court's own citation of this decision in Pushpa Devi v. CIT and is recorded on that footing.. The immediate holding is about gift-tax, but the reason a practitioner needs it in an income-tax file is that it explains the drafting of s.64(2) of the Income-tax Act. If blending were a transfer, the ordinary transfer-based clubbing provisions would have reached it; because it is not, s.64(2) had to be drafted to catch the conversion "through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family" as a separate limb, alongside a transfer to the family otherwise than for adequate consideration. That is an editorial observation of this library, drawn from a comparison of the two texts, and NOT a holding of this judgment: the Court was construing the Gift-tax Act and said nothing about s.64(2). Three further points of the reasoning travel. First, the existence of a coparcenary is absolutely necessary before a coparcener can throw his self-acquired properties into the common stock — the doctrine postulates an owner who is himself a coparcener with an interest in the coparcenary property. Second, the separate property ceases to be separate not by any physical mixing but by the owner's own volition and intention, by his waiving and surrendering his separate rights in it. Third, the change of character is instantaneous: as soon as he declares his intention to treat his self-acquired property as that of the joint family, the property assumes the character of joint family property. The Court also approved the Madras High Court's reasoning in M.K. Stremann that no transfer need precede the change and none ensues either. If it applies to you, the first step is this: Where the department characterises a blending declaration as a gift, take the point on the definition, not on valuation: a unilateral act is neither a "transaction entered into" nor a "disposition".
The assessee was the karta of his joint family. The assessment year in issue was 1959-60, the previous year running from 23 October 1957 to 10 November 1958. He owned movable and immovable properties that were his self-acquisitions. By a deed dated 9 December 1957 he threw into the common stock two houses at Imamba vidi, Secunderabad and a cash deposit of Rs. 1,50,000 in the firm of M/s. Goli Eswariah, Paper Merchants, Secunderabad, and the necessary entries transferring the amount to the family's account were made in the firm's books. The Gift-tax Officer treated that portion of the value of the blended properties in which the assessee ceased to have a right on partition as having been gifted by him to the family. The Appellate Assistant Commissioner held that as the deed was unregistered there was no transfer of the immovable properties and so no gift of the two houses, but treated the sum of Rs. 1,50,000 as a gift and held three-fourths of it taxable. The Tribunal held by order of 17 November 1961 that the act of throwing the self-acquired properties into the family hotchpot did not amount to a transfer, so that no registered document was needed, and that there was no element of transfer within s.2(xxiv)(d) of the Gift-tax Act. On a reference at the Commissioner's instance under s.26(1) of that Act, the Andhra Pradesh High Court, following its own earlier decision in CIT, Hyderabad v. C. Satyanarayanamurthy, answered the question against the assessee. There was at the time a sharp cleavage of judicial opinion, the Andhra Pradesh and Allahabad High Courts holding such an act to be a gift and the Madras, Gujarat, Kerala and Mysore High Courts holding the contrary. The matter was decided on 1970-05-05 by the Supreme Court (J.C. Shah J and K.S. Hegde J (judgment delivered by Hegde J)). On those facts the Supreme Court held as follows. The appeal was allowed, the judgment of the High Court set aside, and the question answered thus: the declaration by which the assessee has impressed the character of joint Hindu family property on the self-acquired properties owned by him did not amount to a transfer so as to attract the provisions of the Act. The Revenue was directed to pay the appellant's costs. The act of a coparcener throwing his separate property into the common stock is a unilateral act; he makes no gift under Chapter VII of the Transfer of Property Act; there is no donor or donee and no question of acceptance arises. Clause (d) of s.2(xxiv) of the Gift-tax Act contemplates a "transaction entered into" by one person with another, must be an act to which two or more persons are parties, and cannot apply to a unilateral act — the assessee did not enter into any transaction with his family even though for the purposes of that Act a Hindu undivided family can be considered a "person". Nor was the act a "disposition" under the main part of s.2(xxiv): the word has no precise meaning, cannot mean "dispose of" (else abandoning or destroying property would be a gift), and, used alongside "conveyance, assignment, settlement, delivery, payment or other alienation of property", refers to a bilateral or multilateral act.
