DIXIT C.J. - This is a reference under section 27(1) of the Wealth-tax Act, 1957, at the instance of the assessee, Seth Narsinghdas Kanhaiyalal of Jabalpur. The Appellate Tribunal has posed before us the following questions :
'Whether, on the facts and in the circumstances of the case,
(a) the value of the properties left by the assessees mother and which properties were given to her under the registered partition deed, dated October 3, 1955, executed by and between the members of the assessee Hindu undivided family; and
(b) the amount of Rs. 1,56,471 received by the assessee from the Government in part payment of the compensation in respect of the land and properties acquired by the Government,
have been rightly included in the net wealth of the assessee ?'
The material facts are that at the time of a partition effected between the assessee, his wife and his two sons by a registered deed dated the 3rd October, 1955, Smt. Ramkunwarbai, the assessees mother, was given one thousand shares of the Perfect Potteries Co. Ltd., Jabalpur, and some land situated in Mankhedi, Tehsil Patna, District Jabalpur, for her maintenance. The material portion of the partition deed dealing with this matter ran as follows :
'I am a Marwadi Vaish following Vallabh Kul Sanuday Principles. I am governed by the Mitakshara Act which is applicable to Hindus of our community. Hence I am responsible for looking after my mother alone during her lifetime about which I have always been vigilant. Therefore I have transferred 1,000 preference shares of the Perfect Pottery Co. Ltd., Jabalpur, in her name at the time of partition of the movable property with her consent and now by virtue of this agreement I further give her the land measuring 102.39 acres in village Mankhedi, Tehsil Patna, District Jabalpur, the yearly rent of which is Rs. 150. She may utilise income of these properties given to her for her maintenance during her lifetime or may give away for the religious cause as she may desire. During her lifetime no co-sharers will have any kind of right or connection whatsoever on these properties given to her by me. I feel these properties given to may respected mother is reasonable according to the standard of living and dignity of our family and I am confident no co-sharer will have any sort of objection in this regard.'
The value of these one thousand shares used to be included in the computation of net wealth of Smt. Ramkunwarbai for purposes of wealth-tax assessment. After her death on 20th October, 1960, the Wealth-tax Officer included the value of these shares in the net wealth of the assessee, Seth Narsinghdas Kanhaiyalal, for assessment of wealth-tax in respect of the assessment year 1962-63, the valuation date being 27th July, 1961. The Wealth-tax Officer rejected the contention of the assessee that the properties which were given to Smt. Ramkunwarbai at the time of partition, having been given to her only for the purpose of her maintenance, reverted back to the defunct Hindu undivided family of the assessee, his wife and sons, and not to the assessee, Seth Narsinghdas, in his individual capacity, and, therefore, the value of the shares could not be included in the net wealth of the assessee. The contention was rejected by the Appellate Assistant Commissioner of Wealth-tax and the Appellate Tribunal also, in the appeals preferred by the assessee.
In 1942, certain properties belonging to the assessee were first requisitioned by the Government. They were later on acquired in 1956, under the Requisitioning and Acquisition of Immovable Property Act, 1952, and the Rules framed thereunder. The assessee made a claim that as he was the owner of the property the Government should pay him compensation of Rs. 13,62,536 in respect of the property acquired. By an agreement dated the 4th July, 1960, concluded between the assessee and the Government, the assessee was paid Rs. 1,56,471 'as compensation for the said property pending agreement as to, or determination of, the amount payable as compensation to the owner.' The amount was received by the assessee in July, 1960. Clause 3 of this agreement provides that :
'If it hereafter transpires that the owner is not entitled to the compensation payable in respect of the said property, or if the Government has to pay any compensation to any other person the owner shall refund to the Government the payments made hereunder and shall otherwise indemnify the Government against any loss or damage suffered by the Government by reason of any fault or defect in his title as represented by him without prejudice to any other remedies for the enforcement of any refund and indemnity, the Government may recover any sum payable by way of refund and indemnity as arrears of land revenue.'
