TMI Blog1965 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e. One Arunachalam Chettiar died on February 23, 1938, leaving a considerable estate, including properties in Ceylon. He was married three times. By his first wife he had a son with a similar name, who died on July 9, 1934, leaving his second widow, Umayal Achi. His mother, Valami Achi, had died long before him. Arunachalam Chettiar (senior) left him surviving his two widows, Lakshmi Achi and Nachiar Achi, and also his last will and testament by which he nominated his executors and directed them to arrange for adoption of a son to each of his widows as also the widow of his pre-deceased son. When Arunachalam Chettiar (junior) died, the Government of Ceylon levied estate duty on his half share in the estate, which belonged to the joint family consisting of himself and his father. The levy as reduced in April, 1942, amounted to Rs. 2,21,743. This amount was paid on March 31, 1943. In the meantime, litigation between the three widows having arisen, the Court of the Subordinate Judge of Devakotta appointed receivers to take possession of the entire estate. On May 16, 1942, they instituted a suit in the District Court of Colombo questioning the validity of the levy of estate duty on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eems to us when all payments and receipts have been made by the Estate, without any allocation to any of the sharers, nor indeed could they have been, for, the sharers came later on the scene, before any of these proceedings for collection of or refund of the estate duty. The books also show that there was no separate allocation between capital and revenue receipts. They were all credited to one account. So, at the time the assessee, and his sharers divided the estate, they only divided the capital left by the Arunachalas. Any share in that capital, whatever it may have been at its inception, at the time of division between the sharers, was only capital having regard to the decision in Veerappa Chettiar's case. Therefore, this sum must be deleted from the assessment. " So, the Tribunal's view was based upon the primary grounds : (1) there was no allocation of the receipt to any of the sharers and (2) the entire receipt without any allocation, as so much for principle and so much for interest, was found credited to one account in the books of the estate. On these premises the Tribunal was prepared to take the view that when there was a division on February 17, 1947, the sharers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest, whatever the character of such interest for purposes of income-tax might be before a division of the estate between the relative sharers, the share obtained by each of them bore the character of capital. As an abstract proposition of law, it may be true that when an estate belonging to a joint Hindu family is divided, irrespective of the character of a particular property or fund, which it possessed before division, it would only be capital in the hands of the sharer. This proposition has been laid down by this court in Veerappa Chettiar v. Commissioner of Income-tax and it has been followed in subsequent cases. Learned counsel for the assessee urges that this principle should apply to the facts of this case. We are of the view that it is not possible to give effect in full to either the contention for the revenue or that of the assessee. It may be that in a sense the decree is the basis for the estate getting interest. But this is only in recognition of a cause of action which the estate already had. The decree was but merely declaratory of the liability of the Ceylon Government to pay interest on the estate duties illegally collected. The circumstances in which the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndu family, held : " What is divided at a partition is the entire family estate consisting of the original family estate with all subsequent accretions to that estate in the shape of income or profits, the whole thing constituting one composite property without allocation to capital or profits. On a partition the sole right of a member of the family is to get an allotment of his share in the assets available after discharging the family debts ..... What is distributed amongst the sharers at the partition is the net residue of the estate after payment of family debts and no artificial dissection of the allotments into capital and profits is necessary and in many cases would be impossible." These observations, which form the ratio of that decision, sprung from the cardinal principle that no member of a joint Hindu family could predicate that he has a right to any definite share in any item of the joint family property or in the income of the family estate until he gets divided from the family. Until a division is effected, the owner of the properties is the joint family, which is treated as a unit even for purposes of income-tax. It is because of this peculiar incident of coparce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, therefore, rightly relied on Veerappa Chettiar, v. Commissioner of Income-tax when he urged that, so long as the joint Hindu family continued undivided, no differentiation could be made between interest and principal at the hands of the joint Hindu family from the standpoint of the character of allotment at partition. But this contention for the assessee does not take him the whole length for, in this case, as we said, there was disruption in the status of the family as on February 17, 1947. The effect of the disruption in status undoubtedly is that the joint Hindu family as such came to an end then. We are not at the moment thinking of a joint Hindu family as statutorily recognised under the provisions of the Indian Income-tax Act, 1922. We may in passing mention that no argument for the assessee was addressed to us based on section 25A. After the disruption in status, the three adopted sons owned the common estate not as coparceners but as tenants-in-common. In Commissioner of Income-tax v. Keshavlal Lallubhai Patel the Supreme Court quoted with approval the following observation of this court in M. K. Stremann v. Commissioner of Income-tax : " . . . obviously no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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