KUMARAYYA J. - The Income-tax Appellate Tribunal, Hyderabad, acting under section 66(1) of the Indian Income-tax Act, 1922, has referred the following question for the decision of this court :
'Whether the entire income from the property and money-lending in this case had been correctly assessed in the status of a Hindu undivided family ?'
The facts giving rise to this question may be shortly stated : One Atyam Subbiah of Palacole owned extensive properties. He was 70 and had no male issue. The only issue that he then had was a daughter, one year old, by his wife, Nagarathnamma, who was alive. He had a great circle of relations and friends. Most of them became the objects of his bounty under the will dated September 4, 1938, which was his last testament. In that will he expressed his intention to take Chinna Sita Ramayya, son of Saladi Mamilayya, in adoption during his lifetime and directed that, in case he died without taking him in adoption, all his properties, movable and immovable, except the properties mentioned in schedules A, B and C, shall devolve on him after his death. He authorised his wife to take the said boy in adoption if she so chose, and no other. The testator died before he could adopt the boy. On his death he demised property became vested in Chinna Sita Ramayya as per the terms of the will. He was, however, later adopted by the widow. He married Padmavathi Rani and had a son by her. He did not live long. He died on March 30, 1948, leaving surviving his widow, Padmavathi Rani, and one son, Atyam Subrahmanyam. The widow was managing the property left by him. For the assessment years 1958-59, 1959-60 and 1960-61, for which the accounting years were the financial years of the respective periods, two returns were filed by the mother, one as a guardian of the minor son for his share in the income and the other as co-owner being the widow of Chinna Sita Ramayya. The status in either was shown as individual. It was claimed that the minor as the son was entitled to a half share in the property and assets of the deceased and the mother as the widow of the deceased in possession of his property had absolute interest in the other half by reason of the provisions of the Hindu Womens Rights to Property Act, 1937, read with section 14 of the Hindu Succession Act, 1956. Accordingly, the entire income was entered in even halves in the returns filed. The Income-tax Officer refused to accept the status of both the minor and the mother as 'individual' and held that they were members of a Hindu undivided family and consequently brought to tax the total income of the entire property in the very returned filed on behalf of the minor considering him as the sole surviving coparcener. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer that the status of the assessee was that of a Hindu undivided family and upheld the assessment. On further appeal, the Appellate Tribunal held that Chinna Sita Ramayya constituted a joint family with his son and after his death the estate in the hands of the widow and the minor son constituted joint Hindu family property and that, as no partition has taken place, the son was rightly assessed as a Hindu undivided family. The matter has now on the requisition of the assessee come before us.
The two main points that arise for consideration are :
1. What is the nature of the property in the hands of Sita Ramayya obtained by him under the will 2. What is the nature of the said estate after his death in the hands of his widow and the son
From the facts stated above, it is clear that the property in question originally belonged to Atyam Subbiah who bequeathed the same to Chinna Sita Ramayya. It is not clear whether the said property was his self acquisition or whether he was in possession thereof as the sole surviving coparcener. But for our purposes it makes no difference whether it is the one or the other as the property has devolved on Chinna Sita Ramayya long before he was adopted. We may recall here the observations of the Privy Council in Krishnamurthy Ayyar v. Krishnamurthy Ayyar, which are to the following effect :
'When a disposition is made inter vivos by one who has full power over property under which a portion of that property is carried away, it is clear that no rights of a son who is subsequently adopted can affect that portion which is disposed of. The same is true when the disposition is by will and the adoption is subsequently made by a widow who has been given power to adopt. For the will speaks as at the death of the testator, and the property is carried away before the adoption takes place.'
