1. These writ petitions have been preferred by four divided brothers, all sons of one S. L. Mannaji Rao, challenging the orders in revision passed by the Commissioner of Income-tax, Mysore, Bangalore, under section 264(1) of the Income-tax Act, 1961, and section 25(1) of the Wealth-tax Act, 1957. Each of the petitioner has preferred two separate petitions questioning the orders of the Commissioner both under the Income-tax Act and the Wealth-tax Act.
2. The assessment year in question in all these petition is 1963-64. The granting of relief to the petitioner depends on the determination of the question whether the writ petitioner, who are all assessees both under the Income-tax Act and the Wealth-tax Act, should be assessed as individuals or as members of a Hindu undivided family. In these circumstances, it is sufficient to consider the facts in one set of these writ petitions, filed by S. M. Ananda Rao, namely, Writ Petition No. 265 of 1966 and Writ Petition No. 272 of 1966, for the disposal of this batch of cases.
3. The facts of the case in Writ Petition No. 265 of 1966 are briefly as follows : The petitioner is one S. M. Ananda Rao, one of the sons of S. L. Mannaji Rao, who is the original owner of the properties involved in these assessment proceedings. The petitioner was assessed to income-tax and wealth-tax for the assessment year 1963-64 as an individual, while he claimed to be assessed as a Hindu undivided family. In support of his claim that he should be assessed as a Hindu undivided family, he relied on a settlement deed executed on March 30, 1952, executed between his father, S. L. Mannaji Rao, and himself and his brothers. Though the deed was executed on March 30, 1952, the petitioner, as also the petitioner in the other petitions, were being assessed as individuals till the year in question. In addition to placing reliance on the settlement deed dated March 30, 1952, the petitioner produced two declarations, one of his father and the other of himself, before the assessing authority. The declarations merely stated that the properties settled on the assessees were intended to be enjoyed by himself and his sons as if they were joint family properties. The Income-tax Officer rejected the contention of the assessee by his order dated December 31, 1963, and proceeded to assess the petitioner as an individual. Against this order the petitioner preferred a revision petition under section 264(1) of the Income-tax Act before the Commissioner of Income-tax, Mysore, Bangalore. By his order dated May 31, 1965, the Commissioner affirmed the order of the Income-tax Officer and rejected the contention of the petitioner that he was entitled to be assessed as a Hindu undivided family.
4. In Writ Petition No. 272 of 1966, the petitioner, S. M. Ananda Rao, was assessed to Wealth-tax for the same assessment year by an order dated February 14, 1964, by the concerned Wealth-tax Officer. Here also, the contention of the petitioner that he was entitled to be assessed as a Hindu undivided family was rejected, and he was assessed as an individual as hitherto. The petitioner preferred a revision petition under section 25(1) of the Wealth-tax Act, 1957, to the Commissioner of Wealth-tax, who was also the Commissioner for Income-tax. The Commissioner by his order dated May 31, 1965, rejected the contention of the petitioner in this regard and affirmed the assessment made by the Wealth-tax Officer. In all the other writ petitions preferred by the three other brothers and facts with regard to the contentions urged and orders of assessment passed by the Income-tax Act and the Wealth-tax Act and the orders in revision passed by the Commissioner, in his capacity as the Commissioner for Income-tax and Wealth-tax, are similar.
5. The first submission made by Mr. T. Krishanan Rao, the learned Advocate-General, appearing for the petitioners in all these cases, is that the order passed by the Commissioner in the exercise of his revisional jurisdiction under the relevant taxing statute was a quasi-judicial order and that it was amenable as such to the jurisdiction of this court under article 226 of the Constitution of India. In support of his contention, he relied on a decision of the Supreme Court in Dwarka Nath v. Income-tax Officer. Subba Rao. J. (as he then was), speaking for the Bench, observed as follows :
'The Commissioner exercising revisional jurisdiction under section 33A(2), Income-tax Act, does not function in an administrative capacity and a writ of certiorari is maintainable to quash his orders.
