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TMI Blog1968 (8) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... 51,and his death, his undivided share in the joint family properties devolved on his widow, Shantaben, under section 3(2) of the Hindu Women's Rights to Property Act, 1937, and the Hindu undivided family continued with only the assessee, his mother, Shantaben, and his two un married sisters as members. The income of the properties continued to be assessed as income of the Hindu undivided family as was being done hitherto until 5th November, 1958, when, according to the revenue, a change took place in the legal position owing to the death of Shantaben. The Income-tax Officer assessing the income for the assessment year 1960-61, the relevant year of account being Samvat year 2015, took the view that, on the death of Shantaben, her undivided half share in the properties of the Hindu undivided family evolved by succession on her children in equal shares under the, provisions of the Hindu Succession Act, 1956, and the assessee was therefore, entitled to two-thirds share in the said properties but, since the assessee was a sole surviving coparcener having full power of disposition over his two-thirds share, he was the absolute owner of it and his income was liable to be assessed in his h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable as income of the Hindu undivided family and no part of it would be assessable in the hands of the assessee as his individual income. Now it is necessary to clear the ground at the outset by pointing out that under section 3 of the Income-tax Act (here the assessment year being 1961-62 we are concerned with the old Act) as also under section 3 of the Wealth-tax Act, not a Hindu coparcenary but a Hindu undivided family is one of the assessable entities. " The phrase 'Hindu undivided family ' ", as observed by the Privy Council in Kalyanji Vithaldas v. Commissioner of Income-tax " is used in the statute with reference, not to one school only of Hindu law, but to all schools," and it would, therefore, be " a mistake in method to begin by pasting over the wider phrase of the Act the words 'Hindu coparcenary ' ". A Hindu joint family consists of all persons lineally descended from the common ancestor and includes their wives and unmarried daughters. A Hindu coparcenary, on the other hand, is a much narrower body than the joint family ; it includes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grandsons and great g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to an end while it is possible in nature or law to add a male member to it. The family cannot be at an end while there is still a potential mother if that mother in the way of nature or in the way of law brings in a new male member ", and urged that it was a necessary implication from these observations that when the potential mother died, the Hindu undivided family came to an end. But we do not think these observations support the implication suggested on behalf of the revenue. These observations were made in the context of the question whether on the death of the sole surviving coparcener, the joint family comes to an end and, dealing with that question, the Privy Council pointed out that : " . . . the Hindu lawyers do not regard the male line to be extinct or a Hindu to have died without male issue until the death of the widow renders the continuation of the line by adoption impossible ", and held that, despite the death of the sole surviving coparcener, the Hindu undivided family does not come to an end so long as there is a potential mother who can in the way of nature or law add a male member to it. The Privy Council did not lay down--and there can be no doubt as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ben and the two unmarried daughters, leaving out of account the provisions of the Hindu Adoptions and Maintenance Act, 1956, and the Hindu Succession Act, 1956. A fortiori, the Hindu undivided family could not be extinct on the death of Shantaben leaving the assessee as the sole surviving coparcener. The same Hindu undivided family, of which, at one time, Chinubhai, Shantaben, the assessee and the two unmarried daughters were members, continued to subsist with two members, namely, Chinubhai and Shantaben, taken away by death. It is in this context that we have to determine whether the properties in the hands of the assessee were the joint properties of the Hindu undivided family. The revenue leaned heavily on the decision of the Privy Council in Kalyanji Vithaldas's case and contended that in view of that decision the properties in the hands of the assessee must be held to be his individual properties for the purpose of assessment to wealth-tax. Since strong reliance was placed on this decision and its analogy was invoked, it is necessary to examine it a little more closely. There were in this case before the Privy Council six appeals by six partners of the firm of Messrs. Moolji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of a Hindu undivided family ? And according to the Privy Council it does not become the property of a Hindu undivided family merely by reason of the existence of a wife or daughter. Property received by the assessee from his father, whether by gift or by succession, is, therefore, not assessable as property of a Hindu