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T. R. Ekambaram and Another Vs. Controller of Estate Duty, Andhra Pradesh. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 77 of 1963
Reported in[1967]66ITR67(AP)
AppellantT. R. Ekambaram and Another
RespondentController of Estate Duty, Andhra Pradesh.
Excerpt:
.....the same, and that on her death it should devolve on his two sons, gopalakrishnan and ekambaram and their heirs in equal shares with absolute rights. both the assistant controller as well as the board of revenue found that the deceased had mortgaged his ancestral properties and received a sum of about rs. in that case also, like the case on hand the cycle business of the deceased was assessed to income-tax as hindu joint family business. ' these observations were made in spite of the fact that notices given by the income-tax department, which the appellant stated he had in his possession, were not produced and the attempt to file the assessment orders had also failed. oral evidence of the contents of the original assessment was however held to the competent, because the originals, on..........of revenue, that the property left by the deceased was the separate self acquired property and not hindu joint family property. it may be stated that the deceased died leaving a will dated 6th september, 1950, to which all the three sons appended their signatures under an endorsement : 'we have read the terms of the will and the facts stated are correct.' in this will, the deceased stated that he started his life as a poor man having had only 3 acres of inferior dry land in padi agraharam village, chengam taluk, north arcot district; that that was the only ancestral property; that as the income from the same was not enough to run a family even for a few months and even that income was precarious, he had to leave the place and seek employment elsewhere; that he had not even the means of.....
Judgment:

The question that has been referred to us by the central board of Revenue under the Estate Duty Act, 1953, is as follows :

'Whether, on the facts and in the circumstances of the case, the assessment of the estate of the deceased as that of an individual is proper and legal ?'

This question arises for consideration in proceedings under the Estate Duty Act taken in respect of the estate of one T. Ranganatha Iyer (herein after referred to as 'the deceased'), who died on 14th September, 1956, leaving behind him his sons, Sarvashri T. R. Ekambaram and T. R. Gopalakrishnan, and his eldest son, E. K. Venkatesan, who went in adoption. The first two sons, being 'accountable persons', questioned the decision of the Assistant Controller of Estate Duty, confirmed by the Central Board of Revenue, that the property left by the deceased was the separate self acquired property and not Hindu joint family property. It may be stated that the deceased died leaving a will dated 6th September, 1950, to which all the three sons appended their signatures under an endorsement : 'We have read the terms of the will and the facts stated are correct.' In this will, the deceased stated that he started his life as a poor man having had only 3 acres of inferior dry land in Padi Agraharam village, Chengam taluk, North Arcot District; that that was the only ancestral property; that as the income from the same was not enough to run a family even for a few months and even that income was precarious, he had to leave the place and seek employment elsewhere; that he had not even the means of getting a good education; that he finally came to Kurnool, serving under R. V. Arthanari Iyer, survey stone contractor, where the survey party was working, that thereafter the party was disbanded, and he started quarrying in slabs and doing business in partnership with capitalists. In paragraph 3, he stated as follows :

'Providence has been very kind to me during all these years and my business has been prospering well. I acquiring all my movable and immovable properties by my own exertions. All these properties, which I own now, are all self-acquired and they belong to me absolutely. I have full powers of disposition over those properties and no one has a share or claim over the same.'

After setting out the aforesaid, the deceased bequeathed the properties in favour of his third daughter, Kanakammal. He further stated that his first son, E. K. Venkatesan, had been adopted into Esainoor Krishna Iyers family and was only a partner with him in the South Indian Mining and Slab Company, Bethamcherla; that his third daughter, Kanakammal, was a dependent on him for the last several years, that she was without means of support, and that, therefore, in addition to the lands which he had given her by a registered deed dated July 29, 1943, he bequeathed to her the A-scheduled property to be enjoyed by her during her lifetime, without powers of alienation over the same, and that after her death it should devolve on his two sons, Gopalkrishnan and Ekambaram, and their heirs who will have absolute rights over the same, each being entitled to a half share. Then he bequeathed the B-scheduled property to his wife Radhammal, to be enjoyed by her during her lifetime without any powers of alienation over the same, and that on her death it should devolve on his two sons, Gopalakrishnan and Ekambaram and their heirs in equal shares with absolute rights. He had also set apart a sum of Rs. 6,000 to the daughter of his predeceased daughter, one Padmini. In view of the question of law that had to be determined, it is unnecessary to go into the details of the other bequests in the will.