The Wealth-tax Officer included by the amount of Rs. 1,56,471 also in the net wealth of the assessee for the relevant year. The assessee claimed that the amount of Rs. 1,56,471 received by him was really a liability, inasmuch as his claim for compensation still remained unascertained and, therefore, should as a part of his total liability, be excluded from the computation of his net wealth. This claim was rejected by the Wealth-tax Officer as well as by the Appellate Assistant Commissioner and the Appellate Tribunal before whom it was repeated in appeals.
Taking first the question of inclusion of the value of one thousand shares in the net wealth of the assessee, Shri Dabir, learned counsel for the assessee, argued that under the partition deed dated the 3rd October, 1955, what was given to Smt. Ramkunwarbai was only the usufruct of one thousand shares and other properties for her maintenance; that even after the partition deed those properties continued to be the properties of the Hindu undivided family and, consequently, after the death of Smt. Ramkunwarbai on 20th October, 1960, the shares and the landed property reverted to the Hindu undivided family; and that being so, they could not be included in the wealth-tax assessment of Seth Narsinghdas as an individual, relying on Jamnabai v. Vasudeo Sagarmal and Sheo Narain v. Janki Prasad learned counsel proceeded to say that in the partition between Narsinghdas, his wife and his sons, Smt. Ramkunwarbai was not entitled to a share; and that the one thousand shares and the landed instrument of partition deed and as that deed prescribed a restricted estate in the property given to her thereby, section 14(2) of the Hindu Succession Act, 1956, applied, so as to rule out the operation of sub-section (1) of section 14 of that Act making her the full owner of the properties given to her under the partition deed. It was contended that, as Smt. Ramkunwarbai did not at any time hold the property in question as full owner thereof, it reverted to the defunct Hindu undivided family after her death.
In reply, Shri Adhikari, learned counsel appearing for the department, said that the terms of the partition deed clearly showed that one thousand shares of the Perfect Potteries Co. Ltd. and some land were given to Smt. Ramkunwarbai absolutely; and that Smt. Ramkunwarbai got not merely the right to enjoy the income of the properties but the corpus itself. It was said that even if paragraph 3 of the partition deed were to be construed as giving to Smt. Ramkunwarbai a right to enjoy the properties only during her lifetime, still, whether Smt. Ramkunwarbai was or was not entitled to a share in the partition that took place between her son, Seth Narsinghdas, and his wife and sons, in either case by virtue of section 14 of the Hindu Succession Act, 1956, Smt. Ramkunwarbai became the full owner of the properties; that, therefore, the shares did not revert to the joint Hindu family; and that under section 15 of the Hindu Succession Act, 1956, Seth Narsinghdas, as the son of Smt. Ramkunwarbai, inherited the shares after her death.
In our judgment, it is plain from the language of paragraph 3 of the partition deed and the dispositive words employed therein that at the time of partition between Seth Narsinghdas, his wife and his sons, Smt. Ramkunwarbai got one thousand shares of the Perfect Potteries Co. Ltd. and some land absolutely and not merely the right to enjoy the income and profits of the properties given to her. That Smt. Ramkunwarbai got not merely the right to enjoy the usufruct but the corpus itself becomes clear enough from the expressions : 'Therefore, I have transferred 1,000 preference shares of the Perfect Pottery Co. Ltd., Jabalpur', and 'now by virtue of this agreement I further give her the land'. It is also worthly of note that after the partition Smt. Ramkunwarbais name was entered in respect of the shares and the land given to her and the value of the shares was included in the wealth-tax assessment of Smt. Ramkunwarbai. The contention of the learned counsel for the assessee that the shares and some land were only set apart by the joint family for the maintenance of Smt. Ramkunwarbai and that they continued to remain the joint family property and Smt. Ramkunwarbai merely enjoyed the usufruct thereof, cannot, therefore, be accepted.