undivided family merely because the assessee has a wife or daughter entitled to be maintained under Hindu law. If the assessee begets or adopts a son, the son would acquire an interest in the property by birth and the property would then become joint property of a Hindu undivided family but until then, the property would be assessable in the hands of the assessee as his individual property. Different considerations, however, apply where property already impressed with the character of joint family property comes into the hands of a single coparcener. The question to be asked in such a case would be : does the property retain the character of joint family property or has it shed the character of joint family property and become the absolute property of the single coparcener ? It would be the reverse of the question in the previous class of cases represented by the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dalli). The decision of the Privy Council in Attorney-General of Ceylon v. AR. Arunachalam Chettiar, a case arising from Ceylon, also falls within the same class of cases as Gomedalli's case. One Arunachalam--Nattukottai Chettiar--and his son constituted a joint family governed by the Mitakshara school of Hindu law. The father and son were domiciled in India and had trading and other interests in India, Ceylon and Far Eastern countries. The undivided son died in 1934 and Arunachalam became the sole surviving coparcener in a Hindu undivided family to which a number of female members belonged. Arunachalam died in 1938 shortly after the Estate Duty Ordinance No. 1 of 1938 came into operation in Ceylon. By section 73 of the Ordinance it was provided that property passing on the death of a member of a Hindu undivided family was exempt from payment of estate duty. On a claim to estate duty in respect of Arunachalam's claim in Ceylon, the Privy Council held that Arunachalam was at his death a member of a Hindu undivided family, the same undivided family of which his son, when alive, was a member and of which continuity was preserved after Arunachalam's death by adoptions made by the wido ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndivided family did not cease to be so because of the "temporary reduction of the coparcenary unit to a single individual" the character of the property, namely, that it was the joint property of a Hindu undivided family, remained the same. The same principle was also applied by the Supreme Court in Gowli Buddanna's case. In that case, one Buddappa, his wife, his two unmarried daughters and his unmarried son, Buddanna, were members of a Hindu undivided family, Buddappa died and after his death the question arose whether the income of the properties held by Buddanna as the sole surviving coparcener was assessable as the individual income of Buddanna or as the income of the Hindu undivided family. The Supreme Court, after examining the decisions of the Privy Council in Kalyanji's case and Gomedalli's case, pointed out there was a clear distinction between the facts of two classes of cases, one represented by Kalyanji's case and the other represented by Gomedalli's case and expressed its disapproval of the Privy Council decision in Gomedalli's case in that it failed to recognise and give effect to this distinction : " It may however be recalled that in Kalyanji Vithaldas's case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family and on the deaths of Chinubhai and Shantaben, the same undivided Hindu family continued to subsist with the assessee and his two unmarried sisters as members and the properties also, therefore, continued to belong to that Hindu undivided family. Nothing transpired to convert the character of the properties from joint properties belonging to a Hindu undivided family into the absolute properties of the assessee. The properties were, therefore, liable to be assessed in the hands of the assessee as properties of a Hindu undivided family and income received from them was also liable to be taxed in the hands of the assessee as income of the Hindu undivided family. Our answer to the question referred to us for our opinion is, therefore, in the negative. The Commissioner will pay the costs of the reference to the assessee. Wealth-tax Reference No. 5 of 1967.--One Dahyabhai Chimanlal Sheth, who is the assessee before us, and his brother formed a Hindu undivided family. There was a partition between the assessee and his brother some time prior to Samvat Year 2014-the exact point of time when the partition took place does not appear from the record and is not material for our purpose- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal is challenged before us in the present reference at the instance of the Commissioner. Before we proceed to discuss the merits of the question arising on the reference, it is necessary at the outset to refer to the decision of the Supreme Court in T. S. Srinivasan v. Commissioner of Income-tax . This decision was strongly relied upon by the revenue and it was contended that this decision clearly laid down, implicitly if not explicitly, that property received by a coparcener on partition cannot be regarded as property of a Hindu undivided family if he has merely a wife or daughter and no son. Now if this contention is well-founded, no further inquiry would be necessary and the question