TMI Blog1967 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... d (5) Lachminarayan. The last-mentioned son was born in the year 1934. Amarchand used to do business in the name of Lachmandas Amarchand, as the sole proprietor, and owned several properties in Calcutta and Bikaner. It is not disputed that the business and the properties were self-acquired in the hands of Amarchand. On May 4, 1927, when Amarchand had only four sons born to him, he executed three deeds--the first one giving some immovable properties in Calcutta and Bikaner to Sewnarain, the second one giving some properties in Calcutta and Bikaner to Harnarain and the third one giving to Ramnarain and Narayandass in two equal shares some immovable properties in Calcutta and Bikaner. In this reference we are concerned with the interpretation of the third deed only. Amarchand also converted his proprietary business into a partnership, by a deed also bearing the date May 4, 1927. Under the deed of partnership he retained, for himself, 5 annas 4 pies share and gave to each of his four sons, then in existence, two annas eight pies share. He also divided the capital in the account standing in his name in the proprietary business between himself and his four sons so that each of his fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the learned counsel for the appellants that each one of them received this gift as an essential part of a family arrangement and that it was impressed with the quality of a Hindu undivided family property and became coparcenary property on birth of sons to each of them. Great emphasis was placed on equality of shares given by the father to each of the sons, pointed reference was made to the father retaining two shares making provisions for unborn child and it was argued that the whole scheme left no doubt in one's mind that Sri Amarchand wanted the gift to his sons to be treated by them as properties of their respective Hindu undivided families and that in no other light can the distribution made by him be viewed. Reference was also made to paragraph 13 of the partnership deed which provided that if a partner shall die intestate, his male descendants will step into his place and should he die without male issue, then his widow will get maintenance not exceeding Rs. 250 per month and the capital and the assets of the deceased partner shall go to his brothers. Reliance was also placed on paragraph 14 of the partnership deed according to which any adult partner could dispose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the principles of intestate succession under Mitakshara Law, there are provisions in the partnership deed which indicate that at least he wanted the shares in the partnership to be held by his sons not only for their benefit but for the benefit of their families and there is no fact brought on record by the department which is incongruous with the appellant's claim that they received gifts which were impressed with Hindu undivided family character. " In the result, the Tribunal set aside the order both by the Wealth-tax Officer and by the Appellate Assistant Commissioner and directed that the appellant be treated as a member of a Hindu undivided family as claimed by him. Aggrieved by the order made by the Tribunal, the Commissioner of Wealth-tax applied for and obtained reference of the following question of law to this court, namely : " Whether, on the facts and in the circumstances of the case, and on a proper construction of the deed of gift executed by Amarchand on May 4, 1927, and the partnership deed dated May 4, 1927, the assessment of net wealth in the hands of Narayandass Sadani could properly be made in the status of a Hindu undivided family for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach of his said sons rupees one lakh and twenty-five thousand in the shape of stock, shares, hundi, Government securities, war bonds and cash money, etc., and whereas the said Amarchand Sadani has agreed to take and admit his said four sons in his said business as partners thereof on the terms, conditions and stipulations hereinafter mentioned. Now this indenture witnesseth that the said parties hereto have mutually agreed to become and be partners upon the terms conditions and stipulations hereinafter contained, that is to say : 2. The partnership business shall be carried on under the name and style of Messrs. Lachmandass Amarchand...... 4. The capital of the partnership business shall be rupees seven lakhs and fifty thousand subscribed by the partners in the manner following, namely : Rs. Amarchand Sadani ....... 2,50,000 Sewnarain Sadani ....... 1,25,000 Harnarain Sadani ....... 1,25,000 Ramnarain Sadani ....... 1,25,000 Naraindas Sadani ....... 1,25,000 13. If any partner shall die intestate during the continuance of the said partnership his male descendants will step into his place and should he die without male issue then his widow shall get a proper mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of gift or testamentary bequest from him vis-a-vis his own male issues. The controversy has now been settled by the decision of the Supreme Court in C. N. Arunachala Mudaliar v. C. A. Muruganatha Mudaliar in the following language : " In view of the settled law that a Mitakshara father has absolute right of disposition over his self-acquired property to which no exception can be taken by his male descendants, it is in our opinion not possible to hold that such property bequeathed or gifted to a son must necessarily, and under all circumstances, rank as ancestral property in the hands of the donee in which his sons would acquire co-ordinate interest..... As the law is accepted and well settled that a Mitakshara father has complete powers of disposition over his self-acquired property it must follow as a necessary consequence that the father is quite competent to provide expressly, when he makes a gift, either that the donee would take it exclusively for himself or that the gift would be for the benefit of his branch of the family. " The Supreme Court was not oblivious of the fact that a deed not couched in proper language may raise doubt as to whether the donee was to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift and the deed of partnership. The purpose which actuated him to make the deed of gift does not appear from the deed itself. It may just be that, in the instant case, Amarchand wanted to make an absolute gift of some of his self-acquired properties to his several sons. We have quoted the material portion from the deed of gift. There is nothing contained in the language of the deed of gift which goes to indicate that an absolute gift was not intended. That is one circumstance against the assessee. Then again, there being power in Amarchand to make an absolute gift of his properties to his sons, there is no reason why it should be taken for granted that he never intended to exercise that power for the benefit of his sons. It may be that he intended to confer upon his sons the same right which he expressed in the deed of gift and without more it is difficult to infer that he intended to confer upon his sons properties which they should take and enjoy for the benefit of their respective undivided families that they may develop in future. We cannot forget that at the point of time when the gift was made in favour of the assessee and his brother, Ramnarain, they were respectively a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te gift and in respect of properties covered by the deed of gift, the assessee must be assessed in his capacity as an individual. We, however, differ from the Tribunal that the business assets covered by the deed of partnership must also be treated as the individual property of the assessee. There is no sufficient material before us to differ from the Wealth-tax Officer and the Appellate Assistant Commissioner to come to a different conclusion. In the result, we hold that in respect of the properties which are covered by the deed of gift, the contention of the assessee should not be upheld and he should be taxed in his capacity as an individual. In respect of the properties which are the subject-matter of the deed of partnership, the assessee's contention shall succeed and in respect of such properties he may be taxed in his status as a Hindu undivided family. The question which was referred to us must, therefore, be answered in the following manner: (a) In the negative in so far as the properties covered by the deed of gift executed by Amarchand on May 4, 1927. (b) In the affirmative in so far as the properties covered by the partnership deed dated May 4, 1927. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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