Appeal No 695 of 1968
Appeal from the judgment and order dated October 13 1966 of the Andhra Pradesh High Court in Case Referred No 74 of 1963
N A Palkhivala and T A Ramachandran for the appellant
B Sen G C Sharma R N Sachthey and B D Sharma for the respondent
M C Chagla M Shankar and K Jayaram for interveners Nos 1 and 2 5 2 4 N D Karkhanis and T A Ramachandran for intervener No 3
The Judgment of the Court was delivered by Hegde J
This appeal by certificate arises from the judgment of the Andhra Pradesh High Court rendered in its advisory jurisdiction on a case stated by the Income tax Appellate Tribunal Hyderabad Bench under section 261 of the to be hereinafter referred to as the Act 
The question referred for the opinion of the High Court was  Whether the declaration by which the assessee has impressed the character of joint Hindu family property on the self acquired properties owned by him amounts to a transfer so as to attract the provisions of the Gift tax Act
 The High Court following its earlier decision in Commissioner of Income tax Hyderabad vs C Satyanarayanamurthy1 answered that question in the affirmative
The material facts as could be gathered from the statement of the case submitted to the High Court are as follows  The assessee is the karta of his joint family
The assessment year with which we are concerned in this case is 1959 60 for which the previous year is the year commencing on 23 10 1957 and ending on 10 11 1958
The assessee owned movable and immovable properties which were his self acquisitions
By a deed dated December 9 1957 he threw into the common stock his houses bearing Nos
6658 5 9 and 2731 situate at Imamba vidi Secunderabad and a cash deposit of Rs 150000 in the firm of Ms Goli Eswariah Paper Merchants Secunderabad
In the books of account of the firm necessary entries were made transferring the amount to the account a the family
The Gift tax Officer treated that portion of the value of the properties so blended in which the assessee ceased to have a right on partition of the family as having been gifted by him to the family
He rejected the contention of the assessee that his act of throwing his self acquired properties into the common stock did not amount to a gift under the Act
In appeal the Appellate Assistant Commissioner took the view that since the deed in question was not registered there was no transfer of the immovable properties to the family and as such there was no gift of the two houses mentioned earlier but with regard to the sum of Rs 150000 he considered it as a gift and accordingly held that 34th of it was liable to be taxed under 1 525 the provisions of the Act
Thereafter the matter was taken up in appeal to the tribunal
The tribunal by its order dated November 17 1961 held that the act by which the assessee threw his self acquired properties to the family hotchpot did not amount to a transfer and hence it need not have been effected by a registered document
It further held that where the copartner threw himself acquired properties into the hotchpot of the joint family there was no element of transfer within the meaning of section 2 cl
xxiv sub cl
d of the Act
At the instance of the CommissionerGift tax Andhra Pradesh the tribunal stated a case for the opinion
of the High Court and submitted the aforementioned question for its opinion
The High Court did not examine the question of law arising for decision afresh as it was bound by the earlier decision of that High Court in Commissioner of Income tax Hyderabadv
C Satyanarayanamurthy1 wherein that court had held that where a Hindu by a declaration has impressed on his self acquired property the character of joint family property the same would 
amount to a transfer of property within the terms of section 2 xxiv d and as such is a gift as envisaged in section 2xii and section 4a of the
The view taken in that case was that an act similar to the one we are called upon to consider in this case would amount to 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
 On the question of law that we are required to decide in this case there is a sharp cleavage of judicial opinion
The Andhra Pradesh High Court in the case referred to earlier as well as in G V Krishna Rao and Ors
vs First Additional Gift tax officer Guntur1 and the Allahabad High Court in Commissioner of Gift tax vs Jagdish Saran  3  have taken the view that when a coparcener in a Hindu Undivided Family governed by Mitakshara School throws his self acquired properties into common stock
same amounts to a gift  under the Act
On the other hands a full bench of the Madras High Court in Commissioner of Gift tax Madras vs P Rangasami Naidu4 and VR
section RM
Ramaswami Chettiar vs The Commissioner of Gift tax Madras a full bench of the Gujarat High Court in Dr A R Shukla vs Comnzissioner of Gift tax Gujarat a division bench of the Kerala High Court in P K Subramania lyer vs Commissioner of Gift tax Kerala1 and a division bench of the Mysore High Court in Smt
Laxmibai Narayana Rao Nerlekar vs Commissioner of Gift tax8 havetaken a contrary view
1 2 70 ITR 812
3 Case 272 of 1964  5 Tax Case No 10 of 1966674 ITR 167
7 ITR 19
526 To pronounce on the question of law presented for our decision we must first examine what is the true scope of the doctrine of throwing into the common stock  or common hotchpot
It must be remembered that a Hindu family is not a creature of a contract
As observed by this Court in Mallesappa Bandeppa Desai and Ors
vs Desai Mallappa and Ors1 that the doctrine of throwing into common stock inevitably postulates that the owner of a separate property is a coparcener who has an interest in the coparcenary property and desires to blend hi  separate property with the coparcenary property
The existence of a coparcenary is absolutely necessary before a coparcener can throw into the common stock his self acquired properties The separate property of a member of a joint Hindu family may be impressed with the character of joint family property if it is voluntarily thrown by him into the common stock with the intention  of abandoning his separate claim therein
