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Commissioner of Income-tax, Poona Vs. H.H. Sir C.A. Patwardhan, Rajasaheb of Sangli - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 104 of 1965
Reported in[1970]75ITR68(Bom)
ActsIncome-tax Act, 1922 - Sections 9(4); Hindu Law
AppellantCommissioner of Income-tax, Poona
RespondentH.H. Sir C.A. Patwardhan, Rajasaheb of Sangli
Appellant AdvocateG.N. Joshi, Adv.
Respondent AdvocateR.J. Kolah, Adv.
Excerpt: - sections 9 (4) of income-tax act, 1922 and hindu law - whether income in hands of assessee was income of hindu undivided family or was liable to taxation in hands of assessee as an individual - property held by shares by reason of grant was not impartible - saranjam as it was granted was itself partible - successive holders of saranjam or shares in saranjam successively partitioned it between themselves and members of their family - section 9 (4) not applicable - held, income was not a grant to one individual but grant to hindu undivided family it was partible and taxable in hands of individual. - maharashtra scheduled castes, scheduled tribes, de-notified tribes (vimukta jatis), nomadic tribes, other backward classes and special backward category (regulation of..........the enjoyment and possession of their share of the saranjam and the tribunal has noted that from time to time several small states came into existence also by further partition such as kurundwad, tasgaon, miraj jr., miraj sr., jamkhandi, etc. we will presently mention some of the references that have been given to us and which have also been referred to by the appellate assistant commissioner and the tribunal. 14. the tribunal held that, though there was originally a saranjam granted and though ordinarily a saranjam is impartible, in this case partition was not only made from time to time with the consent of the sovereign power, that is to say the peshwas for the time being or the british power. it thus came to be officially recognised. the tribunal has referred to considerable.....

Kotval, C.J.

1. The assessee in this reference is the late Rajasaheb of Sangli who passed away during the pendency of these proceedings and whose heirs have been substituted. For the purpose of this reference, however, and for convenience we shall continue to refer to him as the assessee.

2. The assessment years under consideration are the year 1955-56, 1956-57 and 1957-58 relative to the account years ending June 5, 1954, June 5, 1955, and June 5, 1956. Since the point arising in this reference is the same for all the years we shall only refer to the facts pertaining to one year, namely, 1955-56, for the sake of convenience. In that year the assessee received a total income of Rs. 73,273 which was comprised of 7 items as follows :

1. Salary from Sangli Ganpati Panchayatan Sansthan Trust ... 18,0002. Property ... 25,0563. Dividends net Rs. 3,719, Gross ... 5,0434. Interest on mortgages, etc. ... 8,5015. Ground rent ... 1,2706. Cash allowance attached to Saranjam ... 1,0247. Income from sales of grass Rs. 16,683Less Land revenue Rs. 1,500' Expenses Rs. 804 ... 14,379------73,273------

3. Under the present reference there is no dispute as to the amount of the salary received by the assessee, but the dispute is with reference to the remaining items of his income Nos. 2 to 7 mentioned above.

4. The short question that has been posed for our decision is whether this income in the hands of the assessee was income of a Hindu undivided family or was liable to taxation in the hands of the assessee as an individual. The assessee claimed that the income was being received by him as the karta of a Hindu undivided family while the department claimed that the entire income in dispute received by the assessee was received by him as an individual. It was their case that the property belonging to the assessee was a saranjam and all the other items of income were appurtenant to the saranjam, that the saranjam was impartible and governed by the rule of primogeniture and therefore there is no question of treating the income in the hands of the assessee as belonging to the Hindu undivided family.

5. The assessee commenced to make returns only from 1949-50 since the State of Sangli merged with the Indian Union only in 1948. For the first two years, namely, 1949-50 and 1950-51, the assessee made returns as an individual but from the year 1951-52 he claimed that all the income received by him from 1952-53 till 1957-58 was as karta of a Hindu undivided family, except in 1955-56 and in 1957-58 in respect of the salary income only. Therefore, for the items in dispute before us from 1951-52 onwards, the assessee has throughout claimed that the income was received by him as the karta of a Hindu undivided family. The department, however, has assessed him in the status of an individual for all the years 1949-50 to 1954-55 in respect of his income from all sources.

