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Bhagat Singh Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1984)7ITD514(Chd.)
AppellantBhagat Singh
Respondentincome-tax Officer
Excerpt:
1. the assessee in this appeal has come forward with three contentions, the first being in respect of jurisdiction raised in ground nos. 1, 2 and 3, the second regarding inclusion of dividend income, interest from banks and annuity refund in the hands of the assessee as individual disputed in ground nos. 4 and 5 and the third contention being in respect of charging of interest under sections 139(8) and 215 of the income-tax act, 1961 ('the act') both regarding appealability against charging of interest. the assessment year involved is 1977-78 for which the previous year ended on 31-3-1977.2. first of all, for the sake of convenience, we take up grounds pertaining to challenge to jurisdiction raised by the assessee. the facts in regard to this in brief are that the jurisdiction over the.....
Judgment:
1. The assessee in this appeal has come forward with three contentions, the first being in respect of jurisdiction raised in ground Nos. 1, 2 and 3, the second regarding inclusion of dividend income, interest from banks and annuity refund in the hands of the assessee as individual disputed in ground Nos. 4 and 5 and the third contention being in respect of charging of interest under Sections 139(8) and 215 of the Income-tax Act, 1961 ('the Act') both regarding appealability against charging of interest. The assessment year involved is 1977-78 for which the previous year ended on 31-3-1977.

2. First of all, for the sake of convenience, we take up grounds pertaining to challenge to jurisdiction raised by the assessee. The facts in regard to this in brief are that the jurisdiction over the case of Shri Bhagat Singh, individual, the present appellant, vested with the ITO, central circle V, Ludhiana who had issued a notice under Section 139(2) dated 4-5-1977 to Shri Bhagat Singh which was served on him on 28-5-1977. However, the assessee on 30-9-1977 had filed his return with another ITO being the ITO, Distt. 11(4), who completed the assessment under Section 143(3) of the Act on 20-11-1977. Shri Bhagat Singh filed another return in the status of HUF with the ITO, centeral circle VI, who forwarded the same to the ITO, Distt. I(iii), who held territorial jurisdiction over the assessee-HUF. The assessee as individual filed a return with the ITO central circle VI, on 25-3-1980 and marked the same as duplicate. The ITO completed the assessment under Section 143(3) in which he made the following additions-(i) dividend from Gurmukh Singh Sons Auto-parts Rs. (P.) Ltd., Ludhiana.

52,000(ii) interest from banks 3. The assessee had not offered the above three figures as it was stated by him that a partial partition had taken place in the family on 1-4-1971 in respect of share capital invested in the firm of Gurmukh Singh & Sons. Though the assessee in respect of the share income from the said firm was assessed as an individual, but as the assessee was blessed with a daughter after partial partition, his status reverted back to that of HUF in respect of funds received on partial partition on 1-4-1971. The ITO rejected this contention and observing that since his wife was already separated from the HUF, subsequent birth of a daughter to him would not get back to him the status of HUF as no HUF qua this property at the time of her birth was in existence. The ITO, therefore, rejected the claim of the assessee qua these incomes and holding that the same did not belong to the HUF, included the same in the hands of the assessee as individual. In the course of the assessment proceedings, the ITO also charged interest under Sections 215 and 139(8).

4. The assessee, aggrieved by the order of the ITO, challenged the jurisdiction before the AAC on one hand and inclusion of dividend, interest and annuity refund incomes in the hands of the assessee on the other hand as also charging of interest under Sections 215 and 139(8).

The assessee failed in respect of his contentions pertaining to jurisdiction and challenged regarding the inclusion of dividend income from bank and annuity refund and in respect of charging of interest under Sections 139(8) and 215, the Commissioner (Appeals) held that the same was not appealable as there did not lie any appeal against the charging of interest under Sections 215 and 139(8). It is these actions of the Commissioner (Appeals) which are challenged before us by the assessee.

5. The learned counsel for the assessee, while addressing us on the grounds of jurisdiction, submitted that the assessment is illegal and bad in law. He submitted that after the assessment under Section 143(3) was once made by the ITO, Distt. II(iv) and the same having not been cancelled stood as such and, therefore, the assessee could not be reassessed by another ITO. He submitted vehemently that once the assessment is made, it becomes final and cannot be reopened except in the ways specified in the Act. He was, however, unable to point out any authority in support of his contentions though he did not give up the said grounds and vehemently argued that he pressed the same.