The applicants, Ekambaram and Gopalakrishnan, contended that the deceased possessed ancestral properties in Padi Agraharam in North Arcot District in Madras State, that the deceased came to Kurnool in the year 1910 for the purpose of doing business and that he did business in partnership along with B. P. Sesha Reddy, that for the purposes of contributing towards his part of the capital of the said partnership firm, the deceased mortgaged all his ancestral property for a sum of Rs. 5,000, that the said sum was utilised partly towards meeting the debts of his brother, who had gone out in adoption, and that with the balance of about Rs. 2,757, the deceased started stone business, which he later developed. In short, their contention is that the entire property was acquired with the aid of ancestral property. They also contended that this property has been treated as joint family property during the lifetime of the deceased in his income-tax returns, where he described himself as the karta of the joint Hindu family and the income-tax department had assessed him as such, that he continued to file his returns in the same status as the karta even after the will was executed, and that after his death also, they (the applicants) continued to treat the said properties as joint family properties and filed returns, which were being accepted by the department. In support of the mortgage, they filed a Tamil deed with its English translation, in which there was a recital that for their family expenses and for contract work, the deceaseds brother had executed a pronote, that the sum received in cash on the date of mortgage amounted to Rs. 2,757-8-0 and this was also described as cash received 'for our family expenditure and contract works and for other sundry liabilities.'

The Assistant Controller stated that it is not clear whether the contract works referred to were those of the deceased or those done by his brother who went out in adoption and that it is also not clear whether any amount at all was utilised for contract works because the family expenses and other sundry liabilities appear to overwhelm the meager amount received on mortgage, which, according to the Assistant Controller, confirmed the statement made in the will; accordingly, he did not accept the contention of the accountable persons that the property was joint family property.

In appeal, the Board of Revenue confirmed the order of the Assistant Controller of Estate Duty and rejected the contention of the appellants, mostly relying on the terms of the will. The Board of Revenue also stated that, even though there was a nucleus of the Hindu joint family, the properties acquired were out of personal exertions of the deceased and he had full right not to throw the properties into the joint family pool. It further held that the fact that the deceased was declaring himself to be the karta of a Hindu undivided family, in the income-tax returns during his life time, was not evidence enough to contradict the claim made in the will and agreed to by the sons. As such, it held that the properties mentioned in the will were his self-acquired properties and were not thrown into the joint family pool.

From the statement of facts as also from the findings of the estate duty authorities, certain facts are indisputable. First, the deceased had ancestral property, which he mortgaged and obtained a loan for family expenses and for contract work. The second is that the deceased did business in stone-quarrying and earned large sums, which he was treating as the income of the Hindu joint family from 1944-45 onwards (in so far as the assessment orders have been produced) declaring the same before the income-tax authorities in the said status during his lifetime and, thereafter, the sons declared it to be so in their returns. The question is whether, having regard to the statement in the will of 1950, the property should be treated as the individual property of the deceased or as joint family property.

It is one of the presumptions of Hindu law that where it is established or admitted that the family possessed some joint property which from its nature and relative value may have formed the nucleus from which the property in question may have been acquired, the presumptions arises that it was joint property and the burden shifts to the party alleging self-acquisition to establish affirmatively that the property was acquired without the aid of the joint family. Secondly, that even though the property may be throw it into the common hotchpot and blend it by the operation of the doctrine of blending and give it the character of joint family property. A clear intention to waive his separate rights must, however, be established. These propositions admit of no doubt, nor Mr. Kondaiah for the department in any way challenges these basic principals. That there is sufficient nucleus for the deceased to start his business cannot be gainsaid. Both the Assistant Controller as well as the Board of Revenue found that the deceased had mortgaged his ancestral properties and received a sum of about Rs. 2,757 for family expenses and for contract business. Both the authorities say that they do not know whether the contract business is that of the deceased or of his brother who went out in adoption. This can only be determined by the manner in which the deceased treated the subsequent acquisitions. The deceased was treating them as belonging to the joint family property over a period of years, and the acceptance of such returns by the income-tax department, a sister department, coupled with the continued treatment of that property as joint family property even after the execution of the will, in which the deceased sought to treat it as separate property, would, without doubt, give rise to a presumption that it was not only joint family property acquired with sufficient ancestral nucleus with the aid of which the business of stone-quarrying was started, but also that he, on his own volition, treated it as joint family property and solemnly declared, in statements which he was bound under the law to make, his intention to voluntarily abandon his separate claims over it.