6. For the years in dispute the income-tax Officer rejected the claim of the assessee but the assessee went up in appeal in regard to his assessment for the years 1955-56 and 1956-57 and in regard to these assessments the Appellate Assistant Commissioner accepted the contentions of the assessee. He, therefore, directed a modification of the assessments so as to include only the salary income of Rs. 18,000 per year as his individual income. He directed adoption to the status of a Hindu undivided family for the purpose of assessment of the other items. The principal order was passed by him in the assessment or the year 1955-56.

7. Against the orders of the Appellate Assistant Commissioner the department went up in appeal to the Tribunal. It was contended on behalf of the department before the Tribunal that the original grant made to the Patwardhan family was made by the Peshwas in 1964-65 and what was granted was a saranjam for 8,000 horsemen and that, though, no doubt, it was allotted to three members of the then Patwardhan family, the grant itself constituted an impartible estate or property in the hands of the said three grantees. Secondly though there was evidence of some kind of a division taking place in the branch of the family to which the assessee belonged, it was denied that the division was by way of partition of a Hindu undivided family property. Thirdly, it was contended that the State of Sangli came into existence some time in 1799 and, therefore, in order to determine the question, one had really to see what was the position when that State came into existence. Certain extracts from old compilations were relied upon in this respect. lastly, it was urged that when the succession took place at the time of the death of the grandfather of the assessee, the grandson adopted by him was not given any share but only his natural son was allowed to succeed. If the adoption was not recognised it was an indication that there was no Hindu undivided family.

8. Before we set forth the contentions before us it is necessary to refer to the history of this family and of the grant of the saranjam to the ancestors of the assessee. the different branches of the Patwardhan family, to which family the assessee belonged, are shown by the following genealogical tree :

Haribhat Bhuva Patwardhan(died 1750)|---------------------------------------------------------| | | |Balambhat Trimbak Govindrao Ramchandra(Kurundwad Br.) (Saranjam) (Tasgaon Br.)| (died 1771) |Nilkanth | Parasrambhau| Ramchandra-------------------------------------------------------| | | |Gopalrao Wamanrao Pandurangrao Gangadharrao(died 1771) (died 1775) (died 1777)(Saranjam) |-------------------------------| |Hariharrao Chintamanrao(died 1782) (Saranjam)(died 1851)

9. The original grant of the saranjam was made in the year 1764 to Govindrao, son of Haribhat by the Peshwa, Madhavrao. the saranjam territory at that time yielded an annual revenue of Rs. 24 lakhs and the saranjam was required to maintain 8,000 horsemen in the Peshwa's service. The territory with a revenue of Rs. 1 1/2 lakhs was in the addition given as a personal tainat (maintenance grant). The initial grant was made in favour of Govindrao Haribhat but with him were associated his brother's sons, Nilkant Trimbak and Parasrambhau Ramchandra. Nilkant Trimbak was to maintain, 1,000 horsemen and receive a proportionate share of the saranjam. Parasrambhau was to maintain 2,400 horsemen and similarly receive a proportion of the income of the saranjam and Govindrao was to maintain 4,600 horsemen and receive his share. For the purpose of convenience Nilkant's branch had been referred to as Kurundwad branch and Parasrambhau Ramchandra's branch as the Tasgaon branch and that of Govindrao as the Miraj branch which later on was further sub-divided into the Miraj and Sangli branches. Govindrao Haribhat belonged to the Miraj branch and during his lifetime enjoyed the saranjam to the extent of 4,600 horsemen. After his death in 1771 the tainat was renewed in favour of his son, Wamanrao, and at that time similar allocations were made in favour of the Kurundwad and the Tasgaon branches. Wamanrao died in 1775 and the tainat was renewed at that time in the name of his second son, Chintamanrao. At that time also the same ratio was maintained so far as the other branches were concerned, namely, the Kurundwad and Tasgaon branches. They continued to enjoy the saranjam to the extent of 1,000 and 2,400 horsemen, respectively. Chintamanrao, the son of Wamanrao, was the grandfather of the assessee.