6. The learned departmental representative, on the other hand, relied on the order of the Commissioner (Appeals) on this issue.

7. After taking into consideration the rival submissions, we are in agreement with the finding of the Commissioner (Appeals) that the distinction between want of inherent jurisdiction, which is inherent competency, on the one hand and irregular exercise or remission of jurisdiction on the other hand, is well settled. A party may waive objection to irregular exercise or remission of jurisdiction but there can be no question of waiver where there is a want of inherent jurisdiction because in such a case the order must be treated as a nullity. The Commissioner (Appeals) has rightly observed that the assessment completed by the ITO, Distt. 11(4) under Section 143(1) on 20-11-1977 was without inherent jurisdiction over the assessee. Once that order is treated as a nullity, it becomes non est and order passed by the ITO, central circle VI was the valid order as the jurisdiction of assessee as individual vested with him.

8. As above stated, the learned counsel for the assessee was unable to assist the Bench with any authority in respect of his contention, the same as such is rejected and the action of the Commissioner (Appeals) in respect of his finding pertaining to jurisdiction is confirmed.

9. Coming to ground Nos. 4 and 5, which are in respect of inclusion of dividend income, interest income from banks and annuity refund, the facts in brief are that the assessee was himself a member of the HUF of his father, Shri Gurmukh Singh. As early as on 31-3-1954, the partition of Gurmukh Singh & Sons, a HUF headed by Shri Gurmukh Singh, was effected. After the said partition in the said firm of Gurmukh Singh and Sons, the assessee, Shri Bhagat Singh, joined it as a partner with the investment of funds received by him on the partition of the HUF.Thereafter, all through he has been assessed as a HUF in respect of income derived from the aid and assistance of the HUF funds as partner of the firm of Gurmukh Singh & Sons. Again on 1-4-1971, the smaller HUF of the assessee, Shri Bhagat Singh, was partitioned, the then existing members of the said HUF, being Shri Bhagat Singh, his wife Smt. Balbir Kaur, their son, Ranjodh Singh and four daughters, Balwant Kaur, Joginder Kaur, Jaswant Kaur and Harbans Kaur. The assessee's wife and son each got equal shares after Rs. 14,750 were credited in the account of each of the four daughters. The amounts which were given to Smt.

Balbir Kaur and the assessee's son, Shri Ranjodh Singh, were separately credited in the books of the firm styled as Gurmukh Singh & Sons in which Shri Bhagat Singh continued to be a partner. After the said partition, Shri Bhagat Singh got one more daughter Balwinder Kaur on 23-11-1971.

The assessee claimed that since his share of investment in the said firm came to him as a result of partition of the HUF property, the same was ancestral property in his hands and after he was blessed with a daughter, the said sum belonged to his HUF constituted of self and his daughter. It was on strength of this contention that he claimed exclusion of dividend income, interest from bank and annuity refund from his individual assessment as he contended that the same should be subjected to tax in his status of HUF. The ITO rejected this claim as, according to him, the birth of a daughter did not create any HUF. This issue had been raised in the course of the assessment proceedings for the assessment year 1974-75 and the assessee having not met with success travelled up to the Commissioner (Appeals) in first appeal where as well he met the same fate as his contentions were rejected.

When the assessee came forward with the same stand in course of the 1977-78 assessment proceedings, he failed for that year as well both before the ITO and the Commissioner (Appeals).

10. The learned authorised representative for the assessee after stating the above noted facts relied on the Supreme Court judgment in the case of C. Krishna Prasad v. CIT [1974] 97 ITR 493 and the Tribunal's decision in the case of Keshav Shukla v. ITO [1982] 1 ITD 556 (All.) He submitted that ground No. 5 raised by the assessee is just repetition of ground No. 4 in other words. The learned departmental representative, on the other hand, relied on C. Krishna Prasad's case (supra) itself and the judgment of the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 (FB). He submitted that the distinction between the Tribunal's decision in the case of Keshav Shukla (supra) and the instant case is that in that case the unmarried daughter existed whereas in the instant case the daughter did not exist at the time of partition but was subsequently born. Besides relying mainly on the order of the Commissioner (Appeals), he submitted at length in the light of P.L.

Karuppan Chettiar's case (supra), action of the Commissioner (Appeals) deserves to be confirmed and the assessee should fail in his contentions.