It may be noticed that under the Hindu law no formalities are necessary for impressing any self-acquired property belonging to a member of the joint family with the character of joint family property or to throw it into the common hotchpot : see R. Subramania Iyer v. Commissioner of Income-tax. Rajagopala Ayyangar J. observed in that case :

'Under the Hindu law, there is no necessity for joint family property to exist in order that there may be a joint family. The assessee and his son undoubtedly constitute members of a joint Hindu family. They might have started with no ancestral nucleus or other joint family property but there was nothing to prevent the assess from impressing upon any self-acquired property belonging to him the character of joint family property. No formalities are necessary in order to bring this about and the only question is one of intention on the part of the owner of the separate property to abandon his separate rights and invest it with the character of joint family property.'

In Commissioner of Income-tax v. M. K. Stremann Sikri J., agreeing with the finding of the High Court of Madras, held that the facts that the partition proceeded on the basis that the self-acquired properties were made available for partition along with the only item of joint family property, itself constituted proof that, antecedent to the partition, however short the interval, there was blending of the self-acquired properties of the assessee with his ancestral joint family property. At page 66, the learned judge observed :

'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 the partition had been impressed with the character of joint family properties, properties belonging to the joint family of the assessee and his son.'

The two circumstances, viz., that there was sufficient nucleus with the aid of which the stone business was started and the course of conduct of the deceased in treating the property as joint family property without doubt raise a presumption that the property from the inception, at any rate from 1944-45 was treated as joint family property. And once it was either joint family property by reason of the nucleus employed in the business or in its being voluntarily treated as joint family property, the mere statements in the will in 1950 cannot reconvert what has acquired the character of joint family property into separate property. This conclusion will be further reinforced if we consider the possibility of coparceners coming into existence, viz., his sons sons, whose rights cannot be affected by anything their fathers may have done by subscribing their signatures to the statement contained in the will. It is equally a clear proposition of Hindu law that sons and sons sons take an interest by birth in Hindu joint family property. Once it was impressed with that character, it cannot be alienated except for certain purposes recognised by the Hindu law, or treated as separate property. In Pearey Lal v. Nanak Chand the privy Council was considering the case of a joint family consisting of the father and his son, the father inheriting nothing and there being no nucleus of ancestral property. It was held that the onus is on the son to show that he was associated in the business, started by the fathers initiative and carried on mainly or wholly under the fathers direction, in such a manner as to raise a reasonable inference that the father intended to make and did make the business a joint family business, that this onus is heavy where there is no ancestral property, and that if it is proved that the business had at some time been made a joint family business, no subsequent change of intention on the part of the father and no unilateral act of his could undo what had once been done. In that case also, like the case on hand the cycle business of the deceased was assessed to income-tax as Hindu joint family business. Lord Normand at page 110 observed :

'But as no explanation has been offered by the appellant, the fact that the assessment was made on the joint family goes far to establish the respondents case.'

These observations were made in spite of the fact that notices given by the income-tax department, which the appellant stated he had in his possession, were not produced and the attempt to file the assessment orders had also failed. Oral evidence of the contents of the original assessment was however held to the competent, because the originals, on the admission of the appellant, have not been preserved, and, in the circumstances, it is the best evidence that is in the respondents power to tender. In Mulam Chand v. Kanchhendilall a Bench of the Madhya Pradesh High Court held that once separate property has been treated as joint family property and it has acquired the character of joint family property, no member of the family has a right to dispose of the joint interest by a will. At pate 306, the Bench observed.

'Even if the bulk of the property was acquired by the sons of Balle by their own exertions as alleged by the defendants, they had evidently blended it with the estate left by their father, though it was small. This is clear from the fact that the members of the family had themselves treated it as joint family property from which they took share from time to time whenever they separated themselves from the family. Sukkelal had, therefore, no right to dispose of his joint interest by will.'

These judgments are in consonance with the general principles of Hindu law and we, therefore, hold that once the deceased had treated the income and the property, whether he acquired it from self-exertions or from out of the ancestral nucleus as joint family property and impressed it with the character of joint family property, he was precluded thereafter from treating it as separate property or disposing it of by a will. The fact that he disposed it of by will does not by itself make what was joint family property a separate property.

Our answer to the question, therefore, is in the negative and against the department, with costs. Advocates fee Rs. 250.

Question answer in the negative.


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