Jurisdiction conferred under section 33A(2) of the Act prima facie is a judicial one. The order that is brought before the Commissioner affects the right of the assessee. That the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed, is implicit in revisional jurisdiction. The nature of the jurisdiction and the rights decided necessarily carry with them the duty to act judicially in disposing of the revision. The fact that the Commissioner cannot make an order to the prejudice of an assessee does not possibly change the character of the proceeding. Though the Commissioner may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full relief asked for by the assessee'.
6. In view of the aforesaid statement of the law by the Supreme Court, it cannot be contended that the present writ petitions were not maintainable or that the reliefs sought for, could not be granted under article 226 of the Constitution. Now we shall proceed to consider the cases on merits.
7. The case of the petitioners is that by virtue of the settlement deed whereby certain self-acquired properties of their father were partitioned by the father between himself and his sons, the property that was allotted to the share of each of the sons partook the character of joint family property and that therefore each of the sons was entitled to be assessed, both for the purposes of income-tax and wealth-tax, as a Hindu undivided family. The Commissioner rejected the contentions of the assesses-petitioner having regard to certain recitals in the settlement deed. In addition, the two declarations made by the original owner of the properties and the assessee to the effect that the properties settled by the settlement deed were intended to be the enjoyed by the assessee and his children as a Hindu joint family and that the same were being enjoyed as such, were not taken at their face value by the Commissioner. We should however state that such declarations made long after the execution of the settlement deed have very little value as evidence in ascertaining the true intention of the parties. Such declarations cannot also affect or modify the operation of the terms of the settlement deed. Nor can they be utilised or depended upon to interpret the intention of the parties to the settlement deed executed more than 11 years before such declarations were actually made.
8. The Commissioner relying on the use of the words 'him' and 'absolutely' in the under-mentioned recital in the settlement deed came to the conclusion that the property allotted to the share of the assessee under the settlement deed in question was his absolute property and as such he was liable to be assessed as an individual and not as a Hindu undivided family. The passage extracted in the order in question is as follows :
'I hereby transfer and assign the properties described in the schedules A, B, C, D, E, and F, respectively, to the said members of the second part, such that each of the latter should hold that the properties set apart for him as per the respective schedule 'absolutely'.'
9. In doing so, the effect of the other recitals in the said deed have not been considered by the Commissioner.
10. Before proceeding to examine the various recitals in the deed, for the purpose of ascertaining the intention of the parties to the same and the true nature of the transaction of transmission of property evidenced by it, it would be convenient to consider and examine certain questions of law arising in the case.
11. The learned Advocate-General relied on a decision of the Bombay High Court in Kisansing Mohansing Balwar v. Vishnu Balkrishna Jogalekar and submitted that when a Hindu father made a division of his self-acquired properties between himself and his sons, certain inferences would necessarily flow from such a division. The relevant passage in the judgment reads thus :
'We, therefore, regard the transaction by which a father makes a division of his self-acquired property between his sons as a transaction by which he, in the first instance, he nationally throws into the hotchpot his self acquired property, and then divides it between his sons, whether equally or unequally in accordance with his pleasure.'
12. It was also observed in the same decision that, in order to throw one's self-acquired properties into the family hotchpot, it was not always necessary that there should be other joint family properties available for partition.
13. In a case, M. K. Stremann v. Commissioner of Income-tax, the decision in Kisansing's case, had been referred to and followed. Certain observations in the Madras case, M. K. Stremann v. Commissioner of Income-tax were affirmed by the Supreme Court in the case Commissioner Income-tax v. M. K. Stremann. The Supreme Court observed as follows :
'We agree with the High Court that 'whether the averment in relation to the past was supported by other evidence or not, it certainly was unequivocal that the properties dealt with at the partition were treated by the volition of the assessee as the properties available for partition between the members of the joint family. It was certainly an unequivocal declaration that all the properties dealt with under that partition had been impressed with the character of joint family properties, properties belonging to the joint family of the assessee and his sons. The genuineness of the transaction itself was never in issue. The result was that at least on 19th December, 1952, antecedent to the partition, then properties became impressed with the character of joint family property. There was a partition on 19th December, 1952. Thereafter, the properties allotted to the shares of the assessee and his divided sons were held by them in severalty'.'
