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Premchand Chaganlal/Sardarilal Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1983)3ITD768(Hyd.)
AppellantPremchand Chaganlal/Sardarilal
Respondentincome-tax Officer
Excerpt:
.....in taxation laws. it has a definite connotation and embodies the meaning ascribed to 'joint hindu family' in hindu law ;(ii) there is no presumption that a hindu family merely because it is joint, possesses any joint family property ; (iii) though the units of assessment under the income-tax act are, say, individual, huf and so on, the status is and can be determined only by analysing the nature of ths rights of all persons enjoying or having some interest in the income which is the subject-matter of assessment ; (iv) separated members can, if at all, constitutes huf only if they reunite as laid down in paragraphs 342 to 344 of mulla's hindu law ; and (v) the effect of partition is to dissolve the coparcenary with the result that the separating members thenceforth hold their.....
Judgment:
1. The facts and the rival contentions in these two appeals by the different assessees are common. For the sake of convenience, both the appeals are disposed of together.

2. Shri Premchand and Shri Sardarilal, both the assessees herein, are sons of Shri Chaganlal and constituted a HUF (which will hereinafter, if necessary, be referred to as 'bigger HUF') until they executed a deed of partition on 17-11-1969 whereby the two branches represented by them separated and constituted smaller HUF's (hereinafter referred to as "'HUF's" only) comprising of : (7) Shri Premchand (self), Smt.

Sushilabai (wife), Shri Narsing Prasad and Shri Poonamchand (sons), (2) Shri Sardarilal (self), Smt. Jankibai (wife) and Shri Parsuram (son).

The aforesaid HUF's have also undergone complete partition as per the deed of partition dated 27-10-1970. The partition has been not only between the father and son/sons but also with the wives inasmuch as they have also received their share in the HUF property at the time of the partition, i.e., equal to that of a son as per the shastric Hindu law. Both Shri Premchand and Shri Sardarilal are, it is common ground, residing with their respective wives despite the aforesaid complete partition.

3. The dispute is as regards the income from the property received by Shri Premchand and Shri Sardarilal in the aforesaid partitions. While the assessees' claim that the same is assessable as their separate income, i.e., in the status of individual, the ITO has completed the assessments in the status of HUF.4. The proceedings herein are for the assessment year 1977-78 for which the previous year has ended on 23-10-1976. Following the Tribunal's order in the assessee's own case for the assessment year 1974-75, the AAC has confirmed the assessment in the status of HUF.5. After hearing the parties, the Division Bench hearing the appeals felt that the earlier decision of the Tribunal (supra) required reconsideration and made a referenceof the President for constituting a Special Bench. This is how these appeals have come to be heard by a Special Bench.

6. The parties have been heard at length. For the purpose of appreciating the rival contentions, it is desirable to refer to some well-known legal propositions which will have to be kept in mind, namely, (i) 'HUF' is a legal expression employed in taxation laws. It has a definite connotation and embodies the meaning ascribed to 'joint Hindu family' in Hindu law ;(ii) there is no presumption that a Hindu family merely because it is joint, possesses any joint family property ; (iii) though the units of assessment under the Income-tax Act are, say, individual, HUF and so on, the status is and can be determined only by analysing the nature of ths rights of all persons enjoying or having some interest in the income which is the subject-matter of assessment ; (iv) separated members can, if at all, constitutes HUF only if they reunite as laid down in paragraphs 342 to 344 of Mulla's Hindu Law ; and (v) the effect of partition is to dissolve the coparcenary with the result that the separating members thenceforth hold their respective shares as separate property qua the separated members but if a separating member has other persons with him who have some interest in the property so received by him on partition, the property may retain the character of joint family property.

7. Moreover, the Income-tax Act recognises both total and partial partition. The partition can be partial both as regards the property and as regards its members. This, to our mind, clearly shows that the status of the person enjoying the income from a property is to be determined qua that particular property. For instance, if some of the assets of the HUF are partially partitioned in the sense that the wife has not taken any share, the character of the property coming to the husband in such a case will remain joint family property as the wife will have interest in that property. On the other hand, if some other assets of the same HUF have been partitioned and the wife has also received a share she is entitled to under the shastric Hindu law, the character of the property received by the husband in such assets will be individual and noi HUF.8. We are of the view that the fact of the husband's residing with the wife and continuing to have the right of coverture and consortium despite her having taken a share from the HUF may mean that they are living like a family or even constitute a HUF. However, when such a family or HUF has no joint property, it will be difficult, if not impossible, to say or accept that the property received by the husband or wife as their separate property on partition of HUF is or will be a HUF property. As earlier stated by us, it is not necessary for a Hindu family also to have a joint family property. At best, it will be a case of reunion as it is not the case of the department that the property received by the assessee and his wife as their share on partition is owned and is being enjoyed by the husband and wife together. That apart, reunion can perhaps be amongst coparceners only.

9. It niay be mentioned that number of decisions were cited by the parties. For the sake of completeness, we will briefly refer to them to show that all except last two decisions are not applicable.

