Introduction
1. The author in this article has analyzed the provisions of the Income-tax Act and other enactments with regard to the definition of a relative and meaning of lineal descendant. He has opined that no exemption can be claimed in respect of transfer of money/property from son to his stepmother. He has also referred to among other decisions, to the decision of the Supreme Court in the case of Kirtikant D. Vadodaria v. State of Gujarat [1996] 4 SCC 479 wherein the Supreme Court referred to the meaning of the expressions "mother" and "stepmother", as found in various dictionaries and held that "there is inherent distinction between the status of a 'mother' and 'stepmother' and they are two distinct and separate entities. Both could not be assigned the same meaning.
Analysis of provisions of the Income-tax Act
2. The term "relative" appears at 4 places in the Income-tax Act-
(a) Section 2(41) which defines a "relative" in relation to an individual,
(b) Explanation to section 10(26BBB) which provides exemption to any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen, being the citizens of India.
(c) Explanation 1 to section 13 dealing with trusts, and
(d) Explanation to section 56(2)(vi) dealing with receipt of money by an individual without consideration.
It is to be noted that the definition of a "relative" found in (c) and (d) is identical. The relevant section for our purpose is section 56(2)(vii), which may hit the assessee and the donee very badly in case the definition of a relative which includes a mother does not include a stepmother. Whenever the Legislature has chosen to define a term it has done so in no uncertain manner–for example, while defining the term "child" in section 2(15B) of the Income-tax Act it has done so clearly by stating that "child", in relation to an individual, includes a step-child and an adopted child of that individual. But there is no such clarity or clarification, so far as the definition of the term "mother" is concerned. Both mother and stepmother are different in the sense that a mother does not include a stepmother. Unless the Income-tax Act defines the terms "mother" to include "stepmother" the beneficial provisions of section 56(2)(vii) like gifting a certain portion of the property to stepmother cannot be resorted to. There is a difference between "means" and "includes". So, if a particular word or term, say mother does not mean another word like a stepmother – the word used in section 56(2)(vii) to define a relative is "means" and not "includes"- unless the Act defines such a word or term, say mother to include stepmother the word or term mother would only mean a mother and would not include a stepmother.
Internal and external aids of construction
3. For the purposes of construction or interpretation of a statute, the Court obviously has to take recourse to various internal and external aids. "Internal aids" mean those materials which are available in the statute itself, though they may not be part of enactment. These internal aids include long title, preamble, headings, marginal notes, illustrations, punctuations, proviso, schedule, transitory provisions, etc. When internal aids are not adequate, the Court has to take recourse to external aids, which may be Parliamentary materials, historical background, reports of a Committee or a Commission, official statement, dictionary meanings, foreign decisions, etc.
The Supreme Court has accepted the necessity of external aids in interpretation of a statutory provision. O. Chinnappa Reddy J. in B.Prabhakar Rao v. State of Andhra Pradesh AIR 1986 SC 120 has observed as under:
"Where internal aids are not forthcoming, we can always have recourse to external aids to discover the object of the legislation. External aids are not ruled out. This is now a well-settled principle of modern construction." (para.7)
In District Mining Officer v. Tata Iron & Steel Co. [2001] 7 SCC 358 the Supreme Court observed as under:
"It is also a cardinal principle of construction that external aids are brought in by widening the concept of context as including not only other enacting provisions of the same statute, but its preamble, the existing state of law, other statutes in pari materia and the mischief which the statute was intended to remedy." (para.18)
So far as admissibility and utility of these external aids are concerned, law is almost settled in our country now. The Supreme Court in K.P.Varghese v. ITO [1981] 7 Taxman 13 has stated that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible.
That the definition of a word or a phrase as found in the dictionary can be adopted has also been reiterated by the Constitution Bench of the Supreme Court in the case of Sunrise Associates v. Government of NCT of Delhi [2006] 145 STC 576 wherein at paragraph 42-page 594 of STC referred to the definition of a ticket as found in Webster's Words & Phrases, permanent edition volume 25A supplement and para. 42 and is reproduced below-
"Webster's Words and Phrases, permanent edition, volume 25A supplement defines a 'ticket' as 'a printed card or a piece of paper that gives a person a specific right, as to attend a theatre, ride on a train, claim or purchase, etc.'"
(Note - para. 42- can be found at page 1907- 2nd Edition - Webster's New Twentieth Century Dictionary Unabridged Edition). Basing its observations on this definition and on its earlier decision in the case of H. Anraj v. Government of Tamil Nadu [1986] 1 SCC 414 it was held by the Supreme Court that "a lottery ticket has no value in itself. It is a mere piece of paper. Its value lies in the fact that it represents a chance or a right to a conditional benefit of winning a prize of a greater value than the consideration paid for the transfer of that chance. It is nothing more than a token or evidence of this right."