The separate property of a Hindu ceases to be a separate property and acquires the characteristic of a joint family or ancestral property not by any physical mixing with his joint family or his ancestral property but by his own volition and intention by his waiving and surrendering his separate rights in it as separate property
The act by which the coparcener throws his separate property to the common stock is a unilateral act
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
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 doctrine of throwing into the common stock is a doctrine peculiar to the Mitakshara School of Hindu law
When a coparcener throws his separate property into the common stock he makes no gift under Chapter VII of the Transfer of Property Act
In such a case there is no donor or donee
Further no question of acceptance of the property thrown into the common stock arises
Bearing in mind the true nature of the doctrine of throwing into the common hotchpot we shall now proceed to examine the relevant provisions of the Act to ascertain whether the act of the assessee can be considered as a gift under the Act
Section 3 is the charging section
It provides that subject to the other provisions contained in the Act there shall be charged for every assessment year commencing on and from the 1 St day of April 1958 a tax known as gift tax in respect of the gifts if any made by a person during the previous year other than gifts made 1 1961 3 SCR770
5 2 7 before the 1st day of April 1957 at the rate or rates specified in the Schedule
Gift is defined in section 2xii as follows   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
In this case we are not dealing with a deemed gift
Therefore we need not consider the scope of section 4
Before an act can be considered as a gift as defined there must be a transfer of property by one person to another Person  is defined as including a Hindu Undivided Family in section 2xviii
Section 2xxiii says that property  includes any interest in property movable and immovable
Section 22xxiv defines transfer of property thus  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 partners hip 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 the donee of the power  and 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
 The High Court relied on section 2 xxiv d in answering the question referred to it in favour of the Revenue
It came to the conclusion that the act of the assessee in throwing his self acquired properties into the common stock amounted to a transaction entered into by him 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
It is true that the assessee by throwing his self acquired property into the common stock gave up his exclusive right in that property and in its place he was content to own that property jointly with the other members of his family
We do not think that it is necessary in this case to consider whether the act of the assessee can be said to have diminished 5 28 directly or indirectly the value of his own property and increased the value of the property of his joint family because in our opinion that act cannot be considered as a transaction entered into
Clause d of section 2xxiv contemplates a transaction entered into by one person with another
It cannot apply to a unilateral act
It must be an act to which two or more persons are parties
It is true that for the purpose of the Act a Hindu Undivided Family can be considered as a person
But the assessee did not enter into any transaction with his family
Therefore we are unable to agree with the High Court that the act of the assessee fell within the scope of section 2 xxiv d of the Act
Section 2xxivd is similar to Paragraph f of section 4 of the Australian Gift Duty Assessment Act 1941 42
Interpreting that section in Grimwade and Ors
vs Federal Commissioner of Taxation1 the High Court of Australia observed that the transaction by a person referred to therein must be a transaction with some other person and that it cannot be a unilateral act
Mr B Son learned Counsel for the department contended that the said act should be considered as a disposition  under the main part of section 2 xxiv
The word disposition  is not a term of law
Further it has no precise meaning
Its meaning has to be gathered from the context in which it is used
In the context in which that term is used in section 2xxiv it cannot mean to dispose of 
Otherwise even if a man abandons or destroys his property it would become a gift  under the Act
That could not have been the intention of the legislature
In section 2xxiv the word disposition  is used along with words conveyance assignment settlement delivery payment or other alienation of property
 Hence it is clear from the context that the word disposition  therein refers to a bilateral or a multi lateral act
It does not refer to a unilateral act
In this connection reference may be usefully made to the decision of this Court in Commissioner of Income tax Madras vs M K Stremann2
Therein the assessee first threw his private properties into the common stock and afterwards there was a partition amongst the members of the family which included his two minor sons and a minor daughter represented by their mother
The question arose whether the partition in question amounted to a transfer of assets by the assessee to the three minor children so as  to attract the provisions of section 163 a iv of the Indian Income tax Act 1922
In that case the Revenue did not contend in this Court that the act of the assessee throwing into common stock his self acquired properties amounted to transfer of assets by the assessee to his three minor children
On the other hand it contended that the partition that took place subsequently amounted to a transfer of assets of the assessee to his minor child 1  2 5 2 9 ren
This Court overruled that contention
Therein the contention of the Revenue appeared to have proceeded on the basis that the antecedent act of the assessee viz throwing his self acquired properties to the common stock may not amount to a transfer of his assets to his minor children but the partition that followed amounted to such a transfer