The Court began with the true scope of the doctrine of throwing into the common stock. A Hindu family is not a creature of contract; as held in Mallesappa Bandeppa Desai v. Desai Mallappa, the doctrine postulates that the owner of the separate property is himself a coparcener who has an interest in the coparcenary property and desires to blend his separate property with it, and the existence of a coparcenary is absolutely necessary before a coparcener can blend. The separate property ceases to be separate and acquires the character of joint family property not by any physical mixing but by the owner's own volition and intention, by his waiving and surrendering his separate rights in it. The act is unilateral: there is no question of the family rejecting or accepting it, and as soon as the coparcener declares his intention the property assumes the character of joint family property. Turning to the Act, the Court took s.3 as the charging section, "gift" as defined in s.2(xii) to require a transfer by one person to another, and "transfer of property" as defined in s.2(xxiv). It held that it was unnecessary to decide whether the assessee's act diminished the value of his own property and increased that of the family, because the act was not a "transaction entered into" at all — that expression contemplates two or more parties. The Court drew support from the High Court of Australia's construction in Grimwade v. Federal Commissioner of Taxation of the similar paragraph (f) of s.4 of the Australian Gift Duty Assessment Act, 1941-42, that such a transaction must be with some other person and cannot be a unilateral act. On "disposition" it applied the company the word keeps in s.2(xxiv). Finally it approved the Madras High Court's statement in M.K. Stremann v. CIT that when the separate property of a coparcener becomes impressed with the character of coparcenary property there is no transfer from the coparcener to the coparcenary — it becomes joint family property by the exercise of his volition — and that no transfer need precede the change and none ensues either. In the words reproduced by the source cited on this page: "There is no question of either the family rejecting or accepting it. By his individual volition he renounces his individual right in that property and treats it as a property of the family." The decision followed or applied Mallesappa Bandeppa Desai & Ors. v. Desai Mallappa & Ors. [1961] 3 SCR 779 — applied; Grimwade & Ors. v. Federal Commissioner of Taxation, 78 CLR 199 — applied; Commissioner of Income-tax, Madras v. M.K. Stremann, 56 ITR 62 and M.K. Stremann v. Commissioner of Income-tax, 41 ITR 297 — applied and agreed with; Commissioner of Income-tax, Hyderabad v. C. Satyanarayanamurthy, 56 ITR 353; G.V. Krishna Rao & Ors. v. First Addl. Gift Tax Officer, Guntur, 70 ITR 812; and Commissioner of Gift Tax v. Jagdish Saran, 75 ITR 529 — disapproved.
It was decided by the Supreme Court on 1970-05-05 and is reported as Civil Appeal No. 695 of 1968; equivalent citations printed on the source page: 1970 AIR 1722, 1971 SCR (1) 522, AIR 1970 SUPREME COURT 1722. No ITR or SCC citation is printed on either the plain or the print rendering of this document; the ITR reference 76 ITR 675 comes only from the Supreme Court's own citation of this decision in Pushpa Devi v. CIT and is recorded on that footing.. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section Gift-tax Act 1958 s.2(xii), section Gift-tax Act 1958 s.2(xxiv), section Gift-tax Act 1958 s.2(xxiv)(d), section Gift-tax Act 1958 s.3, section Gift-tax Act 1958 s.4, section Gift-tax Act 1958 s.26(1), section 64(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed, the judgment of the High Court set aside, and the question answered thus: the declaration by which the assessee has impressed the character of joint Hindu family property on the self-acquired properties owned by him did not amount to a transfer so as to attract the provisions of the Act. The Revenue was directed to pay the appellant's costs. The act of a coparcener throwing his separate property into the common stock is a unilateral act; he makes no gift under Chapter VII of the Transfer of Property Act; there is no donor or donee and no question of acceptance arises. Clause (d) of s.2(xxiv) of the Gift-tax Act contemplates a "transaction entered into" by one person with another, must be an act to which two or more persons are parties, and cannot apply to a unilateral act — the assessee did not enter into any transaction with his family even though for the purposes of that Act a Hindu undivided family can be considered a "person". Nor was the act a "disposition" under the main part of s.2(xxiv): the word has no precise meaning, cannot mean "dispose of" (else abandoning or destroying property would be a gift), and, used alongside "conveyance, assignment, settlement, delivery, payment or other alienation of property", refers to a bilateral or multilateral act. It arises in Gifts, Shares & Angel Tax, How Tax Law Is Read and Capital Gains matters, on section Gift-tax Act 1958 s.2(xii), section Gift-tax Act 1958 s.2(xxiv), section Gift-tax Act 1958 s.2(xxiv)(d), section Gift-tax Act 1958 s.3, section Gift-tax Act 1958 s.4, section Gift-tax Act 1958 s.26(1), section 64(2) of the Income Tax Act 1961, and was decided by J.C. Shah J and K.S. Hegde J (judgment delivered by Hegde J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Establish that a coparcenary existed before the declaration. The Court held its existence is absolutely necessary before a coparcener can blend, so this is the first fact to prove. Prove the volition and intention, and the date on which it was declared — the change of character takes effect as soon as the intention is declared, and that date will usually decide which previous year is in issue. Do not carry this decision into an argument that s.64(2) of the Income-tax Act is inapplicable. That sub-section catches the conversion expressly and does not depend on there being a transfer. Where the person doing the blending is not a coparcener, this decision does not help; see Pushpa Devi v. CIT, in which the Supreme Court held that the right to blend is limited to coparceners.
