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TMI Blog1969 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... he represented the assets not as individual but as Hindu undivided family in regard to properties which form the corpus of the impartible estate of Vizianagaram and which had devolved on the assessee under the rule of primogeniture but also other properties to be partible properties. For the assessment year 1957-58, the claim of the assessee was that all these properties belonged to the Hindu undivided family of himself and his two minor sons. He made a similar claim for the assessment year 1958-59. The Wealth-tax Officer rejected this claim for both the said years. The Wealth-tax Officer opined that the properties formed the corpus of the impartible estate and devolved on the assessee as his separate property. It was further found that the assessee had treated these properties solely as belonging to himself. He, therefore, treated the assessee as an individual instead of as a Hindu undivided family as was claimed by the assessee. The assessee was the landholder in respect of the Zamindari of Vizianagaram. By virtue of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, the said estate was abolished and was taken over by the Government on September 7, 1949. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and only four-fifths was assessable in the hands of the assessee. The two sons were not born by the time the notification was issued. The assessee wanted the Tribunal to refer the above-said two questions for determination by the High Court and that is how the reference has come to us. Now, taking up the first question for consideration, one thing which immediately leaps to the eye is that the question makes no reference to the nature of property in regard to which the status of the assessee is required to be decided. From the order of reference, it is clear that this question "is rather inaccurately phrased". The real question is whether the assets, which have been shown by the assessee in his return, constitute the assets of the individual or do they constitute the assets of the joint family. The contention of the assessee in the reference application was that the properties shown include both partible as well as impartible properties. In the reference it is further conceded that the full details of the different assets, however, do not appear to be clear from the various orders. The assessee stated that the nature of the property can be ascertained from the judgment of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the question now raised before us, we propose to keep in view the two admitted items of impartible property, that is to say, the Prince of Wales Market and the 38 items of jewellery, regalia, and consider the main question relating to these two items. In regard to all other items about which there is dispute as to whether they are partible properties and therefore belong to the joint family or they are impartible properties and, therefore, belong to the assessee as individual has obviously to be decided by the Tribunal after the question is properly investigated. The opinion which we are expressing is in relation to the impartible properties consisting of the above-said two items and it is obvious that the same opinion will hold good if the Tribunal after investigation find that the other items of properties returned by the assessee are impartible properties. If, on the other hand, it is found that some or all the other items of properties are of partible character and belong to the joint family consisting of the father and the two sons, then it is evident that such an asset cannot be included in the assessment of the assessee as individual. The said question therefore has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Nor is he entitled to maintenance out of the estate except as it is provided under the provisions of the said Act. The holder of the estate is also held to be the absolute owner of the income from such an estate. But as regards future rights, that is the right to survivorship, the property is to be treated as coparcenary property, so that on the death intestate of the last holder it will devolve by survivorship according to certain well-accepted rules in regard to such ancestral impartible estates into which we need not go here. It is, however, plain that the right of the junior member to succeed to the estate by survivorship is not a mere spes successionis but a right of property which can be transferred. Where the impartible estate is ancestral but the last holder was separated, the estate in cases governed by the Mitakshara will descend according to the ordinary rules of succession applicable to partible property. In this case, however, admittedly, the holder of the estate is not separated but continues to be joint with his two sons. In all such cases, the estate passes by survivorship from one line to another according to the rule of primogeniture and devolves not on the memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question is whether after the abolition of the estates what would be the character of the two items left with the assessee-holder. Do they partake of the same character as was of the abolished estate or because of section 45 their character has undergone a change, and if so, does that property belong to the assessee-holder, as an individual. It is conceded by all concerned that whatever is ultimately found to be the character of the compensation in the hands of those who have received them under section 45, the fate of the two items in question will be decided accordingly. In view of this concession expressly made before us, we will proceed to consider the question as to what is the character of the compensation amount paid for the impartible estate abolished and apportioned among the sharers. If section 45 of the Abolition Act were not to be there, then the money equivalent of the impartible estate abolished and taken over would have been admittedly impressed with the same character as was of the impartible estate for which compensation has been paid: see Gopalakrishna v. Sarvagnakrishna. We will proceed to consider as to whether section 45 of the Abolition