In that very case the Revenue appears to have contended before the High Court that the act of the assessee in throwing his self acquired properties into common stock amounted to a transfer of his assets to his minor children
The High Court observed that when the separate property of a copar cener ceases to be his separate and becomes impressed with the character of coparcenary property there is no transfer of that property from the coparcener to the coparcenary it becomes joint family property because the coparcener who owned it until then as his separate property has by the exercise of his volition impressed it with the character of joint family or coparcenary property to be held by him thereafter alongwith other members of the joint family it is by his unilateral action that the property became joint family property the transaction by which a property ceased to be the property of a coparcener and became impressed with the character of copes property does not itself amount to a transfer no transfer need precede the change and no transfer ensues either see M K Stremann vs Commissioner of Income tax Madras1
We are in agreement with those findings
For the reasons mentioned above we allow this appeal set aside the judgment of the High Court and answer the question referred to the High Court thus  The declaration by which the assessee has impressed the cha racter 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 shall pay the costs of the appellant in this appeal
GC Appeal allowed


Summary:
The appellant owned certain self acquired properties which by a deed dated December 9 1957 he threw into the common stock of his Hindu Joint Family
The Gift Tax Officer held that he had thereby made it gift taxable under the Gift Tax Act 1958
After proceedings before the authorities under the Act the question whether the appellant had made transfer  of the property so as to attract the provisions of the Act was referred to the High Court of Andhra Pradesh
Following its earlier decision in Satyanarayanamurthy s case the High Court held that the act of  the appellant amounted to a transfer  within the terms of section 2xxivd of the Act and therefore was a gift such as envisaged in section 2xii and section 4a of the Act
In Satyanarayanamurthy s case aforesaid it had been held that an act similar to that of the appellant would amount to 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
With certificate appeal against the judgment of the High Court was filed in this Court
HELDThe appeal must be allowed since the declaration by which the assessee had 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 provisions of the Act 529 F A Hindu Joint Family is not a creature of contract
The doctrine of throwing into common stock inevitably postulates that the owner of the separate property is a copartner who has an interest in the coparcenary property and desires to blend his separate property with the coparcenary property
The separate property of a member of a joint Hindu Family may be impressed with the character of Joint Family property if it is voluntarily thrown by him into the common stock with the intention of abandoning his separate claim therein
The act by which the coparcener throws his separate property to the common stock is a unilateral act
By his individual volition he renounces his individual right in that property and treats it as a property of the family
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 doctrine of throwing into common stock is a doctrine peculiar to the Mitakshara School of Hindu Law
When a coparcener throws his separate property into common stock he makes no gift under Ch
VII of the Transfer of Property Act
In such a case there is no donor or done
Further no question of acceptance of the property thrown into the common stock arises
526 A F 523 It was not necessary in the present case to consider whether the act of the assessee could be said to have diminished directly or indirectly the  value of his own property and increased the value of the property of his joint family because his act could not he considered as a transaction entered into
Clause d of section 2xxiv contemplates a transaction entered into by one person with another
It cannot apply to a unilateral act
it must be an act to which two or more persons are parties
Even though under the Act the undivided family is a person  the assessee did not enter into any transaction with his family
Therefore it was not possible to agree with the High Court that the act of the assessee fell within the scope of section 2xxiv d of the Act
528 A B The assessee s act could also not be considered as a disposition  under the main part of section 2xxiv
The word disposition  is not a term of law
Further it has no precise meaning
Its meaning has to be gathered from the context in which it is used
In the context in which the term is used in section 2xxiv it cannot mean to dispose of
Otherwise even if a man abandons or destroys his property it would become a gift under the Act
That could not have been the intention of the Legislature
In section 2xxiv the word disposition  is used along with words conveyance assignment settlement delivery payment or other alienation of property
It is clear  from the context that the word disposition  therein refers to a bilateral or multilateral act
It does not refer to a unilateral act
528 D F Mallesappa Bandeppa Desai  Ors
v Desai Mallappa  Ors
  Grimwade  Ors
vs Federal Commissioner of Taxation   Commissioner of Income tax Madras vs M K Stremann and M K Stremann vs Commissioner of Income tax  applied
Commissioner of Gift Tax Madras vs P Rangaswami Naidu TC 272 of 1964  R section R M Ramaswami Chettiar vs The Commissioner of Gift Tax Madras
Tax Case No10 of 1966 Dr A R Shukla vs Commissioner of Gift Tax Gujarati and Smt
Laxmibai Narayana Rao Nerlekar vs Commissioner of Gift tax  approved
Commissioner of income tax Hyderabad vs C Satyanarayanamurthy  G V Krishna Rao  Ors
vs First Addl
Gift Tax Officer Guntur and Commissioner of Gift Tax vs Jagdish Saran 75 ITR 529 disapproved