This decision of the Supreme Court also goes to show that reliance can be placed on the dictionary meaning whenever necessity arises to decide an issue.
According to Webster's New Twentieth Century Dictionary Unabridged - Second Edition the term "a step-mother" means a female step-parent and the term step-parent means the person who has married one's parent after the death or divorce of the other parent; step-father or step-mother
Analysis of the term "lineal descendant" as per clause (v) of the Explanation to section 56(2)(vi) vis-à-vis "relative"
4. Proviso 2 to section 56(2)(vii) of the Income-tax Act states that this clause shall not apply to any sum of money or property received from a relative and as per the Explanation (e) to clause (vii) the term "relative" shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this sub-section. As per clause (v) of the Explanation "relative" means any lineal ascendant or descendant of the individual.
Now the question arises as to the persons who can be included in the list of ascendants and/or descendants. As per the decision of the A.P. High Court in the case of ITAT v. Estate of Late Nuli Lakshminarayana [1979] 116 ITR 739 when the expressions "child" and "lineal descendant" have not been defined in the Estate Duty Act resort must be had to the personal law of the deceased in order to understand the meaning and connotation of the said expressions. This principle was applied by the Rajasthan High Court in the case of CIT v. Dhannalal Devilal [1956] 29 ITR 165 (F.B) while defining the term "lineal descendant".
Extracts from that decision
"In Wharton's Law Lexicon (14th Edition) 'lineal consanguinity' is defined as that 'relationship which subsists between persons descended in a right line, as grandfather, father, son, grandson.' 'Lineal descendent' is defined as the descendent of an estate from ancestor to heir in a right line. Reading these two together, 'lineal descendant' means descendant in the right line as from father to son, etc., without any deviation. In the Oxford English Dictionary, Vol. III, a 'descendant' is defined as one who 'descends' or is descended from an ancestor; issue, offspring (in any degree near or remote).
The idea of right line without any deviation seems to be absent from the dictionary meaning of the word 'descendant'. So, when the law speaks of 'lineal descendant', the intention is that a person must descend in a right line without any deviation as from father to son, grandson, great grandson and so on. Similarly, it seems to us that the 'descendent' is lineal if it goes from mother to daughter, and grand-daughter, and great grand-daughter, because here also it is in a right line without any deviation.
Section 25 of the Indian Succession Act defines 'lineal consanguinity', while section 26 defines 'collateral consanguinity'. Where the descendent is by lineal consanguinity, one may call it a lineal descendent and the person so descending is a lineal descendant. But where the relationship is by collateral consanguinity, one may be a descendant of the other, but he cannot be said to be lineally descended. That is, to our mind, the distinction between lineal descendant and descendant.
The same difference may be explained in other words. Lineal consanguinity is when two persons are connected in one straight line, whether descending or ascending, drawn from the propositus. (The term propositus means the person from whom the descendent is reckoned). Where the line is descending, the persons are lineal descendants. Collateral consanguinity is when two persons are connected by a descending line which is not a straight line.
Such persons may be descendants of each other, but will not be lineal descendants. In this view of the matter, a son will be a lineal descendant of the mother as well as of his grandmother, irrespective of whether the mother or the grandmother can form a line of succession under the Hindu law. These notions of the Hindu law have not in our opinion to be imported in interpreting the words "lineal descendant".
Section 25 of the Indian Succession Act, 1925 reads as under–
Lineal consanguinity - (1) Lineal consanguinity is that which subsists between two persons, one of whom is descended in a direct line from the other, as between a man and his father, grandfather and great-grandfather, and so upwards in the direct ascending line; or between a man and his son, grandson, great-grandson and so downwards in the direct descending line.
(2) Every generation constitutes a degree, either ascending or descending.
(3) A person's father is related to him in the first degree, and likewise is his son; his grandfather and grandson in the second degree; his great-grandfather and great-grandson in the third degree, and so on.
Section 26 of the Indian Succession Act, 1925 reads as under:—
Collateral consanguinity - (1) Collateral consanguinity is that which subsists between two persons who are descended from the same stock or ancestor, but neither of whom is descended in a direct line from the other.
(2) For the purpose of ascertaining in what degree of kindred any collateral relative stands to a person deceased, it is necessary to reckon upwards from the person deceased to the common stock and then downwards to the collateral relative, a degree being allowed for each person, both ascending and descending
As per Webster's New Twentieth Century Dictionary Second Edition the term "Lineal" means in a direct line from an ancestor; Hereditary and the term "ancestor" means one from whom a person descends, either through the father or the mother, at any distance of time.