Act has brought a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) declares that with effect on and from the notified date the Madras Impartible Estates Act, 1904, shall be deemed to have been repealed in its application to the estate, if the estate, as here, is governed by that Act immediately before the date of the notification. A careful reading of section 45 would reveal that in essence it regulates the apportionment of compensation in the case of impartible estates to which that section applies. Sub-section (1) enjoins that the subsequent provision of that section shall apply to "an impartible estate which had to be regarded as the property of a joint Hindu family for the purpose of ascertaining the succession thereto immediately before the notified date ". What sub-section (1) discloses is that there are several kinds of impartible estates out of which the section is applicable only to such impartible estates which fall within the purview of sub-section (1). The words "which had to be regarded" are taken to mean which impartible estates have been regarded by judicial decisions as the property of a joint Hindu family for the purpose of ascertaining its succession. We have already noticed that although most of the substantial features of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts which have to be paid out of the assets of the impartible estates, and the creditors to whom they are payable. It is expressly declared that the creditors shall first be paid out of the aggregate compensation and it is only the remainder that shall be available for division amongst the maintenance-holders and the sharers. Sub-section (4) empowers the tribunal to determine the amount of maintenance which shall be paid to the maintenance-holders, but stipulates that such payment shall not exceed one-fifth of the remainder of the aggregate compensation except in cases to which section 47(2), proviso, is applicable. Sub-section (5) then proceeds to empower the tribunal to determine the apportionment of the payment of compensation found payable to maintenance-holders and directs the tribunal to keep in view the considerations mentioned in that sub-section at the time of determination. We then come to sub-section (6) which is more important. It enjoins that the balance of the aggregate compensation then shall be divided among the sharers. We have already seen who those sharers are. It further directs as to how the said division shall take place among the sharers. It then procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the fiction is treated by law as reality and it has to operate within that field and not transgress the limits. It would, therefore, not be proper to take as reality that the sharers alone were the members of the joint Hindu family on the notified date and they alone were actually divided for all intents and purposes on that date. It must always be borne in mind that, firstly, it is only a formula or a mode adopted for the purpose of dividing the compensation; and, secondly, the mode of division is based on a pure fiction limiting its scope for the purpose of ascertaining the amount which each sharer then living could get. This fiction cannot be extended so as to effect a division even between the sharers who are treated as members of the joint Hindu family or between those coparceners who exist but are not treated as sharers or maintenance-holders in regard to other properties, for neither the status of the family nor its properties other than the compensation are within the operation of that section. What must follow from what is stated above is that whatever may have been the character of the impartible estate referred to in sub-section (1) before the notified date or whoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oparceners whether they get maintenance out of the compensation amount or not. It must be remembered that a legal assumption that a thing is true which is either not true or which is as probably false as true, is called a legal fiction: An assumption in law that does not accord with the actual facts and which may be contradicted for every purpose except to defeat the beneficial end for which the fiction is invented and allowed. As is said by Lord Mansfield: "A fiction of law shall never be contradicted so as to defeat the end for which it was invented but for every other purpose it may be contradicted." If this is true, then as the fiction cannot be extended so as to effect a division between the members of the family in regard to other properties, so also the fiction cannot be extended so as to treat the compensation in the hands of those who get it as sharers as joint family property in their hands vis-a-vis their after-born sons or his son or other coparceners. Section 45 treats the four generations as a single unit and brings about the distribution of the compensation amongst them here and now. It only means that between the father and the two sons, if they were living on the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the provisions of the Hindu Succession Act and not by the customary rule of survivorship subject to the principles of primogeniture. If the impartible estates themselves are made to shed their little attachment with the principle of survivorship in regard to succession, it should present no difficulty in reaching the conclusion that the compensation paid for such estates under section 45 is property coming within the ambit of the Hindu Succession Act, and being the absolute or the self-acquired property of the sharers, succession to it will be governed by the relevant provisions of the Hindu Succession Act. The question of descent arises on the death of the owner after the passing of the Hindu Succession Act. Since the incidents of impartibility does not consist solely of its devolution but also its incapacity to be partitioned, two questions after the Hindu Succession Act has come into force would arise. Firstly, whether a customary impartible estate would be liable to partition after the passing of the said Act. This question assumes that the customary impartible estate is joint family property. And, secondly, whether the devolution of a customary impartible estate would be