10. When the Saranjam was renewed in the name of Chintamanrao he was a minor, and the only person in the family who really mattered was his uncle, Gangadharrao. It was stated that Gangadharrao was a man of wild temper and he and Chitamanrao therefore bitterly quarreled and the mutual recriminations and enmity reached such a stage that at one time the uncle and the nephew were proposed to wage war against each other. At that time Parasrambhau, the son of Ramchandra, of the Tasgaon branch intervened and brought about an amicable partition between the uncle and the nephew whereby, out of the 4,600 horsemen which Chitamanrao was to maintain, Gangadharrao should maintain 2,600 horsemen and Chintamanrao should maintain 2,000 horsemen. This partition deed was entered into with the consent of the then Peshwa, Bajirao.

11. It was as a result of this partition that the Miraj branch and the Sangli branch of the Patwardhan family came to be separated. Gangadharrao came into Miraj and the assessee's family continued in Sangli. This was the first stage of division of the saranjam.

12. During his lifetime Gangadharrao of Miraj was not satisfied with this partition and did not ratify it but after his death the agreement came to be ratified by his successors at Miraj due to the intervention of a representative of the then British political agent, Mr. Morris, in 1850. The two branches of Sangli and of Miraj finally agreed to the original arbitration brought about by Parasrambhau. This was the second stage in the division of the saranjam.

13. Thereafter it appears that each branch continued in the enjoyment and possession of their share of the saranjam and the Tribunal has noted that from time to time several small States came into existence also by further partition such as Kurundwad, Tasgaon, Miraj Jr., Miraj Sr., Jamkhandi, etc. We will presently mention some of the references that have been given to us and which have also been referred to by the Appellate Assistant Commissioner and the Tribunal.

14. The Tribunal held that, though there was originally a saranjam granted and though ordinarily a saranjam is impartible, in this case partition was not only made from time to time with the consent of the sovereign power, that is to say the Peshwas for the time being or the British power. It thus came to be officially recognised. The Tribunal has referred to considerable evidence supporting this finding.

15. Mr. Joshi's contention on behalf of the Commissioner has been that having regard to the provisions of section 9(4) of Income-tax Act, 1922 it must be deemed that the holder of an impartible estate is an individual, for the purposes of income-tax. No doubt, sub-section (4) of section 9 says that :

'(4) For the purposes of this section -

(a) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate;'

16. but it is clear that before this sub-section can apply it must be established that the estate was an impartible estate. That is the pre-requisite condition to it being held that the holder of that estate is deemed to be an individual owner of all the properties comprised in the estate and in this respect the finding of the Tribunal as well as the Appellate Assistant Commissioner are against the department. The question then which we are called upon to examine is, was this saranjam an impartible estate

17. Reference was made by Mr. Joshi to article 584 of Mulla's Hindu law, 13th edition, and particularly to the instances given in the note to sub-section (2), where one of the instances of impartible property is said to be the saranjams in Bombay, but a glance at the two cases referred to in the foot-note shows that what was decided in those cases was that a saranjam is ordinarily impartible and descends entirely to the eldest representative of the family. A saranjam is either created by grant or arises by custom and, though, no doubt, ordinarily, a saranjam is impartible in the present case, the authorities below have found as a fact that in the case of the saranjam granted to the Patwardhan family it was partible not only from the inception but at all subsequent stages of its history. The Assistant Commissioner has held :

'As I have pointed out, historically the origin of the property in question is the saranjam of the Peshwas and this saranjam has been treated as partible at its inception and also later by custom and usage.'

