TMI Blog1997 (12) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... , and under the provisions of the Wealth-tax Act, 1957. Tax Cases Nos. 449 and 450 of 1985 arise under the provisions of the Income-tax Act for the assessment years 1978-79 and 1979-80 and Tax Cases Nos. 1164 to 1179 of 1985, arise both under the Income-tax Act and under the Wealth-tax Act ; in so far as the Income-tax Act assessments are concerned, the assessment years concerned are 1967-68 to 1974-75 and 1976-77 and as regards the Wealth-tax Act the assessment years concerned are 1969-70 to 1975-76. Tax Cases Nos. 968 to 970 of 1986 relate to the assessment years 1977-78 and 1978-79 under the Income-tax Act. The issue raised in all the cases is common. The assessee and his father were the owners of an impartible estate who succeeded each other according to the law of primogeniture. The estate in question was owned by the ancestors of the assessee for the past 200 years and the entire estate was abolished in the year 1951 under the provisions of the Estates Abolition Act. Before it was abolished, the estate consisted of three villages in Tirunelveli District and according to the custom of the family the owners succeeded each other in accordance with the law of primogeniture appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner found, that under the provisions of section 46(6) of the Estates Abolition Act, the compensation amount would be divided between the sharers as if there was a partition on the notified date and the compensation amount is treated as a joint family property and the share of each sharer is determined as if there was a partition between them on the notified date. The Appellate Assistant Commissioner, therefore, held that the half share received by the assessee in the partition became the joint family property in the hands of the assessee inasmuch as he has married and got a son and a daughter. The Appellate Assistant Commissioner strongly placed reliance on the decision of this court in the case of Subramania Iyer v. Sangili Veerappan Balasubramanian Pandian [1960] 2 MLJ 102, in holding that on the abolition of the estate, the Estates Abolition Act treats the property as a joint family property and since the assessee received the property in the partition, the status of the assessee should be taken as that of a Hindu undivided family. The Appellate Assistant Commissioner distinguished the decision of the Supreme Court in the case of CWT v. Rajah Velugoti Sarvagna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal accepted the claim of the assessee that the property should be treated as ancestral in character and the assessee should be assessed in the status of Hindu undivided family. In this view of the matter, the Appellate Tribunal upheld the view of the Commissioner (Appeals) holding that the share of the compensation as well as the interest thereon received by the assessee should be assessed in the status of a Hindu undivided family and not in the status of an individual. The Revenue sought for and obtained a statement of case both under the provisions of the Income-tax Act and the Wealth-tax Act and the Appellate Tribunal has stated the case and referred the question of law set out earlier. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the compensation received by the assessee on the abolition of the estate under the Estates Abolition Act was the share of the assessee and it represented the absolute property of the assessee and the assessee had no pre-existing right over the impartible estate. He submitted that by virtue of the Estates Abolition Act, a new statutory right was created in favour of the assessee and, therefore, the compensation received under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived the property from ancestral source, the property is joint family property in character and, therefore, the Tribunal was correct in law in holding that the assessee should be assessed in the status of a Hindu undivided family. He also submitted that even assuming that the property was held by him as his absolute property, in 1956 when the Hindu Succession Act came into force on the enactment of the Hindu Succession Act with effect from June 17, 1956, the custom with regard to the impartibility of the estate had lost and the property became joint family property. In this connection, he placed reliance on the decisions, (i) CIT v. Maharaja Chintamani Saran Nath Salt Deo [1986] 157 ITR 358 (Patna), (ii) CED v. B. K. Tiwari [1981] 130 ITR 515 (MP), (iii) Pratapsinghji N. Desai v. CIT [1983] 139 ITR 77 (Guj) and (iv) CIT v. U. C. Mahatab, Maharaja of Burdwan [1981] 130 ITR 223 (Cal). He further submitted that since the character of the property was joint family property, the decision of the Supreme Court relied upon by the Revenue in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 is not applicable to the facts of the case. He also placed reliance on the decision of this court in Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devolution is governed by the general Mitakshara law applicable to such property. Though the other rights which a coparcener acquired by birth in joint family property no longer exist, the birth right of the senior member to take by survivorship still remains. Nor is this right a mere spes successionis similar to that of a reversioner succeeding on the death of a Hindu widow to her husband's estate. It is a right which is capable of being renounced and surrendered. Such being their Lordships' view, it follows that in order to establish that a family governed by the Mitakshara in which there is an ancestral impartible estate has ceased to be joint, it is necessary to prove an intention, express or implied, on the part of the junior members of the family to renounce their right of succession to the estate." In CIT v. Krishna Kishore, AIR 1941 PC 120, Sir George Rankin speaking for the Board, held that when in a family governed by the Mitakshara, by custom the rule of primogeniture controls the devolution of impartible property, the custom of impartibility does not touch the succession since the right of survivorship is not inconsistent with the custom ; hence the estate retains it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to