TMI Blog1967 (3) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees both under the Income-tax Act and the Wealth-tax Act, should be assessed as individuals or as members of a Hindu undivided family. In these circumstances, it is sufficient to consider the facts in one set of these writ petitions, filed by S. M. Ananda Rao, namely, Writ Petition No. 265 of 1966 and Writ Petition No. 272 of 1966, for the disposal of this batch of cases. The facts of the case in Writ Petition No. 265 of 1966 are briefly As follows: The petitioner is one S. M. Ananda Rao, one of the sons of S. L. Mannaji Rao, who is the original owner of the properties involved in these assessment proceedings. The petitioner was assessed to income-tax and wealth-tax for the assessment year 1963-64 as an individual, while he claimed to be assessed as a Hindu undivided family. In support of his claim that he should be assessed as a Hindu undivided family, he relied on a settlement deed executed on March 30, 1952, executed between his father, S. L. Mannaji Rao, and himself and his brothers. Though the deed was executed on March 30, 1952, the petitioner, as also the petitioners in the other petitions, were being assessed as individuals till the year in question. In addition to plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he relied on a decision of the Supreme Court in Dwarka Nath v. Income-tax Officer. Subba Rao J. (as he then was), speaking for the Bench, observed as follows : " The Commissioner exercising revisional jurisdiction under section 33A(2), Income-tax Act, does not function in an administrative capacity and a writ of certiorari is maintainable to quash his orders. Jurisdiction conferred under section 33A(2) of the Act prima facie is a judicial one. The order that is brought before the Commissioner affects the right of the assessee. That the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed, is implicit in revisional jurisdiction. The nature of the jurisdiction and the rights decided necessarily carry with them the duty to act judicially in disposing of the revision. The fact that the Commissioner cannot make an order to the prejudice of an assessee does not possibly change the character of the proceeding. Though the Commissioner may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full relief asked for by the assessee. " In view of the aforesaid statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid deed have not been considered by the Commissioner. Before proceeding to examine the various recitals in the deed, for the purpose of ascertaining the intention of the parties to the same and the true nature of the transaction of transmission of property evidenced by it, it would be convenient to consider and examine certain questions of law arising in the case. The learned Advocate-General relied on a decision of the Bombay High Court in Kisansing Mohansing Balwar v. Vishnu Balkrishna Jogalekar and submitted that when a Hindu father made a division of his self-acquired properties between himself and his sons, certain inferences would necessarily flow from such a division. The relevant passage in the judgment reads thus : " We, therefore, regard the transaction by which a father makes a division of his self-acquired property between his sons as a transaction by which he, in the first instance, effects a severance of status between his sons; in the second instance, he notionally throws into the hotchpot his self-acquired property, and then divides it between his sons, whether equally or unequally in accordance with his pleasure. " It was also observed in the same decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather and has become ancestral property in his hands. The property of the grandfather can normally vest in the father as ancestral property if and when the father inherits such property on the death of the grandfather or receives it, by partition, made by the grandfather himself during his life-time. On both these occasions the grandfather's property comes to the father by virtue of the latter's legal right as a son or descendant of the former and consequently it becomes ancestral property in his hands. But when the father obtains the grandfather's property by way of gift, he receives it not because he is a son or has any legal right to such property but because his father chose to bestow a favour on him which he could have bestowed on any other person as well. The interest which he takes in such property must depend upon the will of the grantor. A good deal of confusion, we think, has arisen by not keeping this distinction in mind. To find out whether a property is or is not ancestral in the hands of a particular person, not merely the relationship between the original and the present holder but the mode of transmission also must be looked to ; and the property can ordinarily be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed can be construed as an instrument effecting a partition between the father and his sons in respect of the self-acquired properties of the father, the necessary consequence would be that the property received by the sons would be joint family property in which their male issue would acquire a right by birth. If, on the other hand, it cannot be so construed, having regard to the effect of the deed read as a whole in the light of the surrounding circumstances relating to its execution, then the transaction may be one of individual gifts to the son. In judging the intention and the nature of the interest in the property brought about by it, the Supreme Court observed thus, in the case Arunachala Mudaliar v. Muruganatha Mudaliar : " The material question which the court would have to decide in such cases is, whether taking the document and all the relevant facts into consideration, it could be said that the donor intended to confer a bounty upon his son exclusively for his benefit and capable of being dealt with by him at his pleasure or that the apparent gift was an integral part of a scheme for partition and what was given to the son was really the share of the property which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in estate and status from one another. " (Underlining is ours.) Thereafter, a reference to the equal division of properties and the relevant schedules to the deed, and the recitals relied upon by the Commissioner are set out. It is relevant to notice that immediately following the recital relied upon by the Commissioner for refusing the relief to the assessee, it is stated thus : " Each of the said members of the second part shall hold and enjoy his respective shares of the properties in severalty and as member of the family divided in status and estate from the rest of the members of the family. " (Underlining is ours.) We think that this recital qualifies in a material way the portion of the recital relied upon by the Commissioner in his order. If these two portions are read together, it will be seen that the word "absolutely" has relevance to the enjoyment of the shares of the brothers free from interference in such enjoyment by one another, rather than an expression of an intention to settle the property on the son absolutely to the rights of the other members of the son's family. It may be necessary to take note of the fact that the parties to the deed belong to a Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of gifts made by the father in favour of his sons in respect of his self-acquired properties. He went on further to submit that, if it was considered as a gift, the intention of the donor will have to be further examined. We are satisfied that none of these cases clearly or unambiguously support the contention urged by Mr. Rajasekara Murthy. All these cases are distinguishable, as the decisions therein turned primarily on the construction and interpretation to be placed on the instruments effecting transmission of property. In S. Parthasarathy v. Commissioner of Income-tax a father allotted houses which were his self-acquired properties to his sons and daughters. On the recitals in the deed, which was styled as a "pakapattiram" and judging from the clause relating to pre-emption, in addition to other circumstances, the court came to the conclusion that the father clearly intended that his sons should have the liberty to alienate the property to a stranger subject to the limitation regarding pre-emption. Since he had power of alienation, it was held that it was a transfer absolutely in favour of his son. In the case, Commissioner of Income-tax v. Srimati Rama Bai, a father made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of effecting a division both in estate and in status from one another. We hold, therefore, that the shares acquired by the sons under the settlement deed in question were joint family properties, wherein their sons and grandsons could acquire a right by birth. In view of this conclusion, the fact that the assessees were being assessed as individuals up to the assessment year 1963-64, would not make any difference in so far as their present claim to be assessed as a Hindu undivided family is concerned. Nor are they estopped from taking this stand in the present assessment proceedings. The Commissioner, in holding that the settlement deed conferred an absolute right on the assessee-petitioners, has committed an error of law apparent on the face of the record. Consequently, the orders of the assessing authorities and also the orders in revision made by the Commissioner, in so far as they seek to deal with the petitioners as individuals for the purpose of assessing them to tax under the Income-tax and Wealth-tax Acts, should be quashed. The petitioners have also sought a direction that the respondents should be directed to assess each of the petitioners as a Hindu undivi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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