Even as per Class I of the Schedule to the Hindu Succession Act, 1956 the stepmother is not listed as a heir but is given inheritance in Entry VI of clause II of the Schedule as the widow of the father. This goes on to show that a stepmother is not treated equally with that of a natural mother who finds a place in Class I of the Schedule. Class I of the Schedule which forms part of section 8 of the Hindu Succession Act, 1956 lists out persons who are entitled to get shares in the event of a male Hindu dying intestate and this class includes widow; class II lists persons who are entitled to get shares in the event of no heir of class I. This clause II includes widow of the father; in other words a stepmother.
Whenever the Legislature has intended to extend the meaning to a particular term it has done so. For example, section 45S of the Reserve Bank of India Act, 1934 dealing with prohibition in respect of accepting deposits in certain cases permits accepting of deposits from relatives and the term Mother (including stepmother) finds a place as item No. 2 of "relatives" listed in that section.
Decision of the Supreme Court in Kirtikant D. Vadodaria's case
5. The Supreme Court in the case of Kirtikant D. Vadodaria (supra) referred to the meaning of the expressions "mother" and "stepmother" as found in various dictionaries and held that "there is inherent distinction between the status of a 'mother' and 'stepmother' and they are two distinct and separate entities and both could not be assigned the same meaning. The expression 'mother' clearly means only the natural mother who has given birth to the child and not the one who is the wife of one's father by another marriage". The dictionaries which were referred to by the Supreme Court in this case are summed up as under-
"In the Permanent Edition of Words and Phrases, Vol. 27-A, at p. 348, the word 'mother' has been given the meaning 'to denote a woman who has borne a child or female parent, especially one of the human race'. In Vol. 40 of the said Permanent Edition of Words and Phrases, at p. 145, the expression 'stepmother' has been given the meaning as to be the 'wife of one's father by virtue of a marriage subsequent of that of which the person spoken of is the offspring'. It has been further stated that a 'stepmother' is a relative by affinity and the relationship continues after the death of the father. Black's Law Dictionary, 5th Edition, at p. 913, has given the meaning of 'mother' as 'a woman who has borne a child', a 'female parent'. Further, at p. 1268, the meaning of 'stepmother' is stated to mean 'the wife of one's father by virtue of a marriage subsequent to that of which the person spoken of is the offspring'. Similarly, in the Shorter Oxford English Dictionary, Vol. II, at p. 1360, the meaning of the word 'mother' is given as 'a woman who has given birth to a child or a female parent' and at p. 2122, the expression 'stepmother' has been assigned the meaning as 'the wife of one's father by a subsequent marriage'. According to Webster Dictionary (International Edition), the expression 'mother' means 'a female parent and that which has produced or given birth to anyone.'
The observations made by the Supreme Court in paras 12 and 13 wherein the distinction was succinctly brought out between "mother" and "stepmother" are worth noticing being as under:
"(12) It may be mentioned here that in The General Clauses Act, though the expression 'father' has been defined in clause 20 of section 3, the other expression 'mother' has not been defined. The expression 'father' as defined in the General Clauses Act, 1656 means in the case of anyone whose Personal Law permits adoption, shall include 'an adoptive father'. Applying the said analogy, at best an adoptive mother may also be included in the expression mother but not a stepmother. As discussed above, a stepmother is one who is taken as a wife by the father of the child other than the one from whom he is born or who has given birth to the one from whom he is born or who has given birth to him. This clearly goes to show that the woman who gives birth to a child and another woman who is taken by the father as his other wife are two distinct and separate entities in the eye of Law and who in common parlance are known and recognized as real 'mother' and 'step-mother'. That being so, another woman who is taken as a wife by the father of the child cannot be given the status of mother to the child born from another woman, as there is no blood relation between the two.
(13) We may also here usefully refer to an old decision of a Division Bench of Bombay High Court in Baidaya v. Natha Govindalal [(1885) 9 Indian Law Report 279], it was held that the term 'mata' stands for 'janani' 'genitrix', and sapatnamata 'noverca'. It has been further observed in the said decision that 'mata' and 'mata-pitrau' are Sanskrit words which are used in the text by Manu, Mitakshara and Salamphatta and in both the cases discussion proceeds on the supposition that the primary meaning of 'mata' was 'natural mother' and that it was only in secondary and figurative sense that it could mean a 'step-mother'. It is, therefore, clear that even under the old Hindu Law also, the expression mother was referable only to the natural mother who has given birth to the child and not the step-mother. It would be difficult to assume that the Legislature was unmindful of the social fabric and the structure of relationship in the families. The existence of various kinds of relatives in our society was not something of which the Parliament may be said to ignorant when it thought to enact the New Code of 1973 and for the first time not only the parents were included amongst the persons entitled to claim maintenance under section 125(1)(d) but even the divorced woman had been included in the expression wife to be entitled to claim maintenance, who were not so included in section 488 of the 'step-father' or 'step-mother' are not included in the expression 'his-father' or 'mother' occurring in clause (d) of section 125(1) of the Code giving a clear indication of the legislative intent."