go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act on the lines of section 9(4) of the Income-tax Act. But an identical provision was introduced in the form of section 4(6). This amendment, because of Notification No. S.O. 709 dated February 24, 1965, came into force with effect from April 1, 1965. The said provision reads as follows: " For the purposes of this Act, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate." From these two provisions, the intention of the legislature becomes abundantly clear. The legislature wanted impartible estates to be treated as individual property of the holder and not as his joint family property for the purposes of the tax. It is true that in the assessment years under consideration, section 4(6) was not in force. Nevertheless, the intention of the legislature becomes apparent. It is a well recognised principle of construction of statutes that whenever there is an ambiguity in an Act, as here, it is proper to refer to an earlier Act in pari materia or an Act of analogous character. Assistance in ascertaining the meaning of an enactment may be obtained by comparing its language with that used in an earlier statute re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artition in regard to other properties. The devolution or succession to the share obtained in such a partition would be on the basis of its being a divided item of property. Therefore, the one-fifth share of the compensation amount, to which the deceased zamindar became entitled under the provisions of section 45(6), should be held to be divided property in his hands, and the persons entitled to take it on his death would be his undivided son, his two widows and his two illegitimate sons, the other sons being treated as divided in respect of that item of property. The first three sons of the zamindar will have no interest in the one-fifth share, to which the deceased zamindar became entitled under the provisions of section 45(6)." It will immediately be plain that the one-fifth share of the zamindar was treated as if it was a divided joint family property in his hands and the subsequent born son being a coparcener was declared entitled to it under the principle of survivorship, which is modified by the Hindu Succession Act along with the widows and the illegitimate sons of the zamindar. Their Lordships further observed at page 374: " Therefore, whatever might be the rights of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er quoad the undivided property would be by the rule of survivorship, and quoad the divided property, by succession." That would disclose that the divided share of compensation in the hands of the sharer was held to be his individual property which would devolve by succession and not by rule of survivorship. In spite of this clear observation, the learned judges have ultimately held that the one-fifth of the share of the zamindar in regard to his divided share of compensation would devolve on his death on his undivided sons, his two widows and his two illegitimate sons, the other sons being treated as divided in respect of that item of property. This decision was considered by a Bench of this court in R. C. No. 15 of 1965, an unreported judgment dated 19th November, 1968. The facts of that case were: The assessee, Rajah of Challapalli, was assessed to expenditure-tax for certain years. While so assessing the expenditure-tax, the officer included certain sums being expenses incurred by one of the assessee's sons as expenditure of the assessee's joint family. The contention of the assessee was that the son spent the amount out of his own source of income which included the share wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der law to his legal heirs and not vest in the other coparceners by survivorship. In the view we have taken on this aspect of the matter, the share of the compensation is the separate property of the son, Mallikarjuna Prasad, and he is entitled to spend from that amount the expenses towards his education, which cannot be said to have been incurred by the joint family." From the above, it would be seen that although their Lordships thought that the Madras decision, observations from which are extracted, is in accord with the view taken by them, that does not seem to us to be wholly correct. The Madras decision, as has already been noticed, although treated the amount at one stage as if it was a self-acquired property of the sharer which would have devolved by succession, the result of the decision is that the divided compensation in the hands of the assessee is a divided share of joint Hindu family property in his hands and to such an amount the rule of survivorship would apply and that is why the undivided son together with illegitimate sons and widows were given share in that property depriving the other sons. The conclusion drawn by this court in the above said decision is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment and the balance amount of compensation which is to be ascertained in future under section 39 of the Abolition Act and paid to the assessee, are assets of the assessee to be included in the total wealth of the assessee for the purposes of the Wealth-tax Act. A present liability to pay a sum of money which is ascertainable only in the future constitutes a debt in law. A payment to be made in the future on account of an existing obligation is as much a debt as a payment to be made in present on account of a liability in praesenti. The balance amount of compensation which is to be ascertained in future under section 39 and paid to the assessee is a debt owing to the assessee." The same view is reiterated in Vadrevu Venkappa Rao v. Commissioner of Wealth-tax. The following decisions of the other High Courts also take the same view: Maharajakumar Kamal Singh v. Commissioner of Wealth-tax and Sardar C. S. Angre v. Commissioner of Wealth-tax. Standard Mills Co. Ltd. v. Commissioner of Wealth-tax lends considerable support to this view. In the view which we have taken, we do not consider it necessary to refer to the several decisions which were cited to us by the learned advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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