TMI Blog1979 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Schedule to the Act. The Agrl. ITO accepted the compounding application as in earlier years, on the basis that the assessee had 40.19 standard acres. The Board found that the assessee had gifted 23.83 acres of lands to his minor daughters on 29th January, 1970, and that out of the lands deducted from his holding for the assessment year 1971-72, these gifted lands also formed a part. The reason given for effecting the settlement was to cover the marriage and other expenses of the daughters. The Board was of the opinion that the Agrl. ITO was not correct in excluding the lands settled by the assessee on his minor daughters which attracted s. 9(2) of the Act, and, therefore, proposed to set aside the erroneous orders of the Agrl. ITO. Suo motu revisions were taken under s. 34 of the Act and a show-cause notice was issued. In reply to this show-cause notice, the learned counsel for the assessee stated that the gift was made only in accordance with their community and family customs, and that it was obligatory on the part of the parent to make provision for his daughter, and that the gift had been duly recognised by the I.T. department. At the oral hearing, the assessee's re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of his minor daughters, then s. 9(2)(a) (iv) would be attracted. Though the order of the Board is not clear on the point, still it is not in dispute that the assessee obtained the lands under a partition between himself and his brothers. At the time of partition, the family of the assessee consisted of himself and his two minor daughters. The first point to be examined is whether more than one male member is required for the constitution of the HUF, which is an assessee under the Act. As early as 1936, the Privy Council in Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 noticed a decision in the case of Raja Bhunesh Pratap Narain Singh [1932] 6 ITC 175 (All) and pointed out that their Lordships did not agree that a Hindu joint family necessarily consisted of male members only. The distinction between a HUF and a Hindu coparcenary was pointed out. This case, decided by the Privy Council, was considered by the Supreme Court in Gowli Buddanna v. CIT [1966] 60 ITR 293. In the case before the Supreme Court, one Buddappa, his wife, his two unmarried daughters and his adopted son, Buddanna, constituted a HUF. Buddappa died in 1952 and the question was whether Buddanna, the sole surviv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the property derived by them under the gift was ancestral property or not, it was assumed that their interest was ancestral property, so that, if either had a son, the son would have taken an interest therein by birth. But as no son was born at the relevant time, the Privy Council held that no interest had arisen to qualify or diminish the interest given by Moolji to Kanji and to Sewdas. In the course of the judgment, it was observed at page 95 as follows : " In an extra legal sense, and even for some purposes of legal theory, ancestral property may perhaps be described, and usefully described, as family property; but it does not follow that in the eye of the Hindu law it belongs save in certain circumstances, to the family as distinct from the individual. By reason of its origin a man's property may be liable to be divested wholly or in part on the happening of a particular event, or may be answerable for particular obligations, or may pass at his death in a particular way ; but if, in spite of all such facts, his personal law regards him as the owner, the property as his property and the income therefrom as his income, it is chargeable to income-tax as his, i.e., as the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owns as the joint family property." (Underlining ours) Their Lordships quoted, from the judgment of one of the learned judges of the Supreme Court of Ceylon, the following passage : " To my mind it would make a mockery of the undivided family system if this temporary reduction of the coparcenary unit to a single individual were to convert what was previously joint property belonging to an undivided family into the separate property of the surviving coparcener. " Commenting on the submission that the sole surviving coparcener had plenary powers of disposition or alienations, it was observed in the same page as follows : " But it appears to their Lordships to be an irrelevant consideration. Let it be assumed that his power of alienation is unassailable; that means no more than that he has in the circumstances the power to alienate joint family property. That is what it is until he alienates it and, if he does not alienate it, that is what it remains. The fatal flaw in the argument of the appellant appeared to be that, having labelled the surviving coparcener 'owner ', he then attributed to his ownership such a congeries of rights that the property could no longer be called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the property still continued to belong to that undivided family and income received therefrom was taxable as income of the Hindu undivided family." There would, thus, be a family in the present case, and the property would belong to that family even independently of N. V. Narendranath v. CWT [1969] 74 ITR 190 (SC),which arose under the W.T. Act. The Supreme Court,in this case,went into the question whether the property obtained by a coparcener on a partition between himself and his father and brothers constituted a HUF property so as to be assessed to wealth-tax as such. At page 193, the question formulated was whether the assets, which came to the share of the assessee on partition, ceased to bear the character of a joint family property and became his individual property. The distinction between the two classes of cases where an assessee was sought to be assessed in respect of the ancestral property held by him was pointed out. The first class of cases was where property not originally joint was received by the assessee, and the question to be asked in such a case was whether it had acquired the character of the joint family property in the hands of the assessee. In the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail the decision in Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 and also the other cases noticed earlier, and considered that the case before the Supreme Court came within the ratio of the Privy Council decision in Kalyanji Vithaldas's case [1937] 5 ITR 90, particularly in relation to the cases of the two partners, Kanji and Sewdas. At page 788, the following passage occurs : " On this point (whether Kathoke Lodge which was once the separate property was thrown in the common stock, which raised the question whether that circumstance was sufficient to justify the assessment of the income from that property as that of a Hindu undivided family) the cases of Kanji and Sewdas furnish a near parallel. They did not have to throw their interest in the firm in the common stock because that interest was, on assumption, their ancestral property. But, even though the property was ancestral, the income which they received from it was treated as their separate property as neither of them had a son who could take interest in the ancestral property by birth. Applying that analogy, even if Kathoke Lodge (the self-acquired property impressed with joint family character) were to be an ancestral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s separate property into the family hotchpot. The appellant has no son. His wife and unmarried daughter were entitled to be maintained by him from out of the income of Kathoke Lodge while it was his separate property. Their rights in that property are not enlarged for the reason that the property was thrown into the family hotchpot. Not being coparceners of the appellant, they have neither a right by birth in the property nor the right to demand its partition nor indeed the right to restrain the appellant from alienating the property for any purpose whatsoever. Their prior right to be maintained out of the income of Kathoke Lodge remains what it was even after the property was thrown into the family hotchpot: the right of maintenance, neither more nor less. Thus, Kathoke Lodge may be usefully described as the property of the family after it was thrown into the common stock, but it does not follow that in the eye of Hindu law it belongs to the family, as it would have, if the property were to devolve on the appellant as a sole surviving coparcener." There is no anomaly in treating the sole surviving coparcener as the owner of the property having absolute powers of alienations, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character of the property as joint family property was in issue. The property in this case, having been obtained on partition, belongs to the HUF of which the assessee was the karta. Though he had plenary powers of alienation, still what he could alienate was only joint family property. The gift or settlement was, in legal effect, the act of the joint family of which the assessee was the karta. There was no transfer of any property in favour of a minor child by the joint family as such, as it cannot have a minor child, though the minor child may form part of it. To a similar effect is the decision of a learned single judge of this court in K.Arunachalam Mudaliar v. Commr. of Agrl. I.T. [1978] 111 ITR 780. In that case, the settlement was in favour of the wife; but, as the property was the joint family property, the provisions of s. 9(2)(a) were held to be inapplicable. Section 9(2) would apply only to an individual and not to a joint Hindu family and it would apply only to a transfer of the individual's own separate property and not to the transfer by him of joint family property. For these reasons, the provisions of s. 9(2)(a)(iv) cannot be applied and the order of the Board i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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