1. This is one of those cases which goes to show that the Legislature in enacting a taxing statute does not, possibly cannot, take into consideration all eventualities and all contingencies. The assessee was joint with his brother prior to 1932. On the 19th April, 1932, there was partition and the property in question came to his share on that partition. At the date of the partition the assessee had sons and therefore on the partition taking place the property became joint family property an between the assess and his sons. There was a partition between the assessee and his sons on the 9th June, 1944, and on that partition again the property came to the share of the assessee. On the 22nd of August, 1947, the assessee sold the property and made admittedly a capital gain of Rs. 97,251. The Department seeks to bring this capital gain to tax.
2. It is not disputed by the assessee that he is liable to pay the tax, unless his case falls within the second proviso to sub-section (1) of section 12B; and that proviso runs as follows;
'Provided further that the tax shall not be payable by an assessee in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset, being property the income of which is chargeable under section 9 and which has been possessed by the assessee or a parent of his for not less than seven years before the date on which the sale, exchange or transfer took place;......'
3. Therefore, in order to attract the application of this proviso, the assessee must establish, first, that the capital asset is a property which is chargeable under section 9, and, secondly, that her or his parent has been in possession of the property for not less than seven years. Now the first condition is satisfied because this is a property which is chargeable under section 9. The difficulty in the way of the assessee is to establish that he or his parent was in possession of this property for not less than seven years before the date of the sale. Now undoubtedly on the partition taking place between him and his sons, the assessee was in possession of this property and he continued to be in possession till the 22nd of August, 1947. But the question is whether it could be said that he was in possession with regard to the remaining prior period which is necessary to make up the seven years prescribed by this proviso. Now during that remaining period the property belonged to the undivided Hindu family consisting of the assessee and his sons, and the narrow question that arises for our consideration is whether it could be said that the assessee was in possession of this property when he was not the sole owner or exclusive owner of this property and the property belonged to the joint family.
4. Now it is well settled law as to the rights of coparceners in a joint Hindu family that it cannot be predicated of any property of any joint Hindu family that a particular share in it belongs to a particular coparcener. Hindu law recognises both community of interest and unity of possession in the joint family properties between all the members all the members of the family. In other words, all coparceners are owners of the property and all coparceners are entitled to possession of the property. Could it, therefore, be said that during this period, when the joint family was the owner of this property, the assessee was in possession of it It is clear that the expression 'possessed by the assessee' used in the second proviso means 'possessed juridically'. The possession contemplated is a juridical possession and not actual possession. The juridical possession of this property was not with assessee, but with the assessee along with his sons who were the coparceners and who constituted the joint and undivided Hindu family at the material time. Now Mr. Palkhivala's argument is that there is no warrant for reading into this section the qualification that the possession contemplated by this section is an exclusive possession. Mr. Palkhivala says that his client was in possession of this property even though he may have been in possession jointly with others. Now it would not be correct to say that a person owns a property or is in possession of a property unless the ownership or the possession was exclusive. If the ownership or possession was not exclusive, then the ownership or possession would have to be qualified or limited by appropriate words. In not so qualifying or limiting the expression 'possession' it is clear that the Legislature contemplated the exclusive possession on the part of the assessee or his parent. Mr. Palkhivala drew our attention to the provision of Hindu law where a coparcenary is constituted by a father and his sons, and he emphasized the fact that in the case of such a coparcenary the father is entitled to possession of the property. It is perfectly true, that, when you have a father constituting a joint family with his sons, he has a right to be in possession of joint family property and exclude the possession of the sons and the sons cannot have an grievance against any such exclusion so long as the joint family continues. But the possession here is not juridical, but actual possession. Although the father may be in actual possession, the juridical possession is still with the father and the sons jointly : it is not solely with the father. If we are right in the view that we take - and that aspect of the case is not challenged by Mr. Palkhivala - that the possession that we are dealing with here is juridical and not actual possession, then we fail to see what difference it would make to this argument if the father is in actual possession, but not in juridical possession, of the whole of the property.
5. Mr. Palkhivala has drawn our attention to the difficulties and anomalies that might be created by our placing this construction on the section when a question arises as to tenants-in-common or joint tenants. It is unnecessary to decide more than what actually arises for our decision on this reference. We realise the hardship of the assessee in this case where he is the owner of his property and had rights of ownership in this property for a very long time even longer than the seven years required by the proviso. But it is a mistake to attempt to gather the intention of the Legislature or to construe a section by considering what difficulties will arise if a particular construction was given to this section. Undoubtedly if two views are possible and two constructions are possible, it is better to lean in favour of that construction which would lead to the least amount of difficulty and which would be most favourable to the assessee. But if the construction is clear, then it is for the Legislature to amend the law so as to avoid hardships being caused to a certain type of assessees.
6. Mr. Palkhivala says that he does not want to give up the contention that was put forward before the Tribunal that a Hindu undivided family would fall in the category of 'a parent' referred to in the proviso. How the sons of the assessee who were joint with him can become a parent under the proviso it is rather difficult for us to understand, and however much we May like to stretch the language of a proviso in favour of an assessee, we cannot convert sons into parents.
7. We, therefore, agree with the view taken by the Tribunal that the case of the assessee does not fall within the second proviso to section 12B (1). We must answer the question submitted to us in the negative. Assessee to pay the costs.
8. Reference answered in the negative.