TMI Blog2002 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 12-8-2002 - Judge(s) : V. S. SIRPURKAR., N. V. BALASUBRAMANIAN. JUDGMENT The judgment of the court was delivered by N.V. BALASUBRAMANIAN J.-In pursuance of the directions of this court in T.C.P. Nos. 291 to 304 of 1984, dated February 11, 1985, the Income-tax Appellate Tribunal has stated a case and referred the following questions of law at the instance of the Revenue for our consideration: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding and had valid materials to hold that the assessment made under the Wealth-tax Act on the Hindu undivided family consisting of three brothers was untenable and should be annulled? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law and had reasonable materials to come to the conclusion that there was a division of the two properties situate in Coimbatore and Ooty in definite portion for purposes of wealth-tax? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding and had valid materials to hold that the property in Desabandhu Street, Coimbat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the property and soon after it was requisitioned by the Government of Tamil Nadu for housing its Regional Transport Office for a monthly rent of Rs. 300. It was only in 1971, the three brothers got possession of the property at Coimbatore. As far as the property at Ooty is concerned, the tenant claimed hostile title to the property and there was some litigation which was ultimately settled in O.S. No. 152 of 1975 on the file of the Sub-Court, Nilgiris, and a portion of the land was allotted to the tenant and the three brothers took the rest of the property and the out-house in the Ooty property was washed away in rain. The eldest brother, the respondent herein, wrote a letter to his other brothers on August 3, 1970, suggesting that outright partition was not possible and it was profitable to sell the properties and divide the proceeds. So, the brothers negotiated for the sale of the properties and the advocate of the purchaser insisted that all the three brothers should join in the execution of deed of conveyance and, hence, an agreement was also entered into among the brothers on July 9, 1972, stating that they effected partition in 1943 itself and from that date, they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not belong to the Hindu joint family. He therefore directed that the assessments should be made only on N.R. Srinivasan, karta of a smaller Hindu undivided family consisting of his wife and children and gave necessary directions for assessment on the other smaller Hindu undivided family. The Revenue preferred appeals before the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner and the assessee also filed cross appeals. The Appellate Tribunal took the view that the partition took place in the year 1943 and since the Hindu undivided family ceased to exist from 1943, notice under section 17 of the Act was not a valid notice and assessment could not be made on the Hindu undivided family. The Appellate Tribunal also held that the property situate at Desabhandu Street, Coimbatore, could not be a joint family property. The Appellate Tribunal also held that the valuation of the properties should be done only by adopting the rental capitalisation method. In this view of the matter, the Appellate Tribunal dismissed the appeals preferred by the Revenue and allowed the cross appeals preferred by the assessee. The Revenue, aggrieved by the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence may be returned without answering the questions. We heard Mr. T.C.A. Ramanujam, learned standing counsel for the Revenue, and Mr. Vedantham Srinivasan, learned counsel for the assessee. It is not in dispute that the house property in the West Club Road, Coimbatore, was in occupation of a statutory tenant and after the statutory tenant had vacated the property in the year 1956, it was requisitioned by the Government of Tamil Nadu for housing its Regional Transport Office and the three brothers were enjoying the property by dividing the rental income from the statutory tenant as well as from the Government of Tamil Nadu. The Revenue has also not questioned the genuineness of the letters dated September 9, 1943, which were written by the brothers among themselves, attested by two trustworthy persons stating that the joint family consisting of the three brothers stood dissolved from September 9, 1943, and all the brothers expressed their intention to be separated in status and the joint family ceased to exist from September 9, 1943. As far As the other property in Leslie Cottage, Ooty, is concerned, that property was also in occupation of a hostile tenant and the tenant claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and not genuine ones. The intention of the brothers, as evident from the letters dated September 9, 1943, was to effect a partition of the joint family properties and to enjoy the income from the properties separately from the date of the letter and that would be sufficient to hold that there was a partition by metes and bounds. After the partition, the three assessees would be holding the properties in different character and in different rights and the brothers would be holding the property as tenants in common. The effect of the partition is that the unity of title in the property is lost, though there might have been jointness in possession, in the sense that the three assessees were holding the properties without physical division, and we are of the view, they would be holding the properties as tenants in common. Mr. T.C.A. Ramanujam, learned standing counsel for the Revenue, strongly relied upon the decision of the Supreme Court in Tatavarthi Rajah v. CWT [1997] 225 ITR 561 wherein the Supreme Court considered the effect of section 20 of the Wealth-tax Act and held that section 20 would apply to transactions entered into prior to the enactment of the Wealth-tax Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the properties. In our view, the law does not contemplate that the members of the family should wait till the tenants vacate the property or until the disputes between them and the tenants are settled and then effect a physical partition to be recognised by the Wealth-tax Officer. The division in the present case, took place in the year 1943 prior to the Wealth-tax Act coming into force and, hence, it is not necessary that there must be an order under section 20 of the Wealth-tax Act as the properties were divided in the year 1943 itself. Hence, the decision of the Supreme Court in Tatavarthi Rajah's case [1997] 225 ITR 561 has no application to the facts of the case. No doubt, it is true that in Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690 (SC) and in ITO v. Smt. N.K. Sarada Thampatty [1991] 187 ITR 696 the Supreme Court held that the definition of the term, "partition" in section 171 of the Income-tax Act does not recognise the partition of a Hindu undivided family even if it is effected by a decree of court, unless there is a physical division of the property of the family and if the property is not capable of being physically divided, then, unless there is a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the divided members in the joint family properties and further to declare that the properties of the joint family have been partitioned and the joint family ceased to exist, which had been done on the facts of the case. It is not a case where the members agreed to share the income from the property, though the property was capable of physical division. It is also not a case where the members agreed to divide the income keeping the corpus intact. On the other hand, the clear and manifest intention of the members was to divide the properties and to disrupt the joint family by partition as evident from the letters exchanged between themselves in 1943 and since the properties were not capable of physical division, the three brothers have divided the properties by the method possible, viz., to divide the income and to disrupt the joint family. The decisions of the Privy Council in Malik Harkishan Singh v. Malik Pratap Singh (42 CWN 1021) and Musammat Inder Kuer v. Musammat Prithipal Kuer (49 CWN 689) are authorities for the proposition that separation of the family can be proved by the conduct of the members in the attendant circumstances. The Privy Council also held that once shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhu Street, Coimbatore, which is covered in the third question originally belonged to one Kamalammal, the sister of the assessees and she died in the year 1943 leaving behind a will dated September 20, 1931. According to the will, the house property in Desabandhu Street, Coimbatore, was bequeathed by her in favour of the father to be enjoyed by him till his life time and after his death, the property has to go absolutely to the male heirs of her father. Since her father died in the year 1932 prior to the date of death of Kamalammal, the will of Kamalammal had not taken effect on the date of his death. After the demise of Kamalammal, the property devolved on the three brothers in terms of the will. The Appellate Tribunal which had an opportunity to look into the terms of the will has found that the bequest in favour of the three brothers was absolute and the three brothers obtained a 1/3rd share in the property individually and absolutely. It is not possible to hold that the property originally vested in the father and then from the father, it devolved on the three brothers. We hold that the three brothers derived the property directly from their sister and not from their father. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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