TMI Blog1968 (8) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... , who is the assessee before us, and his two unmarried daughters formed a Hindu undivided family. In respect of the income of the properties of the Hindu undivided family, Chinubhai was assessed during his lifetime as manager and karta and the income was assessed as income of the Hindu undivided family. Chinubhai died on 16th May, 1951,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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Wealth-tax Act or under the Income-tax Act, for it was indisputable that if the properties continued to belong, to the Hindu undivided family, even after the death of Shantaben and neither the two-thirds share nor any part of the properties was held by the assessee in his individual capacity, the income of the properties would be assessable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, there was no Hindu undivided family in existence after the death of Shantaben. The revenue relied strongly on the following observations of the Nagpur High Court which were quoted with approval by the Privy Council in Anant Bhikkappa Patil v. Shankar Ramchandra Patil : " We regard it as clear that a Hindu family cannot be finally 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 rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Maintenance Act, 1956, and the Hindu Succession Act, 1956, the question of " a potential mother " could arise only after the death of the sole surviving coparcener. It would, therefore, appear that, even if the assessee had died before Shantaben, the Hindu undivided family would not have come to an end but would have continued with Shantaben 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 hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re must be some circumstance or event which makes property received by an assessee from his father joint property of a Hindu undivided family. The property being originally not joint family property when received by the assessee, the question has to be asked : has the property acquired the character of joint family property ? has it become property 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the answer to the question referred should be that : " ..... the income received by right of survivorship by the sole surviving male member of a Hindu undivided family can be taxed in the hands of such male member as his own individual income for the purpose of assessment to super-tax. . .." (Commissioner of Income-tax v. A. P. Swamy Gomedalli). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by analyzing the nature 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. " Here also, the basis of the decision was that the property which was the joint property of the Hindu undivided 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case fall : does it fall within the class of cases represented by Kalyanji's case or does it fall within the class of cases represented by Gomedalli's case, Arunachalam's case and Gowli Buddanna's case.We are clearly of the view that it falls within the latter class of cases. The properties sought to be taxed originally belonged to a Hindu undivided 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. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddanna's case, and the Tribunal taking the view that the case before it was directly governed by the decision of the Supreme Court in Gowli Buddanna's case, held that the properties received by the assessee on partition belonged to a Hindu undivided family and were not liable to be included in his individual assessment to wealth-tax. This view taken by the Tribunal 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from the date of the birth of the son and it might, therefore, be suggested that by necessary implication this decision must be taken to have decided that there could be no Hindu undivided family prior to the date of the birth of the son. But we do not think any such implication can be raised from this decision. The case of the assessee throughout the course of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties came to the share of the assessee and the question is whether they ceased to bear the character of joint family properties and became the absolute properties of the assessee. Now, as pointed out by the Privy Council in Arunachalam's case in the passage quoted with approval by the Supreme Court in Gowli Buddanna's case . " It is only by analyzing the nature 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Wealth-tax v. Basappa . The assessee and his two brothers formed a Hindu undivided family and on partition a portion of the joint family property came to the share of the assessee. The assessee was at all material times the only male member in his branch, the other members being his wife and two daughters. The question, therefore, arose whether the properties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sole surviving coparcener. The Privy Council never said that even where there is a coparcener in existence, the potentiality of another coparcener being brought into existence either by birth or adoption of a son would make the property in the hands of that coparcener, property of a Hindu undivided family. If such a test were correct, it would equally apply in a case like 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 fami ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