The Tribunal has held :

In the face of this documentary evidence, much of which is really contemporary evidence, it is impossible to accept the department's submission that property held by the respondent by reason of their grant was impartible.'

18. It seems to us that, having regard to the material which has been placed before us, these findings were correct findings. In the first place, the original saranjam was granted in the name of Govind Haribhat but two other persons, i.e., his brother's sons, Parasrambhau, son of Ramchandra of the Tasgaon branch, and Nilkant, son of Trimbak of the Kurundwad branch shared in it. When it was originally granted it was in respect of 8,000 swears with all the appurtenances, but Govindrao was only granted the saranjam for the maintenance of 4,6000 swears and Nilkant in respect of 1,000 swears and Parasrambhau 2,400 swars.

19. In other words, at the very inception of the grant, there were shares along with the original saranjamdars. That does not show that the intention was to grant an impartible saranjam. That does not show that the intention was to grant an impartible saranjam. the subsequent history of this saranjam and of the several branches of the family also indicates that the saranjam was not impartible. We have already referred to the fact stated in the statement of the case and when Chintamanrao succeeded to the saranjam after the death of Wamanrao he was a minor and it was his uncle, Gangadharrao of the Miraj branch, who entered into the management of Chintamanrao's share of the saranjam. We have also seen how the uncle and the nephew simply could not get on together and that a virtual state of war existed between them. That is also the finding of the Tribunal and it is supported by several authorities. One of these authorities is an instructive memoir on the States of Southern Maratha Country written by Captain Edward W. West. Speaking of Chintamanrao, Captain West has said at page 19 of his book :

'Independently of his natural indisposition to fight very warmly in the cause of a prince who had treated his family so ill, he was busily engaged at this period in recovering his lands from his uncle, Gangadhar Row. The latter, on Pandurang's death, had become the guardian of his nephew and behaved with the proverbial policy of a paternal uncle under such circumstances by appropriating to his own use the property with which he was entrusted. Chintaman Row, before the expedition against Kolapore, where Pursheram Bhow was killed, had managed to get back some of his territory, but when he was wounded and defeated by Dhoondia Wagh, his uncle took advantage of the circumstance to resume his former usurpations. On the close of the war with Dhoondia, Chintaman Row's first care was to repossess himself of his jagheer. He carried on his operations with such vigour that Gangadhar Row had to take refuge in the fort of Meeruj, and would have been attacked had not the relations interposed and persuaded the uncle and nephew to agree to a division of the jagheer and property. Deeds were accordingly drawn up and signed by both parties, and it was arranged that the division was to be made up to the end of 1799, the year when the dispute arose.'

20. Thus, this again confirms the fact that there took place a partition between Chintamanrao and Gangadharrao after disputes had arisen between them and Gangadharrao had appropriated considerable portions which belonged to Chintamanrao. The settlement which took place was in substance that Gangadharrao was to have a portion of the saranjam equal to 2,600 horsemen and Chintamanrao a portion equal it 2,000 horsemen. Thus the portion of the saranjam originally granted to Govindrao of 4,600 horsemen was further divided. The saranjam originally granted to Govindrao on Govindrao's death passed to Wamanrao and after Wamanrao's death passed to Chintamanarao. There was, therefore, the second partition of the saranjam and this again is referred to in West's account at pages 46 to 55 where the learned author gives a long history of the negotiations that took place and the details of that claim. Ultimately the political agent appointed one Mr. Morris to intervene and bring about a settlement and after protracted negotiations what was proposed by Mr. Morris and accepted by the British Government is stated as follows at pages 84-86 :

'To obviate these ill effects he suggested that Government before sanctioning a partition should reserve to itself such a portion as would be sufficient to cover the expenses of the contingent which the saranjam was bound to furnish. In the event of this expedient not meeting with the approbation of Government, he proposed, as an alternative, that the portion of the saranjam to be set apart for the performance of service should be made over exclusively to the head of the family. He also recommended that the unlimited powers of Government conferred on saranjam sirdars, should not continued after the sub-division of estates, but that the various shareholders after partition should merely have the powers of jagheer of the 2nd class.'