referred to us would straightaway have to be answered in favour of the revenue. We must, therefore, first examine this decision and see what is the ratio it lays down. The appellant who was a member of a Hindu undivided family with his father and brothers received certain shares as a result of a partial partition of properties belonging to the Hindu undivided family and with these shares as nucleus he acquired house properties, shares and deposits. His first son was born on 11th December, 1952, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proceedings was that the Hindu undivided family came into existence for the first time in or about March, 1952, when the son was conceived and it was not his case at any time that a Hindu undivided family was in existence prior to the conception of the son. As a matter of fact it wits common ground between the parties that there was no Hindu undivided family in existence prior to the conception of the son. The only dispute, was whether the Hindu undivided family came into existence for the first time when the son was conceived as claimed by the assessee or it came into being when the son was born as claimed by the revenue. The assessee relied on the doctrine of Hindu law that a son conceived is in the same position as a son born and pleaded for its applicability under the Income-tax Act while the revenue contended that this doctrine was inapplicable and could not be invoked by the assessee. That was the only question raised before the Supreme Court which the Supreme Court was called upon to decide and which in fact it decided. The question whether there was, in any event, even without a son conceived or born, a Hindu undivided family consisting of the assessee and his wife an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as 'joint property' of the undivided family. " Applying this test it is clear that, though in the absence of male issue the assessee may properly be described as owner of these properties, his ownership is such that--to quote once again the words of the Privy Council in Arunachalam's case upon the adoption or birth of a son to him it would assume a different quality : " ... it is such, too, that female members of the family... have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it. " And these are incidents which arise because the properties have been and have not ceased to be joint family properties. It is no doubt true that on partition the Hindu undivided family of the assessee, his wife, his brother and other members in the brother's branch was disrupted as between the assessee and his wife on the one hand and his brother and other members in the brother's branch on the other but the effect of the partition so far as these properties are concerned was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties received by the assessee on partition should be considered as properties of a Hindu undivided family or they should be regarded as individual properties of the assessee. The Mysore High Court held, following its earlier decision in Gowli Buddanna's case, which was later confirmed in appeal by the Supreme Court, that the assessee was liable to be assessed in respect of the properties received by him on partition, as karta of a Hindu undivided family and not as an individual even though his family did not include any other male member but consisted only of himself, his wife and daughters. This decision proceeded on the ground that the properties originally belonged to a Hindu undivided family and they did not cease to bear the character of joint family properties by reason of the fact that they came to be held by a single coparcener as a result of partition. That is the same ground which has found favour with us and on which we have rested our decision. That takes us to the decision of the Allahabad High Court in Pratap Narain v. Commissioner of Income-tax. Though there is not much discussion, this decision proceeds on the same principle as Basappa's case and emphasizes that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke Kalyanji's case and the property received by the assessee from his father would have to be held to be joint family property, contrary to the decision in Kalyanji's case . We do not think this is a correct test to be applied for the purpose of determining whether ancestral property in the hands of an assessee is the property of a Hindu undivided family. We certainly agree with the ultimate conclusion reached by the Patna High Court, but our reasons for doing so are different. We have already discussed the reasons earlier. Before we close, we must refer to two decisions relied upon by the revenue. The first is the decision of the Punjab High Court in Purshotam Dass v. Controller of Estate Duty. In that case there was a partition between K, the father, and his three sons who were members of a Hindu undivided family and as a result of the partition certain properties went to the share of K. K's wife did not take any share on partition and K was, therefore, bound to maintain her which he did until his death. On the death of K the question arose whether estate duty was payable on K's properties in the status of an individual. Now the estate duty would be payable on K's property as an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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