1. These three appeals by the assessee and the other three by the department pertain to the assessment years 1974-75 to 1976-77, respectively, and for the sake of convenience they are being disposed of by this common order.
2. The ITO made the assessments on the HUF of Manmohan Kapur Jagmohan Kapur who had filed a return of income in the status of HUF, as a protective measure because he held that the house property, the income of which was the subject-matter of assessment, was the self-acquired property of their father late Maj. Gen. B.L. Kapoor and it did not become the HUF property in the hands of the assessees, the sons. Shri B.L. Kapoor died on 18-1-1969. The ITO held that no evidence had been furnished to prove that the assets received on the death of B.L. Kapoor belonged to the HUF. The subject-matter of assessment besides the income from self-occupied property was dividend and interest.
3. The assessees came in appeal before the AAC and claimed that on the death of B.L. Kapoor the two sisters of the assesees, Smt. Sushma Ghei and Miss Rita Kapoor, had relinquished their shares in the estate of their father in favour of the two brothers. The affidavit of Smt.
Sushma Ghei along with a deed of relinquishment dated 25-4-1970 was filed wherein it was stated that she had relinquished all her rights and interest in all such properties and estate in favour of her brothers. Photostat copy of the deed of relinquishment dated 23-8-1970 by Miss Rita Kapoor was also filed. It was urged that since the two sisters had relinquished their rights in favour of their brothers and the two brothers have decided to keep the estate inherited from the father in the joint account, the same should be treated as belonging to the HUF of the two brothers. It was further urged that even if it was considered as the self-occupied property of B.L. Kapoor, it should be treated as his HUF property, since the two brothers had kept the house property, dividend and the other income as the joint estate belonging to them. The married daughter had been given an agreed share in terms of family settlement and was excluded from the joint family properties.
The AAC mentioned that Manmohan Kapur is married and has three children, one son and two daughters, while Jagmohan Kapur is unmarried.
The Hindu Succession Act, 1956, lays down an uniform and comprehensive system of inheritance. It provides that on the death of a Hindu intestate on or after 17-6-1956, all his heirs have equal rights in the property of the deceased. Therefore, both the sons as well as the daughters had one-fourth share in the property/assets left by B.L.
Kapoor. Even if the daughters relinquished their rights in the property of their father in favour of their brothers, it cannot be treated as the property belonging to HUF of two brothers. Since to constitute a joint family there must be more than one member, he held that Jagmohan Kapoor could not form the HUF and had, therefore, to be assessed as individual. For this the AAC relied on the Supreme Court ruling in the case of C. Krishna Prasad v. CIT  97 ITR 493.
4. As regard Manmohan Kapur, reliance was placed on the Gujarat High Court ruling in the case of CIT v. Dr. Babu Bhai Mansukhbhai  108 ITR 417 wherein it was held that where a son inherits the self-acquired property of his father, he takes it as joint family property of himself and his sons and not as a separate property. The correct status for the assessment to income-tax of the son in respect of such property is as representing his HUF. Following this ruling, the AAC held that Manmohan Kapur shall be assessed in respect of one fourth share of the property as his HUF property. This HUF would be of Manmohan Kapur, his wife, son and two daughters, while the remaining property shall be treated as the separate property to the extent of one-half in the case of Jagmohan Kapur and one-fourth in the case of Manmohan Kapur.
5. Both the assessee and the department are aggrieved by this order.
The department challenges the order holding that one-fourth of the property shall be assessed as the HUF property of Manmohan Kapur and his family. The assessee is aggrieved by the order holding that there is no HUF of the two brothers. The contention is that both the brothers had blended the shares of the property to be treated as joint and actually enjoyed and held the same as joint family property. The contention also is that Jagmohan Kapur was entitled to convert his individual property into joint family property as soon as it devolved upon him on 20-1-1969.