11. After taking into consideration the rival submissions and considering the law on the issue, we are unable to sustain the order of the Commissioner (Appeals) on this issue. As stated above, the following facts are admitted- (i) Shri Bhagat Singh with his only son, Shri Ranjodh Singh, his wife, Smt. Balbir Kaur and his four daughters, namely Balwant Kaur Joginder Kaur, Jaswant Kaur and Harbans Kaur, constituted a HUF; (ii) Shri Bhagat Singh and his wife and son each got equal shares on 1-4-1971 after they effected partition in respect of joint Hindu family funds after Rs. 14,750 were credited in the account of each of the four daughters ; (iv) On 23-11-1971, Shri Bhagat Singh was blessed with another daughter Balwinder Kaur ; and (v) There is no controversy about the fact that it was out of ancestral properties that the partition was effected on 1-4-1971.

12. After the above admitted facts being there, the only issue which is to be clinched is whether Shri Bhagat Singh in respect of the properties acquired by him on partition would constitute a HUF after he was blessed with a daughter.

13. Coming to the law on the issue as to what is a joint Hindu family, we find it is given in Article 212 of the Hindu law in the following words : Joint Hindu family.-(1) A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. A daughter ceases to be a member of her father's family on marriage and becomes a member of her husband's family.

(2) The joint and undivided family is the normal condition of Hindu society. An undivided Hindu family is ordinarily joint not only in estate, but also in food and worship. The existence of joint estate is not an essential requisite to constitute a joint family and a family which does not own any property may nevertheless be joint....(p. 261) With definition of joint Hindu family it is necessary for us to look in respect of the share allotted on partition and position of a wife. It is in Article 223(4) of the Hindu Law that share allotted on partition is dealt with, viz., The share which a coparcener obtains on partition of ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of" partition or are born subsequently. Such share, however, is ancestral property only as regards his male issue. As regards other relations, it is separate property and if the coparcener dies without leaving male issue, it passes to his heirs by succession.

14. In the instant case, Shri Bhagat Singh has his wife who is included in the joint Hindu family and though the present one son has been separated, the possibility of sons born subsequently cannot be ignored.

The assessee has subsequent to the partition been blessed with another daughter on 23-11-1971. Even regarding the shares obtained by wife on partition in the instant case if we look to Article 315 of Mulla's Principles of Hindu Law, we find that Wife.- '(1) A wife cannot herself demand a partition, but if a partition does take place between her husband and his sons, she is entitled to receive a share equal to that of a son and to hold and enjoy that share separately even from her husband. Where at a partition between a father and his three sons, the wife was not allotted a share, it was held that she was entitled to reopen the partition, there being no waiver merely by her not asking for a share but that in the partition the value of the ornaments taken by her must be taken into account.(p. 403) 15. When we look to the Hindu Law of Shri N.R. Raghavachariar, we find in para 233 as under : The joint family status being the result of birth, possession of joint property is only an adjunct of the joint family and is not necessary for its constitution. The cord that knits the members of the family together is not property but the relationship. A joint family may consist of a single male member and widows of deceased male members and the property of the family does not cease to belong to the joint family merely because the family is represented by a single coparcener who possesses rights which an absolute owner of property may possess. The joint family cannot be said to come to an end even when the last surviving male member thereof dies, leaving only some widows. The reason is that it is possible even then for any of the widows to make an adoption and treat a joint family consisting of male members as before and it is held that so long as this possibility is there it cannot be said that there is no joint family. (p. 247) In the instant case, the assessee has his wife, the property secured by him on partition is out of his larger HUF property and he is blessed with a daughter subsequent to the date of partition and even further possibility of future progeny cannot be ignored.