Though the issue before the Supreme Court was, whether a step-mother (who married step-son's father after the death of the first wife) is entitled to claim maintenance from the step-son, yet the principles emanating out of this decision with regard to definition of real "mother" and "step-mother" can be applied in suitable cases.
Conclusion
6. From the above discussion it is clear that only where the descent is by lineal consanguinity, one would call it a lineal descendent and the person so descending would be a lineal descendant. "Lineal consanguinity" is defined as that relationship which subsists between persons descended in a right line, as grandfather, father, son, grandson. As there is no descending right line relationship between stepmother and son (of her husband) - these two cannot be stated to have satisfied the definition of a relative as it appears in clause 5 of the Explanation to section 56(2)(vi) which runs as under:—
"any lineal ascendant or descendant of the individual"
No exemption can be claimed in respect of transfer of money/property from son to his stepmother.
No decision touching these terms, "mother" to include "stepmother" and "sister" to include "stepsister" seems to have been rendered directly on this point by the Supreme Court, High Courts or Income-tax Appellate Tribunal Benches. Moreover, amendment to section 56, to include money received by the individual without consideration to be taxed in his hands, is relatively new – the amendment being introduced only with effect from 1-9-2004 – the issue touching upon this point of definition of mother/sister may not have reached appellate stage to be decided by the appellate authorities. It is also to be noted that when there is a possibility of the issue being raised by the Income-tax authorities which may ultimately result in being against and not in favour of the assessee why adopt that route? Moreover, with effect from 1-10-2009 any transfer of immovable property without consideration attracts income-tax in the hands of the transferee (donee) and the stamp value of the property would be the value on which income-tax would be payable by the transferee (donee).
In such an eventuality it is advisable to go for family arrangements. While entering into a family arrangement it is essential to follow the principles that have emerged from various decisions of the Supreme Court, such as Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 1836, Kale v. Deputy Director of Consolidation AIR 1976 SC 807 and S.K. Sattar, S.K. Mohd. Choudari v. Gundappa Ambadass Bukate [1996] 6 SCC 373 and also from the jurisdictional High Court of Madras in the case of CIT v. A.L. Ramanathan [2003] 128 Taxman 87.
These principles can be concretized and succinctly reduced to the following propositions:–
(1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family;
(2) The said settlement must be voluntary one and should not be induced by fraud, coercion or undue influence;
(3) The family arrangement may be even oral one, in which case no registration is necessary;
(4) It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made, either for the purpose of the record or for information of the Court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and, therefore, does not fall within the mischief of section 17(1)(b) of the Registration Act and is, therefore, not compulsorily registrable;
(5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest – even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld, and the courts will find no difficulty in giving assent to the same;
(6) Even if bona fide disputes, present or possible, which may not involve legal claims, are settled by a bona fide family arrangement which is fair and equitable, the family arrangement would be final and binding on the parties to the settlement.
With regard to the question - Can the amount be transferred to any one and can he/she (the recipient), in turn, transfer the fund to step mother, if both the transferees (recipients) satisfy the meaning of relatives as per the Explanation to section 56(2)(vi) of the Income-tax Act, the answer would be that it is not advisable to adopt such a route as the Bombay High Court in the case of CIT v. Kanchanlal Vadilal [1993] 70 Taxman 469 applying the principles laid down by the Supreme Court in the cases of CIT v. C. M. Kothari [1963] 49 ITR 107 and CIT v. Keshavji Morarji [1967] 66 ITR 142 held that if two transfers are inter-connected and are parts of the same transaction in such a way that it can be said that a circuitous method has been adopted as a device to evade the implications of section 64 of the Income-tax Act, 1961 (which deals with clubbing of income) the case would fall within the mischief of that section. Applying the principles of these decisions to the suggestion made in this case the Income-tax department would definitely bring such a circuitous transfer outside the exceptions provided under section 56(2)(vii) of the Income-tax Act by treating the same as income and tax the receipt(s) in the hands of the transferee.