Now, in paragraph 3 of the Partition deed no words are to be found restricting or cutting down the interest of Smt. Ramkunwarbai in the properties given to her. There is no presumption that, when a grant of some property is made to a Hindu female, she gets only a limited estate. There must be express words in the front indicating that it was to enure for the lifetime of the female. This is clear from the decisions of the Supreme Court in Ram Gopal v. Nand Lal, and Nathoo Lal v. Durga Prasad. In those cases, it has been stated that there is no warrant for the proposition that when a grant of an immovable property is made to a Hindu female, she does not get an absolute or alienable interest in such property, unless such power is expressly conferred upon her. The position is no different in the case of movable property given to a Hindu female in a partition. No doubt, paragraph 3 of the partition deed mentioned that Smt. Ramkunwarbai could utilise the income of the properties given to her 'for her maintenance during her lifetime or may give away for the religious cause as she may desire.' But this was only the purpose of giving the properties to her. As pointed out by the Supreme Court in Ram Gopal v. Nand Lal. and by the Privy Council in Rai Bishunath Prasad Singh v. Rani Chandika Prasad Kumari, the purpose of the grant cannot by itself restrict or cut down to life interest an estate taken by the female in whose favour the grant was made. The desire to provide maintenance would only show the motive which prompted Seth Narsinghdas to give the property that he did to Smt. Ramkunwarbai. But it cannot be read as a measure of the extent of Smt. Ramkunwarbais right in the property. If, as we think, Smt. Ramkunwarbai got one thousand shares and the land absolutely, then the shares really become the property of her son, Seth Narsinghdas, after Smt. Ramkunwarbais death.
Even if paragraph 3 of the partition deed is construed as meaning that under that instrument, Smt. Ramkunwarbai took the property given to her not as full owner but as a limited owner, still, as will be shown presently, she became the full owner of the property by virtue of section 14 of the Hindu Succession Act, 1956. Before examining section 14, it is necessary to consider whether Smt. Ramkunwarbai was entitled to a share in the partition that took place between her son, Seth Narasingdas, his wife and his sons. On the question whether a paternal grandmother is entitled to a share when a partition takes place between her son and his sons, divergent views have been expressed by the High Courts of Allahabad, Bombay, Calcutta and Patna. It has been held in Sheo Narain v. Janki Prasad and Jamnabai v. Vasudeo Sagarmal that she is not entitled to a share. The view of the High Courts of Calcutta and Patna, as expressed in Badri Roy v. Bhugwat Narain Dobey and Krishna Lal Jha v. Nandeshwar Jha is that she is so entitled. It is not necessary to examine all these decisions. So far as this court is concerned, the view taken in Rambhau Krishnajee v. Bala Punjaji. where, following the decision in Badri Roy v. Bhugwat Narain Dobey it has been held that the paternal grandmother is entitled to a share in a partition between her son and his sons, must be followed unless there are cogent reasons for departing from it. We see no such reason. In our judgment, the text of Vyas that 'fathers sonless wives shall be made equal sharers as also the paternal grandmother, for they are declared to be equal to mother' clearly supports the view expounded in Badri Roy v. Bhugwat Narain Dobey and Rambhau Krishnajee v. Bala Punjaui. It may be mentioned that this question has been elaborately considered in Krishna Lal Jha v. Nandeshwar Jha where it has been held that paternal grandmother is entitled to a share in such a partition. The applicability of section 14 of the Hindu Succession act, 1956, must, therefore, be considered on the basis that Smt. Ramkunwarbai was entitled to a share in the partition that took place between Seth Narasinghdas and his sons.
Section 14 of the Hindu Succession Act, 1956, is as follows :
'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.
(2) Nothing contained in sub-section (1) shall apply to any property acquired by way of gift or under a will or any other instrument or under a decree or order of a civil Court or under an award where the terms of the gift, will or other instrument or the decree, order or award prescribe a restricted estate in such property.'
The effect of sub-section (1) is that any property possessed by a Hindu female and held by her as a limited owner prior to the coming into force of the 1956 Act will thereafter be held by her as full owner. The Explanation is plain enough and does not require any elaboration. It, inter alia, makes it clear that property acquired by a Hindu female at a partition or in lieu of maintenance is property acquired by her for the purposes of sub-section (1). If there is an instrument or document, which is the source or foundation to the right of a Hindu female to the property in question, and that document or instrument contains terms restricting the estate taken by her, then by virtue of sub-section (2) of section 14 the applicability of sub-section (1) and the Explanation thereto is ruled out.