16. Though the Privy Council decision in the case of Attorney-General of Ceylon v. AR. Arunachalam Chettiar [1958] 34 ITR (ED) 42 is not directly in support of the assessee's contentions but the observations made therein do support the contention of the assessee which are as under : That it was only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it could be determined whether the family property could properly be described as 'joint property' of the undivided family. While it might be correct to describe the sole surviving coparcener as the 'owner' of the family property, that which he 'owned' was joint family property. His ownership was such that on the adoption of a son it assumed a different quality.... (p. 43) 17. The Bombay High Court's decision in the case of CIT v. M.M. Khanna [1963] 49 ITR 232 again though pertains to a different issue of impressing the self-acquired property with the character of joint family property of the smaller family, in that case, it was observed by their Lordships : that the smaller family was an assessable unit capable of holding property as belonging to it and the circumstance that it was also a branch of another larger assessable unit did not in any way affect it from being an assessable unit itself. It was not necessary in order that the smaller family could be an assessable unit that the larger family should have been completely disrupted by a partition; (p. 234) 18. If we look to the Andhra Pradesh High Court's decision in the case of A. Hanumantha Rao v. CWT [1961] 65 ITR 586 which also deals with the throwing of a separate property into a common hotch-potch under the Wealth-tax Act, 1957, but the observation of their Lordships in that case as well helps the contention of the assessee which is, viz. : there can be a smaller Hindu undivided family within a larger Hindu undivided family, which can hold property as a unit to the exclusion of the larger family.... (p. 587) 19. In the case of Bharat Kumar Chinubhaiv. CIT [1969] 71 ITR 1, the Gujarat High Court held : ... even where an assessee has only a wife or unmarried daughter and no son, the property received by him, in respect of his share in the joint family properties on partition, belongs to the Hindu undivided family consisting of himself and his wife or unmarried daughter and is liable to be assessed as property of the Hindu undivided family and not as his individual property. (p. 2) The property which was the joint property of the Hindu undivided family does not cease to be so because of the temporary reduction of the coparcenary unit to a single individual. (p. 1) 20. In the instant case, even if potentiality of future progeny is ignored, there is no dispute about the fact that Shri Bhagat Singh got his share as a consequence of partition out of ancestral funds and though his wife also got separated by getting her share, he now is blessed with a daughter and even if for the sake of argument it is considered in his present family, it is only he and his only unmarried daughter that the contention of the assessee gets support from the above case.

21. The Delhi High Court's decision in the case of CIT v. Bawa Arjan Singh [1969] 73 ITR 576 held that- A family consisting of only one coparcener and female members can enjoy the status of a Hindu undivided family within the Income-tax Act.(p. 576) and the two findings on which their Lordships arrived at after considering a very large number of cases on the issue held in the case where there was only a sole surviving male coparcener as under : ...(i) that the correct status of the assessee was that of a Hindu undivided family ; (ii) that, even assuming that the mother also separated at the time of the partition, the correct status of the assessee was still that of a Hindu undivided family. (p. 576) In the said case their Lordships dealing with certain cases, with some of which we have also dealt with above, observed as under : I will now proceed to answer the question on the assumption that the assessee's mother also separated as urged by Mr. Kirpal (though there is no material on the record pointing towards that). The position, in my opinion, will not be any different even in those circumstances. In Arunachala Mudaliar v. C.A. Muruganatha Mudaliar AIR 1953 SC 495, their Lordships of the Supreme Court held that the property of the grandfather would normally vest in the father as an ancestral property if and when the father inherited the property on the death of the grandfather or received it, by partition, made by the grandfather himself during the lifetime. On both these occasions, the grandfather's property would devolve on the father by virtue of the latter's legal right as son or descendant of the former and would consequently be an ancestral property in his hands.

In CIT v. Beni Prasad Tandon [1969] 71 ITR 322, a Division Bench of the Allahabad High Court reviewed the entire case law on the subject. In that case the assessee constituted a Hindu undivided family with his father. The family property was completely partitioned and the assessee was for several years assessed as an individual. In the assessment for the year 1958-59 the income assessed in the hands of the assessee included income from property allotted to the assessee on partition. The assessee contended that the income from such property was the income of the Hindu undivided family consisting of his wife and unmarried daughters. It was held that the assessee constituted a Hindu undivided family with his wife and unmarried daughters in respect of the property devolving to him on partition even in the absence of male issue. It was observed : It is true that the observations made by the Privy Council in Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 lend some support to the contention of Mr. Gopal Behari appearing on behalf of the Commissioner, UP, that under such circumstances the property should be treated as separate property of the individual assessee. But it may be pointed out that in Kaylanji Vithaldas's case the Judicial Committee was not dealing with a case where a member of a joint Hindu family had received property by a partition. The preponderance of judicial authority is in support of the view that, upon partition, the property retains the character of joint family property. We see no sufficient reason 'for departing from the view taken by this Court in Pratap Narain's case [1967] 63 ITR 505. We are of opinion that the property under consideration should be regarded as property belonging to the Hindu undivided family consisting of the assessee, his wife and minor daughters and not property exclusively belonging to the assessee.