Still good law. A citator check has now been run. The judgment is recorded as cited in 65 later documents and continues to be applied. In Parbhatrao Pundlik Ghire v. Asaram Parma Rathod, decided 6 February 2018, the Bombay High Court at Aurangabad took it up at paragraph 16, but at one remove. The Judge does not go to this judgment at first hand; he adopts an earlier judgment of that Court, Bapurao Nanu, which itself rested on it, and the Supreme Court's construction that 'disposition' is not a term of law and takes its meaning from its context reaches him inside the block quotation of Bapurao Nanu rather than in his own words. On that footing he applied the distinction between a unilateral act and a bilateral conveyance to hold that an agreement of sale was not a transfer. Nothing overruling or doubting the judgment was found. Its standing was also recorded seven years after it was given: the Supreme Court in Pushpa Devi v. CIT (30 August 1977) cited it as Goli Eswariah v. Commissioner of Gift-tax 76 ITR 675 and recorded that the Delhi High Court had followed it in Commissioner of Gift-tax, Delhi v. Munshi Lal to hold that the transaction did not amount to a gift; that passage records what the Delhi High Court did rather than the Supreme Court adopting the reasoning afresh, and Pushpa Devi went on to hold that a Hindu female who is not a coparcener cannot blend her separate property at all. A reader should note that the Gift-tax Act, 1958 has ceased to apply to gifts made after 1 October 1998, so the immediate holding is of historical rather than current application; what continues to matter, and what later courts continue to use, is the characterisation of blending as a unilateral act, which is a proposition of Hindu law and not of the Gift-tax Act. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full — header, ACT and HEADNOTE blocks, counsel, the whole of Hegde J's judgment and the disposal — at https://indiankanoon.org/doc/333446/. It carries NO paragraph numbers at all in that rendering, so no paragraph locator is given for the quotation; I established the absence of numbering by seeing the whole document transcribed in one piece. The central passage was then read a second time through https://indiankanoon.org/docfragment/333446/. The two renderings agree word for word on the sentences quoted here, but the fragment rendering carries OCR corruption elsewhere in the same passage — it prints "coparcer" for "coparcener" and "coparcenry" for "coparcenary" — so I have deliberately chosen for 'key_quote' two consecutive sentences that are spelt identically in both renderings and have not quoted the sentences containing those corrupted words. The HEADNOTE printed on the source page is the law reporter's editorial writing, not the Court's, and nothing has been quoted from it. Note that the page's ACT block and the headnote refer to the section as "s. 2(xxiv)(d)" while one line in the body of the judgment prints "Section 22(xxiv)" — an obvious typographical error for s.2(xxiv), since every other reference on the page is to s.2(xxiv). The observation in 'why_it_matters' about the drafting of s.64(2) of the Income-tax Act is this library's own comparison of two statutory texts and is expressly not attributed to the Court. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed, the judgment of the High Court set aside, and the question answered thus: the declaration by which the assessee has impressed the character of joint Hindu family property on the self-acquired properties owned by him did not amount to a transfer so as to attract the provisions of the Act. The Revenue was directed to pay the appellant's costs. The act of a coparcener throwing his separate property into the common stock is a unilateral act; he makes no gift under Chapter VII of the Transfer of Property Act; there is no donor or donee and no question of acceptance arises. Clause (d) of s.2(xxiv) of the Gift-tax Act contemplates a "transaction entered into" by one person with another, must be an act to which two or more persons are parties, and cannot apply to a unilateral act — the assessee did not enter into any transaction with his family even though for the purposes of that Act a Hindu undivided family can be considered a "person". Nor was the act a "disposition" under the main part of s.2(xxiv): the word has no precise meaning, cannot mean "dispose of" (else abandoning or destroying property would be a gift), and, used alongside "conveyance, assignment, settlement, delivery, payment or other alienation of property", refers to a bilateral or multilateral act.
TaxSphere, “Goli Eswariah v. CGT — throwing self-acquired property into the common stock is a unilateral act and no transfer at all (Gift-tax Act, 1958)”, https://taxnotice.vittsphere.com/caselaw/case/goli-eswariah-v-cgt-throwing-self-acquired-property-into-the-common-stock-is-a-unilateral-act/ (validity last checked 2026-09-16)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
A lady member of a Hindu undivided family made a sworn declaration throwing her own money and her share in a business into the family stock, and the family has been offering the income ever since. The Assessing Officer says the income is still hers. Who is right?
My client received Rs 60 lakh from his own HUF. The Assessing Officer says an HUF is not a 'relative' in the Explanation, so it is taxable. What is the answer?
My client received money from his family HUF during the year. The Assessing Officer wants to tax it in his hands. Is it exempt, and if so is there anything that can take the exemption away?
A client wants to transfer a rental property he owns personally into his family HUF so that the rent is taxed in the HUF's lower slab. He says the HUF will be a separate assessee with its own basic exemption. Does that work?