Now, here, sub-section (2) of section 14 is not attracted. The reason is that Smt. Ramkunwarbai had a right to a share in the partition between Seth Narsinghdas and his sons. That being so, if any property was allotted to her in the deed of partition, it cannot be held that there was acquisition of that property by her under the partition deed. She had a subsisting title to the totally of the property of the family. What the partition deed effected was to transform the joint title into separate titles of the individual members of the family in respect of the several items of the property allotted to them respectively. The decision of the Supreme Court in Sarin v. Ajit Kumar Poplai as also of this court in Tribhuwandas v. Premchand shows that when a member of a joint family gets an item of property in a partition, there is no acquisition by him of that property by transfer. It is true that the terms of the partition deed proceeded on the footing that Smt. Ramkunwarbai was only entitled to a maintenance and could only be a limited owner in respect of the property given to her for that purpose. But if Smt. Ramkunwarbai was entitled to a share in the partition, then, while making an allotment out of the joint family property, whether she was treated as entitled to a share or as only entitled to maintenance can make no difference to the legal position that the source or foundation to the right to the property allotted was a right to get a share in the partition and not the partition deed. As she was entitled under the Hindu law to get a share, it cannot be held that the property given to her was acquired by her under the partition deed. That being so, the provisions of sub-section (2) of section 14 do not apply, and the provisions of sub-section (1) and the Explanation thereto fully come into play. It must, therefore, be held that the limited interest in the properties allotted to Smt. Ramkunwarbai in the partition was transformed into absolute interest under section 14(1) and the Explanation thereto. If that is the position, then under section 15 of the Hindu Succession Act, 1956, Seth Narsinghdas clearly became the owner of those properties on the death of Smt. Ramkunwarbai, and thereafter they formed an asset of the assessee. Therefore, our answer to the first question is that the value of the properties left by the assessees mother was rightly included in the assessees net wealth.
In regard to the amount of Rs. 1,56,471 received by the assessee as compensation for the land and properties acquired by the Government, it is difficult to appreciate the contention that the said amount was a liability of the assessee. It was as owner that Seth Narsinghdas made a claim for compensation for the properties acquired by the Government. The agreement dated the 4th July, 1960, concluded between the assessee and the Government, clearly shows that the amount of Rs. 1,56,471 was paid to him as owner of the acquired properties. Clause 3 of that agreement is nothing but an indemnity clause providing that if it turns out that the assessee was not entitled to get any amount of compensation and if the Government is required to pay any compensation to any other person, then Seth Narsinghdas shall refund to the Government the amount received by him as compensation. That clause did not make Seth Narsinghdas a person merely holding in deposit the amount of Rs. 1,56,471 for the Government, or postponed to any future date his right of ownership to that money. Nor did that clause make the amount of Rs. 1,56,471 received by Seth Narsinghdas as owner, a liability of his. In the case of a contract of indemnity, the indemnifier cannot be called on to make good his promise until the indemnified has incurred actual loss (see Rangnath v. Pachusao). It is not the case of the assessee that he incurred a liability to refund Rs. 1,56,471 constituted a debt owed by the assessee to the Government on the valuation date. Under section 2(m) of the wealth-tax Act, 1957, all debts owed by the assessee on the valuation date other than the debts enumerated in section 2(m), are to be deducted in computation of the net wealth. The contingent liability arising under clause 3 of the agreement for payment of the compensation amount received by the assessee is clearly not a debt owed by the assessee to the Government on the valuation date. The Tribunal was, therefore, right in including the amount of Rs. 1,56,471 in the net wealth of the assessee and in rejecting the assessees claim for its exclusion as a liability in the computation of the net wealth.
For the foregoing reasons, both the questions referred to us are answered in the affirmative. The assessee shall pay of this reference.
Counsels fee is fixed at Rs. 200.
Questions answered in the affirmative.