14. The next decision relied upon by the learned Advocate-General is the very case on which the Commissioner placed reliance, namely, C. N. Arunachala Mudaliar v. C. A. Muruganatha Mudaliar, Their Lordships of the Supreme Court observed as follows :
'The controversy arises, however, on the question as to what kind of interest a son would take in the self acquired property of his father which he receives by way of gift or testamentary bequest from him, 'vis-a-vis' his own male issue. Does it remain self-acquired property in his hands also, untrammelled by the rights of his sons and grandsons or does it become ancestral property in his hands, though not obtained by descent, in which his male issues become co-owners with him ?'
15. It is further observed therein :
'It is obvious, however, that the son can assert this equal right with the father only when the grandfather's property has devolved upon his father and has become ancestral property in his hands. The property of the grandfather can normally vest in the father as ancestral property if and when the father inherits such property on the death of the grandfather or receives it, by partition, made by the grandfather himself during his life-time. On both these Occasions the grandfather's property comes to the father by virtue of the latter's legal right as a son or descendant of the former and consequently it becomes ancestral property in his hands.
But when the father obtains the grandfather's property by way of gift, he receives it not because he is a son or has any legal right to such property but because his father chose to bestow a favour on him which he could have bestowed on any other person as well. The interest which he takes in such property must depend upon the will of the grantor. A good deal of confusion, we think, has arisen by not keeping this distinction in mind. To find out whether a property is or is not ancestral in the hands of a particular person, not merely the relationship between the original and the present holder but the mode of transmission also must be looked to; and the property can ordinarily be reckoned as ancestral only if the present holder has got it by virtue of his being a son or descendant of the original owner'.
16. In the light of the above principles, the learned Advocate-General submitted that the deed in the instant case was a deed of partition of the self-acquired properties of the father, between himself and his sons as members of a joint Hindu family. He further stated that by the process adopted by the father his self-acquired properties got impressed with the characteristics of joint family properties, and, further, on a fair and reasonable construction of all the relevant provisions and terms of the settlement deed, it would be reasonably clear that it was a document evidencing a partition of such joint family properties in respect of which the son's son would acquire a right by birth. It was, therefore, submitted that the petitioner should be assessed as a HIndu undivided family. He also submitted that during the assessment year in question all the assessees who figure as petitioner in these cases had a son or sons living, who could claim a right by birth in the properties received by them under the settlement deed.
17. We are of the opinion that the contentions of the learned Advocate General are well-founded. The order impugned in these petitions proceeded on the footing that the Supreme Court ruling cited above declares that, in every case, self-acquired property remains or continues to be absolute property whatever be the process by which another person acquires an interest therein. But that is not what their Lordships declare to be the law. What they say is that, the father has the right of disposal untrammelled by the existence of sons and that, therefore, he can either confer a complete absolute title on a son or even a stranger or impress the property with the character of join family property and divide it among himself and his sons either equally or unequally. It is, therefore, a question of ascertaining his intention in each case. In cases where he chooses the process of partition benefiting all the sons, an inference of his intention to treat the property as joint family property is obvious and inevitable because a partition in Hindu law presupposes pre-existing joint rights arising out of joint family ownership.
18. It follows from the above discussion that in the instant cases, if the settlement deed can be construed as an instrument effecting a partition between the father and his sons in respect of the self-acquired properties of the father, the necessary consequence would be that the property received by the sons would be joint family property in which their male issue would acquire a right by birth. If, on the other hand, it cannot be so construed, having regard to the effect of the deed read as a whole in the light of the surrounding circumstances relating to its execution, then the transaction may be one of individual gifts to the son. In judging the intention and the nature of the interest in the property brought about by it, the Supreme Court observed thus, in the case Arunachala Mudaliar v. Muruganatha Mudaliar :
'The material question which the court would have to decide in such cases is, whether taking the document and all the relevant facts into consideration, it could be said that the donor intended to confer a bounty upon his son exclusively for his benefit and capable of being dealt with by him at his pleasure or that the apparent gift was an integral part of a scheme for partition and what was given to the son was really the share of the property which would normally be allotted to him and his branch of the family on partition. In other words, the question would be whether the grantor really wanted to make a gift of his properties as he himself chooses, there is, strictly speaking, no presumption that he intended either the one or the other.'