21. West has used the word 'partition' throughout and this account of the settlement clearly indicates that the share of Govindrao which passed on to Chintamanrao was ultimately partitioned between Chintamanrao and his uncle, Gangadharrao. Everything else besides the saranjam was also partitioned but equally. This was the second stage at which the saranjam came to be partitioned. It has to be noted that this partition was not so to say any clandestine arrangement between two squabbling parties. It was openly made and subsequently recognised by the then suzerain power - the grantors. At the time it was recognized by the Peshwa, Bajirao, who granted approval. After the partition Gangadharrao settled in Miraj and the assessee family continued at Sangli. This arrangement brought about by Parasrambhau however did not please Gangadharrao of Miraj. He did not ratify it as long as he lived. After his death however the agreement was ratified through the intercession of Mr. Morris, a representative of the British political agent in 1850. Thus the two branches of Sangli and Miraj finally agreed to the partition originally brought about by Parasrambhau and it was approved and recognized both by the Peshwa and the British power.

22. In further passages in the same book we find mention of partition of other similar estates carved out of this saranjam, particularly Tasgaon, Kurundwad, Miraj, Jamkhandi, etc., and in each case the memoir shows that there were partitions between the members of the family. Miraj was partitioned and divided into Miraj Sr. and Miraj Jr. Tasgaon and Kurundwad were portions of the original saranjam granted to the Patwardhan family. Therefore, it is clear beyond upon the materials placed before us that this saranjam from its inception had shares who treated the shares as belonging to them although the saranjam was one. Subsequently each of the branches of shares further sub-divided it shares by partition with other members of its family and all these partitions were permitted by the grantors. Though, no doubt, normally, a saranjam is not partitioned it has been held in a number of cases that where members of the family had treated saranjam as partible over a long period of years and had dealt with them as such in effecting partitions of the entire family estate which consisted both of incomes and saranjams, the court is justified in concluding that the saranjam was either originally partible or has becomes so by family disputes. This was laid down in an early case of this court in Madhavrao Manohar v. Atmaram Keshav.

23. In the present case we have already shown that even at the time of the original grant it was never the intention of the grantor, the them Peshwa, to make the saranjam impartible. Whatever indication is furnished by the old records shows that from the start there were shares and the saranjam was intended to be impartible. Mr. Joshi contended that it must be held that the three shares who were the original grantees of the saranjam held each share as a saranjam themselves and that in their hands that share was impartible. That is not, however, the case which has been put forward on behalf of the department at any stage nor do the facts establish such a case. When the saranjam was originally granted, it was granted to Govind Haribhat for 8,000 swears with all the income but with him were associated his two brothers' sons, Nilkant and Parasrambhau of the Kurundwad and Tasgaon branches, and a specific share was allotted to them out of the totality of the saranjam. The saranjam therefore was one and entire but shares were created and it cannot, therefore, be said that the shares which the shares held were in the saranjam. In fact the whole case as argued before the authorities was on the basis that there was only one saranjam granted and that to Govind Haribhat. This is clear from paragraph 3 of the Tribunal's judgment where they set forth the first point argued on behalf of the department.

24. Secondly, Mr. Joshi relied upon one important fact which has been accepted by the authorities below and that is the manner in which the saranjam was granted after the death of Chintamanrao. Chintamanrao had a son by name Ganpatrao who died during the lifetime of Chintamanrao. Ganpatrao's widow adopted one Vinaykrao as son to Ganpatrao. Later on, however a natural son, one Dhundirao was born to Chintamanrao. On Chintamanrao's death it was his son, Dhundirao, who succeeded to Chintamanrao's share of the saranjam. The British power at that time did not recognise Vinayakrao, the adopted grandson. It was therefore urged that the fact that a division which should have been made according to the law governing a Hindu undivided family was not accepted and recognised, shows that it was not a Hindu undivided family. Unfortunately, the reasons why the adoption of the grandson of Chintamanrao was not recognised are not very clear and the argument on both the sides was concerned more or less with speculation as to why it must not have been recognised. On behalf of the department it was argued that was not recognised because there was no Hindu undivided family whereas that conclusion was challenged as unwarranted on behalf of the assessee.

