1. This is a reference under section 66(1) of the Indian Income-tax Act, 1922, which will be hereinafter referred to as the Act.
2. The question of law referred for the opinion of this court is : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that registration should be granted to the firm.'
3. The facts material for the purpose of this case may be stated thus : One Seshmull was the son of Roopchand; they were the only two members of their family; the father and the son got divided some time prior to November 15, 1936; on November 16, 1936, they entered into a partnership to carry on the very business that their family was carrying on earlier; Seshmull died on September 15, 1955, leaving behind him his widow Anoop Kunwar; he had no children; Roopchand died on November 29, 1955, leaving behind him his widow, Gattu Bai; after the death of Roopchand, Gattu Bai and Anoop Kunwar entered into a partnership; that firm was registered under section 26A of the Act; on October 17, 1956, Anoop Kunwar adopted Jugraj as a son to her deceased husband; the Hindu Succession Act came into force on June 17, 1956; Gattu Bai died on August 9, 1959; on September 5, 1959, a partnership was entered into between Jugraj and his adoptive mother, Anoop Kunwar; that partnership applied for registration under section 26A of the Act; that application was rejected by the Income-tax Officer and the order of the Income-tax officer was affirmed by the Appellate Assistant Commissioner holding that Anoop Kunwar had no separate interest in the assets of the partnership; the Income-tax Appellate Tribunal reversed the order of the Appellate assistant Commissioner and directed that the firm be registered. This reference was made at the instance of the Commissioner.
4. The parties before us are governed by Hindu Mitakshara law. The adoption of Jugraj to Seshmull which took place on October 17, 1956, in law dates back to the date of death of Seshmull on September 15, 1955. Therefore, it must be deemed that Jugraj was in existence as the son of Seshmull at the time of death of the latter. This question is more in controversy. There is no need to refer to any authority on this point. If any authority is needed, reference may be usefully made to the decision of the Supreme Court, in Krishnamurthy v. Druvaraj.
5. It is not disputed before us that the estate taken by Gattu Bai on the death of her husband Roopchand on November 29, 1955, became her absolute estate on the coming into force of the Hindu Succession Act on June 17, 1956. After that date Gattu Bai was the absolute owner of that estate in view of section 14(1) of the Hindu Succession Act. It is also not disputed before us that Gattu Bai's estate devolved solely on Jugraj on her death on August 9, 1959. After August 9, 1959, Jugraj was the owner of not only the estate of Gattu Bai, but also that of his adoptive father, Seshmull, subject to the rights obtained by Anoop Kunwar under section 3(2) of the Hindu Women's Right to Property Act (Act 18 of 1937). As Seshmull had died prior to the coming into force of the Hindu Succession Act, his widow, Anoop Kunwar, did not become his heir under the provisions of the Hindu Succession Act. But in view of section 3(2) of Act 18 of 1937, on the death of Seshmull his share in the joint family property had devolved on her, though, as the law stood then, she would have had only a life interest therein. The estate that had devolved on her is a statutory one. She had obtained a vested right in the same. The contention of Mr. Srinivasan, the learned counsel for the assessee, is that that estate inherited by Anoop Kunwar became her absolute estate after the coming into force of the Hindu Succession Act, in view of section 14(1) of that Act. On the other hand, it is contented by the learned counsel for the department that, though Anoop Kunwar had obtained a right to claim the share of her husband in the family properties, she having not claimed the same, consequently, she having not been divided in status from her adopted son, she could lay no claim for a separate share in the family property and, hence, the family can be represented only by Jugraj, its karta. We have now to consider which one of these contentions is correct.
6. The essential question for decision in this case is, whether the properties with which we are concerned in this are solely of the ownership of Jugraj or whether Anoop Kunwar has an independent share of her own in the same. If she has a separate interest in those properties and not merely an interest as a member of a Hindu undivided family, then the partnership entered into between her and her adopted son is valid.