19. It is convenient to summarise some of the important recitals in the settlement deed, which require consideration for the purpose of ascertaining the intention of the parties to it, as also the nature of transmission of property effected by it. The settlement deed though styled as a 'deed of settlement' purports to divide the self-acquired properties of S. L. Mannaji Rao, the father of the assessee. Indeed, in one part of the deed it is said that the members of the first and second parts shall be divided in estate that status from one another. It also refers to a deed of release executed by his son through his first wife, the occasion being the allotment to him of a portion of the self-acquired properties of S. L. Mannaji Rao. It is also stated therein that the said son, namely, S. M. Ramakrishna Rao, became divided both in status and estate, and commenced living separately from him. It is obvious from this recital that the original owner of the properties intended to put his self-acquisitions in the common hotchpot of the joint family, much earlier to the execution of the present settlement deed. The other recitals in the settlement deed make it further clear that by consent of all the parties concerned a division in status had been effected. Further, it is stated that the other female members of the family had also been provided for. After the aforesaid recitals regarding the division of status, the deed goes on to mention that a further division of the estate would be necessary to complete the division both in status and estate from one another. It would be relevant to reproduce a recital in the deed which runs thus :
'..... and so far as my above-named sons are concerned, I consider it desirable to effect a division in status among them and myself and In have obtained the consent of the adult members... and we have accordingly this day made a declaration and that on and from this day, each one of us - members of the first and second part named above - shall be divided in estate and status from one another'.
20. Thereafter, a reference to the equal division of properties and the relevant schedules to the deed, and the recitals relied upon by the Commissioner are set out. It is relevant to notice that immediately following a recital relied upon by the Commissioner for refusing the relief to the assessee, it is stated thus :
'Each of the said members of the second part shall hod and enjoy his respective shares of the properties in severally and as member of the family divided in status and estate from the rest of the members of the family'.
21. We think that this recital equalities in a material way the portion of the recital relied upon by the Commissioner in his order. If these two portions are read together, it will be seen that the word 'absolutely' has relevance to the enjoyment by one another, rather than an expression of an intention to settle the property on the son absolutely to the rights of the other members of the son's family. It may be necessary to take note of the fact that the parties to the deed belong to a Hindu Mitakshara joint family. If this background is kept in view, the recitals in the settlement deed point of a division of self-acquired properties made by a Hindu father between himself and his sons with the intention of effecting a severance of status between the sons and also a separation in estate. We are, therefore, of the opinion that the settlement deed in question was really an instrument of partition.
22. The contention on behalf of the revenue as formulated by its learned counsel, Mr. Rajasekhara Murthy, is that the settlement deed should be understood as making a series of gifts by the father in favour of his sons to be enjoyed by them absolutely, without reference to the right by birth of their children in the property. He further submitted that there was actually no declaration of the intention that his self-acquisitions had been thrown into the common hotchpot and as such the properties in question could never be said to gave been impressed with the characteristics of joint family property as a result of any such blending.
23. The contention of Mr. Rajasekhara Murthy based on the absence of a declaration that the self-acquired properties were thrown into the hotchpot is unsustainable. Such a declaration is also a matter for inference to be drawn from a scrutiny and examination of the document as a whole together with the surrounding circumstances attending its execution. We are of the opinion that no such express declaration would be necessary to impress the self-acquired property with the characteristics of a joint family property. In a decision of this court in Commissioner of Gift-tax v. Marutrarao Nayakoji Kadam it was observed as follows :
'The fact that in some of the decided cases, reference is made to declarations made by the individual concerned does not mean that formal declaration proclaiming his intention to throw his individual properties into the common hotchpotch is an essential prerequisite for a valid blending. Whether, in a given case, there is blending or not is a matter for the decision of the court on the basis of the available facts.'