6. We have heard the learned counsel for the assessee, Miss Anita Nagpal, and the learned departmental representative. On behalf of the assessee an application was made to admit additional evidence. After hearing the parties, we admitted the additional evidence which was in the shape of a copy of the lease deed executed in favour of the deceased B.L. Kapoor in respect of plot No. B-43, Defence Colony, on which the disputed property is built. The other document is a copy of the letter written by the deceased Maj. Gen. B.L. Kapoor to the ITO, Poona, furnishing details for computing the income from property for the purposes of income-tax assessments. The details enclosed with this copy of letter are on pages 6-7 of the paper book. On page 9 of the paper book is a photostat of a deposit made by Manmohan Jagmohan Kapur, HUF, with the Motor & General Finance Ltd. The learned counsel for the assessee contended that the very entitlement for allocation of this plot of land in Defence Colony to the deceased was the fact that he owned ancestral property in Pakistan which was left behind on the formation of Pakistan. The deceased had written to the ITO, Poona, on 25-7-1964 giving details of the house built by him on a plot allotted by the Ministry of Rehabilitation, Government of India. On page 1 in column 16D it was mentioned that the deceased owned ancestral property-8 shops and a residential house-in Peshawar. On page 7 of the paper book is the circular from the Kilokri Defence Services Co-operative House Building Society Ltd. to the deceased in which it was stated "in the year 1953 that having lost your house in Pakistan, you would be naturally anxious to have your own house built". It was urged that this clearly shows that the very entitlement to the allotment of the plot depended on the ownership of a house in Pakistan.
The property left by the deceased in Pakistan was his ancestral property. It was urged that though the deceased paid for the plot in cash and the plot was allotted to him in his individual capacity, but as the allotment was a privilege given to the serving personnel of defence services, the deceased wanted to treat this property as HUF property during his lifetime. The allotment was in fact in lieu of the ancestral property left in Pakistan. That was the nucleus of the ancestral property which went into construction of the house so that the house became the ancestral property. We have very carefully considered these arguments but we find that the fact that the deceased owned ancestral property in Pakistan was only incidentally mentioned in the form submitted to the ITO and did not make the allotment of land to the deceased as, a defence personnel, his HUF property. The construction was made by the deceased admittedly with his self-acquired assets and the loan obtained from the defence authorities. During his lifetime he continued to be assessed on the income thereof as an individual and made no claim that his property was his HUF property or that there was any ancestral nucleus. In spite of the fact that we have admitted the entire additional evidence on behalf of the assessee at a later stage even that evidence does not persuade us to hold that this property at B-43, Defence Colony, was the ancestral property of the deceased. It was his self-acquired property and it was so treated by him in his lifetime. We, therefore, reject the contention that it was the ancestral property in the hands of the deceased B.L. Kapoor.
7. Coming now to the question as to whether it was converted into a HUF property after the death of B.L. Kapoor. There is no direct evidence of such conversion or blending. On the death of B.L. Kapoor the properly devolved on two sons and two daughters under the Hindu Succession Act.
The two daughters relinquished their shares in the property in favour of their two brothers. Thus so far as the share relinquished by the sisters in favour of the brothers is concerned that cannot be treated as HUF property at all. By the relinquishment the two brothers would get the one-fourth share each relinquished by the sisters as their separate property. Jagmohan Kapur being a bachelor, cannot have a HUF of his own. There was no HUF of Manmohan Kapur and Jagmohan Kapur, two brothers. It is immaterial that they made joint deposits in Motor General Finance Ltd. on interest or had a common account of the property income. There is no evidence of conversion of the inherited property by the two brothers as their HUF property. Therefore, the claim that it was HUF property or there was a HUF of two brothers, Manmohan Kapur and Jagmohan Kapur, is rejected.
8. So far as the order of the AAC that Manmohan Kapur forms a HUF with his wife, son and two daughters and the property that fell to his share would be his HUF property to the extent of one-fourth of the house in question, the learned AAC has relied on the Gujarat High Court ruling in CIT v. Dr. Babu Bhai Mansukhbhai (supra) but there are contrary rulings of the Madras High Court in CIT v. V.R.A. Manicka Mudaliar  114 ITR 521 which has been considered and approved by the Full Bench of that very High Court in Addl. CIT v. P.L. Karuppan Chettiar [l978] 114 ITR 523 (Mad.). Their Lordships have relied on a number of rulings of Allahabad High Court in CIT v. Rakshpal Ashok Kumar  67 ITR 164, the Assam & Nagaland High Court in Ghasiram Agarwalla v.CGT  69 ITR 235, and have differed from the Gujarat High Court ruling on which reliance has been placed by the learned AAC. Clearly the consensus appears to be in favour of the view that where a Hindu dies intestate and his property devolves on his sons and daughters under Section 8 of the Hindu Succession Act, the property becomes the individual property and not the HUF property of the heirs. We, respectfully, follow the Madras High Court ruling and hold that the entire property in the hands of the two brothers is their individual property and no part of it is HUF property in the hands of Manmohan Kapur.
9. In the result, we dismiss the assessee's appeals and allow the departmental appeals. The order of the AAC is set aside and that of the ITO is restored.