25. There may be a number of reasons why the adoption of the grandson of Chintamanrao was not recognised and in the absence of any evidence it would be idle to speculate, but one thing is certain that the non-recognition of the adoption of his grandson need not necessarily be attributable to there not being a Hindu undivided family. After the British power became the sovereign power in India, it appears that they insisted that at every succession a fresh sanad should be obtained by the successor to the saranjam and this is clear from article 2 of the engagement between the East India Company and Chintamanrao entered into in 1820 quoted in paragraph 3 of the Tribunal's order and extracted from Capt. Burke's book, Notes on Sangli State. In this letter of engagement Chintamanrao finally accepted the partition arrived at through the good offices of Parasrambhau. Article 2, as then agreed to by Chintamanrao, was as follows :

'As long as you act with fidelity and attachment, the Jahagir in your possession and in the possession of the sirdars of your family shall be continued without any interruption or question. This is mentioned in the 5th paragraph of the agreement entered into at Pandharpur, and it is accordingly now confirmed. On this subject you will receive a sanad issued by the Right Honourable the Governor-General of India. It will hereafter be necessary for your descendants to obtain new sanads from generation to generation, on which occasions applications should be made to the Government which will be pleased to issued a sanad, and to continue the jahagir without levying a nazur.'

26. It will thus be seen that in addition to the ordinary incidents which attached to this saranjam by custom, namely, that it was not impartible from the commencement nor by the subsequent dealing with it by its holders, there was attached also a condition that the then person in political power may or may not recognise it or renew it and that at each succession a new sanad will have to be obtained. Therefore, it may be that for political reason when Chintamanrao died the British power did not recognise the right of his adopted grandson and it cannot, therefore, be said that the non-recognition of the adopted son leads to the inference that there was no Hindu undivided family. There may also be several other which may have prevailed but, in the absence of any material, it would be idle to speculate.

27. Then as regards each of the subsequent partitions which have in fact taken place between the holders of the saranjam or the shares in the saranjam, Mr. Joshi urged that each partition was made only with the sanction of the then sovereign power during the time of the Peshwas, that the consent of the Government of India had been obtained. These were, therefore, not genuine partitions and cannot be an indication that the saranjam was not impartible. It seems to us that it is necessary here to distinguish between the ordinary incidents attached to the saranjam (and we have shown that there is ample material for holding that the saranjam in the present case was partible and continued to be partible and was actually partitioned several times) and other results brought about by the political intervention of the sovereign power. That partitions made by shares in the saranjam had to be sanctioned each time cannot indicate that they were not partitions. All that was necessary was that the sovereign power's consent had to be obtained for such partition but nevertheless, in substance and in essence, they were true partitions under the law governing Hindu undivided families. The requirement of sanction, therefore, did not alter the nature of the estate. It still continued to be an estate enjoyed by the Hindu undivided family.

28. Having considered all the circumstances that have been placed before us and the documentary and other evidence to which the Tribunal has referred we cannot but hold that the conclusion which it reached that the property held by the shares by reason of the grant was not impartible, was correct. It is clear that the saranjam as it was originally granted was itself partible and that successive holders of the saranjam or shares in the saranjam had successively partitioned it between themselves and the members of their family. It must, therefore, be held that it was not a grant to one individual but a grant to the Hindu undivided family and that it was partible. If it was partible then section 9(4) would not be attracted.

29. In the result, we answer the question referred in the affirmative. The Commissioner shall pay the costs of the application for reference. No order on the notice of motion. No order as to costs of the motion.

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