The legatee indeed is no other than the person who has been subsequently adopted. But, on the death of the testator, the property became vested in him beyond recall. Subsequent adoption cannot undo the effect thereof. Therefore, his right, title and interest in the said property cannot inevitably be traced to any event apart from the will. The nature of the property would, therefore, be his separate property and not the ancestral or joint family property. The same would be the result if the property was the self-acquisition of Atyam Subbiah. Such property in the hands of the legatee does not become ancestral either on a son being born to him, for it is not the property that has come from an ancestor either by reason of partition or by inheritance. It cannot be deemed to be a gift or bequest made in terms to the son either, for it was made and even came into force when such relationship between the testator and legatee did not exist at all. Even if it were a bequest to a son, the express words of the bequest indicate an intention that it shall be held by him for his benefit. The testator had in his will clearly stated that if the adoption does not take place during his lifetime excepting the bequests comprised in schedules A and C, dwelling house and properties in schedule B, all the rest of the properties, movable and immovable, shall devolve on the said Chinna Sita Ramayya, with powers of gift and sale. It is clear that the intention of the testator was to give that property exclusively to Chinna Sita Ramayya with complete and unfettered powers of disposition and enjoyment. It was not the intention of the testator that the bequest will be for the benefit of the family. No doubt, in the gift the adopted son is directed to perform the marriage of the daughter and pay her Rs. 10,000, but all that was to be done out of family funds. There is nothing to indicate that these family funds could be connected with income of the property bequeathed to him (Chinna Sita Ramayya). Judged in this way also, the bequest exclusively was for the benefit of the legatee. So, then, even if it were a bequest to the son, the male issue of such a son does not acquire an interest in that property by birth. The Supreme Court in C. N. Arunachala Mudaliar v. A. Muruganatha Mudaliar observed that a Mitakshara father has absolute right of disposition over his self-acquired property to which no exception can be taken be his male descendants. On the question whether such property, if given by gift or bequest to his own son, would constitute in the hands of the donee or legatee ancestral property so that his son on that account may claim right by birth, their Lordships observed thus :
'.... a Mitakshara father has complete powers of disposition over his self-acquired property, it must follow as a necessary consequences that the father is quite competent to provide expressly, when he makes a gift either that the donee would take it exclusively for himself or that the gift would be for the benefit of his branch of the family. If there are express provisions to that effect, either in the deed of gift or a will, no difficulty is likely to arise and the interest which the son would take in such property would depend upon the terms of the grant. If, however, there are no clear words describing the kind of interest which the donee is to take, the question would be one of construction and the court would have to collect the intention of the donor from the language of the document taken along with the surrounding circumstances in accordance with the well-known canons of construction.
Thus it is clear that even if the gift or bequest was to a son, it does not automatically become the ancestral property on a son being born to him. The intention of the donee or testator would determine the issue. It follows from the above discussion that the testator had bequeathed certain property to Chinna Sita Ramayya which property the latter had to take in case the testator did not adopt him during his lifetime. It was not therefore a bequest to a son but was made irrespective thereof. The powers over the property given to him were unfettered. The property thereof in the hands of Chinna Sita Ramayya was not ancestral property in relation to his son. If that be so, it is indisputable that, on his dying intestate, his widow got under section 3(1) of Act 18 of 1937 (The Hindu Womens Rights of Property Act as amended by Act 11 of 1938) the same share as the son. Of course, her interest was a limited interest known as Hindu Womens estate under that Act but on account of the radical change in the law introduced by 14 of the Hindu Succession Act, 1956, her limited interest was changed to absolute right by reason of her possession on the date of the latter Act. The expression 'possessed' used in the initial part of section 14 refers to the possession on the date when the Succession Act came into force. Such possession may be actual or constructive or may be what is described as possession in law. It cannot be disputed that she was in actual possession of the property both as a guardian and as a co-owner. It is on this basis that the widow and the minor both have filed their returns as individuals and not as Hindu undivided family. The Income-tax authorities have rejected the claim on the basis that the property was the joint family property and what the widow had got was only the interest that her husband himself had in that property within the meaning of section 3(2) of the Act 18 of 1937, which interest is indeterminate until actual partition takes place. It is no doubt true that the interest contemplated by section 3(2) of the Hindu Womens Rights of Property Act is a fluctuating one and is liable to increase or decrease according as there are deaths in or additions to the members of the family or according as there are accretions to or diminutions of the property, and the quantum or interest to which a Hindu widow is entitled under section 3(2) of the Hindu Womens Rights of Property Act, 1937, is to be determined as on the date on which she seeks to enforce partition under sub-section (3) of section 3. But in the view that we have taken as to the nature of the property that the property is not the joint family property, it is unnecessary for us to deal with this aspect of the case, as it is sub-clause (1) of section 3 and not sub-clause (2) that is relevant for our purpose. Having regard to the clear wording of section 3(1), we should hold that the widow has got equal share with her minor son in the property left by Chinna Sita Ramayya under the Hindu Succession Act. The share is thus defined and ascertainable and it has become her absolute property by reason of section 14 of the Hindu Succession Act. It may be seen that the property the income whereof was assessed to tax consists of immovable property, bank deposits, securities and money-lending assets, in which the widow has equal share as a co-owner. We are of the view that the assessment in the status of a Hindu undivided family is not correct. We answer the question accordingly in the negative. The assessee will be entitled to the costs. Advocates fee is fixed at Rs. 200.
Question answered in the negative.