7. We have earlier seen that on the death of Seshmull on September 5, 1955, his widow, Anoop Kunwar, obtained in the family properties the same interest as her husband had on the date of his death. Because of the adoption of Jugraj, it must be deemed that at the time of the death of Seshmull there were two coparceners in the family of Seshmull, namely, Seshmull and Jugraj. Each of them had a half share in the family properties. The share of Seshmull devolved on Anoop Kunwar. It must be remembered that Anoop Kunwar was not a coparcener in the family of her husband though she was a member of that family. The interest that had devolved on her is one that has been created by the statue. It had nothing to do with Hindu law or with rules governing the Hindu coparceners. Hence, the Hindu law conception of division of status is inapplicable to such a case. The estate that devolved on her became vested in her immediately her husband died. It is true that in the estate that devolved on her, she had originally only a life interest. But the question is whether she has now become a full owner of the same in view of section 14(1) of the Hindu Succession Act.
8. Section 14(1) of the Hindu Succession Act reads :
'14. (1) Any property possessed by a female Hindu, whether acquired before or after the commencement of this act, shall be held by her as full owner thereof and not as a limited owner.
Explanation. - In this sub-section 'property' includes both movable and immovable property acquired by a female Hindu by inheritance or devise, or at a partition or in lieu of maintenance or arrears of maintenance, or by gift from any person, whether a relative or not, before, at or after her marriage, or by her own skill or exertion, or by purchase or by prescription, or in any other manner whatsoever, and also any such property held by her as stridhana immediately before the commencement of this Act.'
9. Section 14(1) is of wide import. Every type of property 'possessed' by female Hindu on June 17, 1956, became her absolute property in whatsoever manner she might have acquired it, the only necessary requisites being that she must have acquired it and possessed it on the date the Hindu Succession Act came into force. It is clear that Anoop Kunwar acquired the share of her husband in his family properties on his death. Therefore, the question is whether she 'possessed' the same on June 17, 1956.
10. What exactly is the meaning of the word 'possessed' found in section 14(1) of the Hindu Succession Act Does it refer to physical possession or possession in law It is true, as contended by the learned counsel or the department, that the physical possession of the properties of the family of Seshmull is likely to be with Jugraj. It is not the case of the applicants that there was any division between them. We may take it that Jugraj is in possession of all the properties of the family. Therefore, we have to see whether the possession contemplated by section 14(1) of the Hindu Succession Act includes also possession in law. In that event, Anoop Kunwar must be deemed to have been in possession of the property that devolved on her on the death of her husband.
11. The expression 'possessed' found in section 14(1), has been the subject-matter of interpretation in numerous decisions. In view of the decision of the Supreme Court in Kotturswami v. Veeravva, it is unnecessary to refer to any other decisions on that point. Therein the Supreme Court held held that the word 'possessed' in section 14 is used in aboard sense and in the context means that estate of owning or having in one's hand or power. It further observed that the opening words 'property possessed by a female Hindu' obviously mean that, to come within the purview of the section, the property must be in the possession of the female concerned at the date of commencement of the Act; the possession might have been either actual or constructive or in any form recognized by law; but unless the female Hindu, whose limited estate in the disputed property is claimed to have been transformed into absolute estate under this particular section, was at least in such possession, taking the word 'possession' in that widest connotation, when the Act came into force, the section would not apply, Imam J., who spoke for the court, observed as follows in paragraph 11 (page 581 of the report) of the judgment :
'In the case before us, the essential question for consideration is as to how the words 'any property possessed by a female Hindu, whether acquired before or after the commencement of this Act' in section 14 of the Act should be interpreted. Section 14 refers to property which was either acquired before or after the commencement of the Act and that such property should be possessed by a female Hindu. Reference to property acquired before or after the commencement of the Act certainly makes the provisions of the section retrospective, but even in such a case the property must be possessed by a female Hindu at the time the Act came into force in order to make the provisions of the section applicable. There is no question in the present case that Veeravva acquired the property of her deceased husband present case that Veeravva acquired the property of her deceased husband before the commencement of the Act. In order that the provision of section 14 may apply to the present case it will have to be further established that the property was possessed by her at the time the Act came into force. It was the case of the appellant that the estate of Veerappa was in actual possession of the second defendant and not Veeravva at the relevant time. On behalf of the respondent it was urged that the words 'possessed by' had a wider meaning than actual physical possession, although physical possession may be included in the expression. In the case of Venkayamma v. Veerayya, Viswanatha Sastri J., with whom Satyanarayana Raju J. agreed, expressed the opinion that 'the word 'possessed ' in section 14 refers to possession on the date when the Act came into force. Of course, possession referred to in section 14 need not be actual physical possession or personal occupation of the property by the Hindu female but may be possession in law. The possession of a licensee, lessee or a mortgagee from the female owner or the possession of a guardian or a trustee or an agent of the female owner would be her possession for the purpose of section 14. The word 'possessed' is used in section 14 in a broad sense and in that context possession means the state of owing or having in one's hands or power. It includes possession by receipt of rents and profits.' The learned judges expressed the view that even if a trespasser were in possession of the land belonging to a female owner, it might conceivably be regarded as being in possession of the female owner, provided the trespasser had not perfected his title. We do not think that it is necessary in the present case to go to the extent to which the learned judges went. It is sufficient to say that 'possessed' in section 14 is used in a broad sense and in the context means the state of owing or having in one's hand or power. In the case of Gostha Behari v. Haridas Samanta, P.N. Mookherjee J. expressed his opinion as to the meaning of the words 'any property possessed by a female Hindu' in the following words :
'The opening words 'property possessed by a female Hindu' obviously mean that to come within the purview of the section the property must be in the possession of the female concerned at the date of the commencement of the Act. They clearly contemplate the female's possession when the Act came into force. That possession might have been either actual or constructive or in any form recognized by law, but unless the female Hindu, whose limited estate in the disputed property is claimed to have been transformed into absolute estate under this particular section, was at least in such possession, taking the word 'possession' in its widest connotation, when the Act came into force, the section would not apply.' In our opinion, the view expressed above is the correct view as to how the words 'any property possessed by a female Hindu' should be interpreted. In the present case, if the adoption was invalid, the full owner of Veerappa's estate was his widow, Veeravva, and, even if it is assumed that the second defendant was in actual possession of the estate, his possession were merely permissive and Veeravva must be regarded as being in constructive possession of it through the second defendant.'
12. In Subhalakshmi Ammal v. Ramalakshmi Ammal, Ramamurti J. held that 'the words 'possessed by a female Hindu' in section 14 of the Hindu Succession Act have been used in a very wide and broad sense, and in the context of the section the words mean the state of owning or having in one's own hand or power. Possession under the section the words mean the state of owning or having in one's own hand or power. Possession under the section need not be actual physical possession or personal occupation of the property by the female. It is used in a broad comprehensive sense, and includes the right to possession. On the death of a Hindu widow having rights under the Hindu Women's Right to property Act after the coming into force of the Hindu Succession Act, her heirs will take the property. The widow need not have worked out her rights by securing a partition by metes and bounds, in order to come within section 14 of the Hindu Succession Act.' We are in respectful agreement with this view. The same view was taken by a bench of the Bombay High Court in Smt. Indubai v. Vyankati Vithoba Sawadha. Therein the court came to the conclusion that though the share of a Hindu widow under Act 18 of 1937, had not been separated from the remaining family property, she obtained absolute interest in the same on the coming into force of the Hindu Succession Act. Their Lordships father held that she became the owner of the share that devolved on her after the death of her husband even without claiming a partition of the same and she must be regarded as being in possession of her estate in the family property, though there was no division by metes and bounds. It was father observed in that decision, that 'by reason of section 14 of the Hindu Succession Act her limited estate became transformed into full estate with all its incidents including that of its passing to her heirs in accordance with section 15 of the Act.' To repeat, the estate obtained by a Hindu widow under section 3(2) of Act 18 of 1937 is a statutory estate. It is defined and fixed. It is not affected by subsequent births or deaths in the family. The interest of the widow in the property of the family of her husband is determined as on the date of death of her husband. It does not fluctuate as a result of any change in the composition of the family. The rule of division of status is inapplicable to that estate. The separation of that estate need not be preceded by any claim for division. On the death of the widow, her estate devolves on her heirs.
13. From our above conclusion, it follows that Seshmull's share in family properties devolved on Anoop Kunwar on the death of the former on 15th September 1955. But at that time she obtained only a life interest in the same. But she became the full owner of that interest on 17th June, 1956. Hence, when she and her adopted son Jugraj entered into a partnership on 5th September, 1959, she had a definite interest of her own in the partnership assets. That being the position, the partnership entered into is valid partnership. That would be so even if she had only a life interest in the estate taken by her.
14. For the reasons mentioned above, our answer to the question referred to us is that, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration should be granted to the firm.
15. The assessee is entitled to his costs of this reference. Advocate's fee Rs. 250.