S.KRISHNAN
CA
1. The author in this article has analyzed the provisions of the Income-tax Act and other enactments with regard to the definition of a relative and meaning of lineal descendant. He has opined that no exemption can be claimed in respect of transfer of money/property from son to his stepmother. He has also referred to among other decisions, to the decision of the Supreme Court in the case of Kirtikant D. Vadodaria v. State of Gujarat [1996] 4 SCC 479 wherein the Supreme Court referred to the meaning of the expressions "mother" and "stepmother", as found in various dictionaries and held that "there is inherent distinction between the status of a 'mother' and 'stepmother' and they are two distinct and separate entities. Both could not be assigned the same meaning.
Analysis of provisions of the Income-tax Act
2. The term "relative" appears at 4 places in the Income-tax Act-
(a) Section 2(41) which defines a "relative" in relation to an individual,
(b) Explanation to section 10(26BBB) which provides exemption to any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen, being the citizens of India.
(c) Explanation 1 to section 13 dealing with trusts, and
(d) Explanation to section 56(2)(vi) dealing with receipt of money by an individual without consideration.
It is to be noted that the definition of a "relative" found in (c) and (d) is identical. The relevant section for our purpose is section 56(2)(vii), which may hit the assessee and the donee very badly in case the definition of a relative which includes a mother does not include a stepmother. Whenever the Legislature has chosen to define a term it has done so in no uncertain manner–for example, while defining the term "child" in section 2(15B) of the Income-tax Act it has done so clearly by stating that "child", in relation to an individual, includes a step-child and an adopted child of that individual. But there is no such clarity or clarification, so far as the definition of the term "mother" is concerned. Both mother and stepmother are different in the sense that a mother does not include a stepmother. Unless the Income-tax Act defines the terms "mother" to include "stepmother" the beneficial provisions of section 56(2)(vii) like gifting a certain portion of the property to stepmother cannot be resorted to. There is a difference between "means" and "includes". So, if a particular word or term, say mother does not mean another word like a stepmother – the word used in section 56(2)(vii) to define a relative is "means" and not "includes"- unless the Act defines such a word or term, say mother to include stepmother the word or term mother would only mean a mother and would not include a stepmother.
Internal and external aids of construction
3. For the purposes of construction or interpretation of a statute, the Court obviously has to take recourse to various internal and external aids. "Internal aids" mean those materials which are available in the statute itself, though they may not be part of enactment. These internal aids include long title, preamble, headings, marginal notes, illustrations, punctuations, proviso, schedule, transitory provisions, etc. When internal aids are not adequate, the Court has to take recourse to external aids, which may be Parliamentary materials, historical background, reports of a Committee or a Commission, official statement, dictionary meanings, foreign decisions, etc.
The Supreme Court has accepted the necessity of external aids in interpretation of a statutory provision. O. Chinnappa Reddy J. in B.Prabhakar Rao v. State of Andhra Pradesh AIR 1986 SC 120 has observed as under:
"Where internal aids are not forthcoming, we can always have recourse to external aids to discover the object of the legislation. External aids are not ruled out. This is now a well-settled principle of modern construction." (para.7)
In District Mining Officer v. Tata Iron & Steel Co. [2001] 7 SCC 358 the Supreme Court observed as under:
"It is also a cardinal principle of construction that external aids are brought in by widening the concept of context as including not only other enacting provisions of the same statute, but its preamble, the existing state of law, other statutes in pari materia and the mischief which the statute was intended to remedy." (para.18)
So far as admissibility and utility of these external aids are concerned, law is almost settled in our country now. The Supreme Court in K.P.Varghese v. ITO [1981] 7 Taxman 13 has stated that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible.
That the definition of a word or a phrase as found in the dictionary can be adopted has also been reiterated by the Constitution Bench of the Supreme Court in the case of Sunrise Associates v. Government of NCT of Delhi [2006] 145 STC 576 wherein at paragraph 42-page 594 of STC referred to the definition of a ticket as found in Webster's Words & Phrases, permanent edition volume 25A supplement and para. 42 and is reproduced below-
"Webster's Words and Phrases, permanent edition, volume 25A supplement defines a 'ticket' as 'a printed card or a piece of paper that gives a person a specific right, as to attend a theatre, ride on a train, claim or purchase, etc.'"
(Note - para. 42- can be found at page 1907- 2nd Edition - Webster's New Twentieth Century Dictionary Unabridged Edition). Basing its observations on this definition and on its earlier decision in the case of H. Anraj v. Government of Tamil Nadu [1986] 1 SCC 414 it was held by the Supreme Court that "a lottery ticket has no value in itself. It is a mere piece of paper. Its value lies in the fact that it represents a chance or a right to a conditional benefit of winning a prize of a greater value than the consideration paid for the transfer of that chance. It is nothing more than a token or evidence of this right."