a person not capable of alienating the land acquired (see Special Deputy Collector, Ramnad v. Rajah of Ramnad, AIR 1935 Mad 215 ; [1935] ILR 58 Mad 442). It is difficult to follow the argument that the nature of an estate in any immovable property is changed once it is converted into money." The above decision clearly establishes that the compensation amount payable under the provisions of the Estates Abolition Act still retains the character of impartible estate. The question what is the effect of section 45 of the Estates Abolition Act as regards an impartible estate was the subject-matter of consideration before a Division Bench of this court in Subramania Iyer v. Kutti Raja [1960] II MLJ 102 and the learned judge, Mr. S. Ramachandra Iyer J. (as his Lordship then was) speaking for the Bench observed that whatever may be the right of the principal landholder or the sons in the impartible estate before the date of the notification, the compensation amount should be treated as one owned by it consisting of members of the joint family and the share of each of the sharers should be determined as if there had been a partition between them on the notified date. In other words, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his hands and the person entitled to take it on his death would be his undivided sons (born subsequent to the notification) and his two widows and also two illegitimate sons, other sons being treated as divided in respect of that item of property and the first three sons have no interest in the said 1/5th share of the deceased zamindar. The above decision makes it clear that the compensation obtained by the deceased holder of the estate was the divided property and the divided sons cannot claim any share in that property and the real nature of the property was divided property and hence, for that reason, this court held that three sons who obtained compensation under section 45 of the Estates Abolition Act were not entitled to any amount on the death of the principal landholder of the estate. This decision throws light on the character of the property that the holder was holding and it clearly shows that it was divided property which presupposes that it was a joint family property. The Supreme Court in the case of CWT v. Rajah Velugoti Sarvagna Kumar Krishna Yachendra Bahadur [1973] 89 ITR 246 held that the compensation paid to the sons can be regarded as absolute property an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AP 63 and Pachiammal v. Veerappa Thevar, AIR 1975 Mad 131. Therefore, when the assessee received compensation, the source of the compensation was ancestral. It may be separate property as regards the persons from whom he is statutorily divided, but it would be a joint family property as regards his male issues. The decision of the Andhra Pradesh High Court has not taken this aspect into consideration, but on the other hand in the decision in Subramania Iyer's case [1960] 2 MLJ 102, this court has taken this aspect into consideration and held that two results follow from the statutory provision, viz, (i) the compensation amount is joint family property, and (ii) there had been a partition in the joint family properties. The next decision that was relied upon by learned counsel for the Revenue is Commissioner of Expenditure-tax v. S. R. Y. Sivarama Prasad Bahadur [1970] 78 ITR 622 (AP) (Appex.), wherein the learned judges held that in earlier cases the Andhra Pradesh High Court had taken a view that the property cannot be regarded as joint family property, but as an absolute property of the sharers. Learned counsel also stressed that the decision of the Andhra Pradesh High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me he likes and, therefore, the assessee has treated the property as joint family property. He also relied upon a decision of the Supreme Court in CWT v. Chander Sen [1986] 161 ITR 370, and submitted that though the property was originally a joint family property, it became an absolute property by virtue of section 8 of the Hindu Succession Act. The next decision that was relied upon by learned counsel for the assessee is the decision of the Patna High Court in CIT v. Maharaja Chintamani Saran Nath Sah Deo [1986] 157 ITR 358, wherein the Patna High Court held that after the introduction of the Hindu Succession Act, 1956, section 4 of the Act would prevail over custom and the custom as regards impartible estates ceased to be in operation upon the enactment of the Hindu Succession Act and the property would become joint family property. We are of the view that a study of various decisions clearly shows that in the impartible estate the joint family was the owner and the estate retains the character of joint family at least to the extent of the right of survivorship and the property though joint family property is clothed with the incidents of self-acquired property. On the enactmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Patna High Court in CIT v. Maharaja Chintamani Saran Nath Sah Deo [1986] 157 ITR 358 are all authorities for the proposition that after the enactment of the Hindu Succession Act, the impartible estate's character is lost over the estate and the property would become joint family property. Further, when the assessee expressed his intention to treat his property as joint family property right from the date he obtained the compensation, it would take effect from the date of the birth of the son as the composition of the family has changed and from the year 1968, the property would become joint family property. Even assuming that the contention of learned counsel for the Revenue, that the assessee expressed his intention only in the return filed in 1976 is accepted, it has to be taken that the intention was not from the date when the return was filed, but with reference to the income of the particular assessment years, viz., 1967-68 and 1968-69. Therefore, the decision of the Supreme Court in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, which deals with a case of throwing of the self-acquired property into family property where the family consisted of himself, his wife a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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