9.1 The facts in the Supreme Court's decision in the case of C. Krishna Prasad v. CIT [1974] 97 ITR 493 are that Shri Krishna Prasad was unmarried at the time of the partition. He claimed the status of HUF.It was held that a family signifies a group. Plurality of persons is an essential attribute of a family. A single person, male or female, does not constitute a family. A family consisting of a single individual is a contradiction in terms. The observations herein are in the context of that case which only mean that if there are more than one person at any time before or after the partition having interest in the property received on partition, they may constitute HUF.9.2 The facts in the Bombay High Court's decision in the case of Manohar Vithal Velankiwar v. CED [1967] 63 ITR 379 are that there was a partition between V who was the karta of a joint Hindu family and his son in 1954. V's wife was not a party. The share allotted to the son was about one-third of the total HUF property. V died in 1955. The question arose whether V's interest in the said property was full or one-half. It was held that V's wife did not automatically become owner of a share in the joint family as a result of the partition in 1954 and, therefore, the entire HUF property was liable to be included in the assessee's estate. It is evident that this case has no application.

Assuming it is applicable, it supports the assessee's claim. The facts in the Allahabad High Court's decision in the case of Vithal Das v. CED [1972] 85 ITR 432 are identical and for the reasons given hereinabove this case has also no application.

9.3 The Full Bench of the Andhra Pradesh High Court's decision in the case of Addl. CIT v. Visakha Flour Mills [1977] 108 ITR 466 deals with the provisions of Sections 187 and 188. In this decision the Full Bench of the Andhra Pradesh High Court has followed the Punjab and Haryana High Court's decision in the case of Dharam Pal Sat Dev v. CIT [1974] 97 ITR 302 and the Calcutta High Court's decision in the case of Sandersons & Morgans v. ITO [1973] 87 ITR 270 approved its own earlier decision in the case of CIT v. T. Veeraraghavulu Chetty & Sons Co.

[1975] 100 ITR 723 (AP) and dissented from the Allahabad High Court's decision in the case of CIT v. Shiv Shanker Lal Ram Nath [1977] 106 ITR 342 and the decision of the Full Bench in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All.) 9.4 The principle laid down in the Patna High Court's decision in the case of Panna Lal Rastogi v. CIT [1967] 65 ITR 592 is that the test to be applied in determining the status of the assessse is not whether he has an alterable right in respect of such property but whether there is a potentiality of a coparcener being brought into existence either by law or by nature. That is to say, either by adoption or birth of a son.

Here again, we find that the decision does not support the department's case. We find that the assessee's age at the material time is 62 and his youngest child, a married daughter, is 26 years old. He has already a living son and, therefore, the question of adoption does not arise and there does not also appear to be the possibility of getting a son to constitute a HUF.9.5 The facts in the decision of the Supreme Court in the case of N.V.Narendranath v. CWT [1969] 74 ITR 190 are entirely against the revenue.

In that case, a coparcener had received property on partition along with wife and two minor daughters who had admittedly right of maintenance and also right to be married according to the family standard. That apart, the wife was entitled to a share on partition between her husband and the son, if any, born subsequently. In the present case, the wife and son have also separated from the assessee.

This case has, therefore, no application.

9.6 The Allahabad High Court's decision in the case of Prem Kumar v.CIT [1980] 121 ITR 347 deals with a case where the coparcener at the time of partition was unmarried. The question that arose in that case was whether after the marriage he constituted a HUF qua property received on partition. It was held that the HUF came into existence on marriage. The facts of this case are also different from the one before us.

9.7 The facts in the Supreme Court's decision in the case of Gowli Buddanna v. CIT [1966] 60 ITR 293 were : there was a HUF consisting of A, his wife and two unmarried daughters and his adopted son B. A died.

The question that arose was regarding the status of the remaining members of the family as there had remained only the sole surviving coparcener. The distinction between the Hindu coparcenary and a HUF was noted and it was held that there being so many persons having some interest in the property, the assessee was assessable in the status of HUF.10. On the other hand, the following two decisions at least indirectly support the assessee's contentions.

10.1 The Supreme Court's decision in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 lays down that special provisions will prevail over the general provisions, that is, what has also been held by the Supreme Court in its earlier decision in the case of CIT v. Shahzada Nand & Sons [1966] 60 ITR 392.

This case appears to have been cited for the purpose of emphasising that in view of Section 8 of the Hindu Succession Act, a property so received by the on partition has got to be treated as the individual property. It may be stated that the Calcutta High Court in the case of Malchand Thirani & Sons v. CIT [1980] 121 ITR 976 and the Full Bench of the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 have taken the view that when a property of a male Hindu dying intestate devolves under Section 8 of the Hindu Succession Act, the character of that property in the hands of the recipient is always individual. It is in this context the principal that special provisions will prevail over the general provisions (generalia specialibus non derogant) has been relied upon in this case.

10.2 The facts in the Supreme Court's decision in the case of Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 have been that the assessee had a wife and an unmarried daughter. By a declaration he threw his self-acquired immovable property into the family hotchpot. Thereafter, he claimed that the income from (he said property was assessable in the status of a HUF. It was held that though the assessee, his wife and the unmarried daughter were members of a HUF, the income was chargeable to income-tax in the appellant's hands as his individual income. Though the facts in this case are different, the decision indirectly supports the view we have taken.

11. Having regard to the above discussion, we hold that the very fact that the assessees herein are residing with their separated respective wives, the character of the property, which the assessees received on partition of the family whereby their respective wives had also received a share and then separated, will be individual and not HUF.12. The assessee's status thus will be individual. The appeals are treated as allowed.


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