This decision of the Supreme Court also goes to show that reliance can be placed on the dictionary meaning whenever necessity arises to decide an issue.
According to Webster's New Twentieth Century Dictionary Unabridged - Second Edition the term "a step-mother" means a female step-parent and the term step-parent means the person who has married one's parent after the death or divorce of the other parent; step-father or step-mother
Analysis of the term "lineal descendant" as per clause (v) of the Explanation to section 56(2)(vi) vis-à-vis "relative"
4. Proviso 2 to section 56(2)(vii) of the Income-tax Act states that this clause shall not apply to any sum of money or property received from a relative and as per the Explanation (e) to clause (vii) the term "relative" shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this sub-section. As per clause (v) of the Explanation "relative" means any lineal ascendant or descendant of the individual.
Now the question arises as to the persons who can be included in the list of ascendants and/or descendants. As per the decision of the A.P. High Court in the case of ITAT v. Estate of Late Nuli Lakshminarayana [1979] 116 ITR 739 when the expressions "child" and "lineal descendant" have not been defined in the Estate Duty Act resort must be had to the personal law of the deceased in order to understand the meaning and connotation of the said expressions. This principle was applied by the Rajasthan High Court in the case of CIT v. Dhannalal Devilal [1956] 29 ITR 165 (F.B) while defining the term "lineal descendant".
Extracts from that decision
"In Wharton's Law Lexicon (14th Edition) 'lineal consanguinity' is defined as that 'relationship which subsists between persons descended in a right line, as grandfather, father, son, grandson.' 'Lineal descendent' is defined as the descendent of an estate from ancestor to heir in a right line. Reading these two together, 'lineal descendant' means descendant in the right line as from father to son, etc., without any deviation. In the Oxford English Dictionary, Vol. III, a 'descendant' is defined as one who 'descends' or is descended from an ancestor; issue, offspring (in any degree near or remote).
The idea of right line without any deviation seems to be absent from the dictionary meaning of the word 'descendant'. So, when the law speaks of 'lineal descendant', the intention is that a person must descend in a right line without any deviation as from father to son, grandson, great grandson and so on. Similarly, it seems to us that the 'descendent' is lineal if it goes from mother to daughter, and grand-daughter, and great grand-daughter, because here also it is in a right line without any deviation.
Section 25 of the Indian Succession Act defines 'lineal consanguinity', while section 26 defines 'collateral consanguinity'. Where the descendent is by lineal consanguinity, one may call it a lineal descendent and the person so descending is a lineal descendant. But where the relationship is by collateral consanguinity, one may be a descendant of the other, but he cannot be said to be lineally descended. That is, to our mind, the distinction between lineal descendant and descendant.
The same difference may be explained in other words. Lineal consanguinity is when two persons are connected in one straight line, whether descending or ascending, drawn from the propositus. (The term propositus means the person from whom the descendent is reckoned). Where the line is descending, the persons are lineal descendants. Collateral consanguinity is when two persons are connected by a descending line which is not a straight line.
Such persons may be descendants of each other, but will not be lineal descendants. In this view of the matter, a son will be a lineal descendant of the mother as well as of his grandmother, irrespective of whether the mother or the grandmother can form a line of succession under the Hindu law. These notions of the Hindu law have not in our opinion to be imported in interpreting the words "lineal descendant".
Section 25 of the Indian Succession Act, 1925 reads as under–
Lineal consanguinity - (1) Lineal consanguinity is that which subsists between two persons, one of whom is descended in a direct line from the other, as between a man and his father, grandfather and great-grandfather, and so upwards in the direct ascending line; or between a man and his son, grandson, great-grandson and so downwards in the direct descending line.
(2) Every generation constitutes a degree, either ascending or descending.
(3) A person's father is related to him in the first degree, and likewise is his son; his grandfather and grandson in the second degree; his great-grandfather and great-grandson in the third degree, and so on.
Section 26 of the Indian Succession Act, 1925 reads as under:—
Collateral consanguinity - (1) Collateral consanguinity is that which subsists between two persons who are descended from the same stock or ancestor, but neither of whom is descended in a direct line from the other.
(2) For the purpose of ascertaining in what degree of kindred any collateral relative stands to a person deceased, it is necessary to reckon upwards from the person deceased to the common stock and then downwards to the collateral relative, a degree being allowed for each person, both ascending and descending
As per Webster's New Twentieth Century Dictionary Second Edition the term "Lineal" means in a direct line from an ancestor; Hereditary and the term "ancestor" means one from whom a person descends, either through the father or the mother, at any distance of time.