24. He relied on three cases, S. Parthasarathy v. Commissioner of Income-tax, Commissioner of Income-tax v. Smt. Rama Bai and Commissioner of Income-tax v. Hadige Rangappa Setty, in support of his contention that the settlement deed in question should be considered to have effected a series of gifts made by the father in favour of his sons in respect of his self-acquired properties. He went on further to submit that, if it was considered as a gift the intention of the donor will have to be further examined. We are satisfied that none of these cases clearly or unambiguously support the contention urged by Mr. Rajasekara Murthy. All these cases are distinguishable as the decisions therein turned primarily on the construction and interpretation to be placed on the instruments effecting transmission of property.
25. In S. Parthasarathy v. Commissioner of Income-tax a father allotted houses which were his self-acquired properties to his sons and daughters. On the recitals in the deed, which was styled as a 'Pakapattiram' and judging from the clause relating to pre-emption, in addition to other circumstances, the court came to the conclusion that the father clearly intended that his sons should have the liberty to alienate the property to a stranger subject to the limitation regarding pre-emption. Since he had power of alienation, it was held that it was a transfer absolutely in favour of his son.
26. In the case, Commissioner of Income-tax v. Srimati Rama Bai, a father made a bequest by will of all his movable and immovable properties in favour of his wife with a direction that she should educate that children, maintain the family and apply the property for the well-being and prosperity of the members of the family. It was held therein that, notwithstanding the fact that there was a direction regarding the education and maintenance of the children on behalf of the family, the wife received the properties as an absolute owner, and as such she was liable to be assessed as an individual under the Income-tax Act.
27. In the case, Commissioner of Income-tax v. Hadige Rangappa Setty, a karta of a family, while dividing his self-acquired properties under a document, a styled as a partition deed, further provided that in the business conducted by him his two sons and his wife should be entitled to received a share of the profits thereof provided the sons co-operated with him in the conduct of the busine1 The contention of the assessee was that by virtue of the provision relating to the business he was entitled to be assessed only as a registered firm and not as an individual under the Income-tax Act. The court held that the recitals regarding the sharing of profits were not sufficient to prove the existence of an agreement to share profits of a business carried on by all those persons or by any of them acting for all of them, and the partition deed and the recitals therein did not have the effect of constituting a partnership in respect of the business which was to be carried on in the shop which fell to the share of the assessee.
28. We have earlier set out the various relevant recitals in the settlement deed relied upon by the assesses-petitioners in all these cases in support of their claim that what they acquired under the settlement deed was joint family property, wherein their sons would acquire a right by birth and as such they were entitled to be assessed as a Hindu undivided family under the relevant taxing statutes. On a careful consideration of the aforesaid recitals and all the relevant surrounding circumstances, we are satisfied that the settlement deed in question was only an instrument of partition wherein the father had thrown all his self acquired properties into the hotchpot, and thus impressed upon them the character of joint family properties, and, thereafter, proceeded to divide the same among his sons with the obvious intention of effecting a division both in estate and in status from one another. We hold, therefore, that the shares acquired by the sons under the settlement deed in question were joint family properties, wherein their sons and grandsons could acquire a right a birth.
29. In view of this conclusion, the fact that the assessees were being assessed as individuals up to the assessment year 1963-64, would not make any difference in so far as their present claim to be assessed as a Hindu undivided family is concerned. Nor are they estopped from taking this stand in the present assessment proceedings.
30. The Commissioner, in holding that the settlement deed conferred an absolute right on the assesses-petitioner, has committed an error of law apparent on the face of the record.
31. Consequently, the orders of the assessing authorities and also the orders in revision made by the Commissioner, in so far as they seek to deal with the petitioner as individuals for the purpose of assessing them to tax under the Income-tax and Wealth-tax Act, should be quashed. The petitioner have also sought a direction that the respondents should be directed to assessee each of the petitioner as a Hindu undivided family. In view of what has been said with regard to the main question raised, it follows that a direction should be issued as prayed for.
32. In the result, in each of these writ petitions we make an order quashing the impugned orders of the assessing authorities and the Commissioner and directing the assessing authorities to assess the petitioners in the status of a Hindu undivided family.
33. In the circumstances of the case, we make no order as to costs.