Even as per Class I of the Schedule to the Hindu Succession Act, 1956 the stepmother is not listed as a heir but is given inheritance in Entry VI of clause II of the Schedule as the widow of the father. This goes on to show that a stepmother is not treated equally with that of a natural mother who finds a place in Class I of the Schedule. Class I of the Schedule which forms part of section 8 of the Hindu Succession Act, 1956 lists out persons who are entitled to get shares in the event of a male Hindu dying intestate and this class includes widow; class II lists persons who are entitled to get shares in the event of no heir of class I. This clause II includes widow of the father; in other words a stepmother.
Whenever the Legislature has intended to extend the meaning to a particular term it has done so. For example, section 45S of the Reserve Bank of India Act, 1934 dealing with prohibition in respect of accepting deposits in certain cases permits accepting of deposits from relatives and the term Mother (including stepmother) finds a place as item No. 2 of "relatives" listed in that section.
Decision of the Supreme Court in Kirtikant D. Vadodaria's case
5. The Supreme Court in the case of Kirtikant D. Vadodaria (supra) referred to the meaning of the expressions "mother" and "stepmother" as found in various dictionaries and held that "there is inherent distinction between the status of a 'mother' and 'stepmother' and they are two distinct and separate entities and both could not be assigned the same meaning. The expression 'mother' clearly means only the natural mother who has given birth to the child and not the one who is the wife of one's father by another marriage". The dictionaries which were referred to by the Supreme Court in this case are summed up as under-
"In the Permanent Edition of Words and Phrases, Vol. 27-A, at p. 348, the word 'mother' has been given the meaning 'to denote a woman who has borne a child or female parent, especially one of the human race'. In Vol. 40 of the said Permanent Edition of Words and Phrases, at p. 145, the expression 'stepmother' has been given the meaning as to be the 'wife of one's father by virtue of a marriage subsequent of that of which the person spoken of is the offspring'. It has been further stated that a 'stepmother' is a relative by affinity and the relationship continues after the death of the father. Black's Law Dictionary, 5th Edition, at p. 913, has given the meaning of 'mother' as 'a woman who has borne a child', a 'female parent'. Further, at p. 1268, the meaning of 'stepmother' is stated to mean 'the wife of one's father by virtue of a marriage subsequent to that of which the person spoken of is the offspring'. Similarly, in the Shorter Oxford English Dictionary, Vol. II, at p. 1360, the meaning of the word 'mother' is given as 'a woman who has given birth to a child or a female parent' and at p. 2122, the expression 'stepmother' has been assigned the meaning as 'the wife of one's father by a subsequent marriage'. According to Webster Dictionary (International Edition), the expression 'mother' means 'a female parent and that which has produced or given birth to anyone.'
The observations made by the Supreme Court in paras 12 and 13 wherein the distinction was succinctly brought out between "mother" and "stepmother" are worth noticing being as under:
"(12) It may be mentioned here that in The General Clauses Act, though the expression 'father' has been defined in clause 20 of section 3, the other expression 'mother' has not been defined. The expression 'father' as defined in the General Clauses Act, 1656 means in the case of anyone whose Personal Law permits adoption, shall include 'an adoptive father'. Applying the said analogy, at best an adoptive mother may also be included in the expression mother but not a stepmother. As discussed above, a stepmother is one who is taken as a wife by the father of the child other than the one from whom he is born or who has given birth to the one from whom he is born or who has given birth to him. This clearly goes to show that the woman who gives birth to a child and another woman who is taken by the father as his other wife are two distinct and separate entities in the eye of Law and who in common parlance are known and recognized as real 'mother' and 'step-mother'. That being so, another woman who is taken as a wife by the father of the child cannot be given the status of mother to the child born from another woman, as there is no blood relation between the two.
(13) We may also here usefully refer to an old decision of a Division Bench of Bombay High Court in Baidaya v. Natha Govindalal [(1885) 9 Indian Law Report 279], it was held that the term 'mata' stands for 'janani' 'genitrix', and sapatnamata 'noverca'. It has been further observed in the said decision that 'mata' and 'mata-pitrau' are Sanskrit words which are used in the text by Manu, Mitakshara and Salamphatta and in both the cases discussion proceeds on the supposition that the primary meaning of 'mata' was 'natural mother' and that it was only in secondary and figurative sense that it could mean a 'step-mother'. It is, therefore, clear that even under the old Hindu Law also, the expression mother was referable only to the natural mother who has given birth to the child and not the step-mother. It would be difficult to assume that the Legislature was unmindful of the social fabric and the structure of relationship in the families. The existence of various kinds of relatives in our society was not something of which the Parliament may be said to ignorant when it thought to enact the New Code of 1973 and for the first time not only the parents were included amongst the persons entitled to claim maintenance under section 125(1)(d) but even the divorced woman had been included in the expression wife to be entitled to claim maintenance, who were not so included in section 488 of the 'step-father' or 'step-mother' are not included in the expression 'his-father' or 'mother' occurring in clause (d) of section 125(1) of the Code giving a clear indication of the legislative intent."
Though the issue before the Supreme Court was, whether a step-mother (who married step-son's father after the death of the first wife) is entitled to claim maintenance from the step-son, yet the principles emanating out of this decision with regard to definition of real "mother" and "step-mother" can be applied in suitable cases.
Conclusion
6. From the above discussion it is clear that only where the descent is by lineal consanguinity, one would call it a lineal descendent and the person so descending would be a lineal descendant. "Lineal consanguinity" is defined as that relationship which subsists between persons descended in a right line, as grandfather, father, son, grandson. As there is no descending right line relationship between stepmother and son (of her husband) - these two cannot be stated to have satisfied the definition of a relative as it appears in clause 5 of the Explanation to section 56(2)(vi) which runs as under:—
"any lineal ascendant or descendant of the individual"
No exemption can be claimed in respect of transfer of money/property from son to his stepmother.
No decision touching these terms, "mother" to include "stepmother" and "sister" to include "stepsister" seems to have been rendered directly on this point by the Supreme Court, High Courts or Income-tax Appellate Tribunal Benches. Moreover, amendment to section 56, to include money received by the individual without consideration to be taxed in his hands, is relatively new – the amendment being introduced only with effect from 1-9-2004 – the issue touching upon this point of definition of mother/sister may not have reached appellate stage to be decided by the appellate authorities. It is also to be noted that when there is a possibility of the issue being raised by the Income-tax authorities which may ultimately result in being against and not in favour of the assessee why adopt that route? Moreover, with effect from 1-10-2009 any transfer of immovable property without consideration attracts income-tax in the hands of the transferee (donee) and the stamp value of the property would be the value on which income-tax would be payable by the transferee (donee).
In such an eventuality it is advisable to go for family arrangements. While entering into a family arrangement it is essential to follow the principles that have emerged from various decisions of the Supreme Court, such as Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 1836, Kale v. Deputy Director of Consolidation AIR 1976 SC 807 and S.K. Sattar, S.K. Mohd. Choudari v. Gundappa Ambadass Bukate [1996] 6 SCC 373 and also from the jurisdictional High Court of Madras in the case of CIT v. A.L. Ramanathan [2003] 128 Taxman 87.
These principles can be concretized and succinctly reduced to the following propositions:–
(1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family;
(2) The said settlement must be voluntary one and should not be induced by fraud, coercion or undue influence;
(3) The family arrangement may be even oral one, in which case no registration is necessary;
(4) It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made, either for the purpose of the record or for information of the Court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and, therefore, does not fall within the mischief of section 17(1)(b) of the Registration Act and is, therefore, not compulsorily registrable;
(5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest – even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld, and the courts will find no difficulty in giving assent to the same;
(6) Even if bona fide disputes, present or possible, which may not involve legal claims, are settled by a bona fide family arrangement which is fair and equitable, the family arrangement would be final and binding on the parties to the settlement.
With regard to the question - Can the amount be transferred to any one and can he/she (the recipient), in turn, transfer the fund to step mother, if both the transferees (recipients) satisfy the meaning of relatives as per the Explanation to section 56(2)(vi) of the Income-tax Act, the answer would be that it is not advisable to adopt such a route as the Bombay High Court in the case of CIT v. Kanchanlal Vadilal [1993] 70 Taxman 469 applying the principles laid down by the Supreme Court in the cases of CIT v. C. M. Kothari [1963] 49 ITR 107 and CIT v. Keshavji Morarji [1967] 66 ITR 142 held that if two transfers are inter-connected and are parts of the same transaction in such a way that it can be said that a circuitous method has been adopted as a device to evade the implications of section 64 of the Income-tax Act, 1961 (which deals with clubbing of income) the case would fall within the mischief of that section. Applying the principles of these decisions to the suggestion made in this case the Income-tax department would definitely bring such a circuitous transfer outside the exceptions provided under section 56(2)(vii) of the Income-tax Act by treating the same as income and tax the receipt(s) in the hands of the transferee.
S.KRISHNAN
CA
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