The same view had been taken earlier by the Allahabad High Court in Pratap Narain v. CIT [1967] 63 ITR 505 and in Gajanand Sutwala v. CIT [1967] 63 ITR 512. In Panna Lal Rastogi v. CIT [1967] 65 ITR 592, 595, the Patna High Court, while taking the same view, observed : If it be held that the property in the hands of a sole surviving coparcener is not the property "of the Hindu undivided family, startling results may ensue. As soon as he gets a son or adopts a son, the property will become the property of a Hindu undivided family. If that son happens to die, the property will then become the property of an 'individual' until another son is either born or adopted. We will thus have a bewildering complexity as regards the status of an assessee which would vary from time to time. The safer test seems to be, as pointed out by the Privy Council in the Ceylon case [1958] 34 ITR (ED) 42, whether there is a potentiality of a coparcener being brought into existence either by law or by nature.

So long as that potentiality is there, the property must be held to be that of a Hindu undivided family. Such a potentiality exists in the case of a sole surviving coparcener, because either he may beget a son or, adopt a son. It also existed while the property was in the possession of a Hindu widow prior to the Hindu Succession Act of 1955, because by making a valid adoption she could continue the original joint family. It is true that in the Orissa case Ruktnini Bai Rathor v. CWT [1964] 54 ITR 430, it was pointed out that when she becomes the full owner of the property by virtue of the Hindu Succession Act, the aforesaid potentiality disappears and the property in her hands must be assessed as that of an 'individual'.

Here, however, the assessee is male and whether he adopts a son or begets a son a coparcenary is established between him and his son.

The property cannot be treated for all purposes as equivalent to his self-acquired property, in which alone his status can be said to be that of an 'individual' Again in CWT v, Lt. Col. DC. Basappa [1964] 51 ITR 790, the same view was taken. In Muild's Hindu Law, 13th Edition, p. 249, it is said : The share which a coparcener obtains on partition of ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently. (p. 583) 22. The Supreme Court's decision in the case of N.V. Narendranath v.CWT [1969] 74 ITR 190 lends support to the contention of the assessee in which their Lordships held : There need not be at least two male members to form a Hindu undivided family as a taxable unit for the purpose of the Wealth-tax Act, 1957. The expression Hindu undivided family, in the Act is used in the sense in which a Hindu joint family is understood in the personal laws of Hindus. Under the Hindu system of law a joint family may consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth-tax Act to suggest that a Hindu undivided family as an assessable unit must consist of at least two male members. (p 190) 23. In the case of Gowli Buddanna v. CIT [1966] 60 ITR 293, it was held by their Lordships of the Supreme Court that : There need not be more than one male member to form a Hindu undivided family as a taxable entity under the Income-tax Act. The expression 'Hindu undivided family' in the Income-tax Act is used in the sense in which a Hindu joint family is understood under the personal law of the Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members and the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members. (p. 293) 24. Their Lordships of the Patna High Court in the case of CWT v. Panna Lal Rostogi [1571] 96 ITR 110 have again referred to N.Y.Narendranath's case (supra) and observed as under : In N.V. Narendranath's case, however, Ramaswami J. has said at page 197 : Applying this test it is clear, though in the absence of male issue the dividing coparcener may be properly described in a sense as the owner of the properties, that upon the adoption of a son or birth of a son to him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it and the partition only cuts off the claims of the dividing coparceners. The father and his male issue still remain joint. The same rule would apply even when a partition had been made before the birth of the male issue or before a son is adopted, for the share which is taken at a partition by one of the coparceners is taken by him as representing his branch.

Again, the ownership of the dividing coparcener is such 'that female members of the family may have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it' : [see Arunachalam's (No. 2) case]. It is evident that these are the incidents which arise because the properties have been and have not ceased to be joint family properties. It is no doubt true that there was a partition between the assessee, his wife and minor daughters on the one hand and his father and brothers on the other hand. But the effect of partition did not affect the character of these properties which did not cease to be joint family properties in the hands of the appellant. (p. 116) the law on the question was not settled. Therefore, following an ealier Bench decision regarding the same assessee, the assessment had to be made on the assessee in the status of a Hindu undivided family.(p. 110) 25. The contention of the assessee in the instant case is also supported by the Allahabad High Court's decisions in the case of Bajrang Lal v. CIT [1977] 108 ITR 245. In that case, there was a partial partition effected in the HUF of Mr. B amongst him, his wife and four sons. In respect of the share fallen to Mr. B, the assessee claimed his status as that of HUF. The ITO assigned the status of individual to him, but on second appeal before the Tribunal in view of the Supreme Court's decision in the case of Gowli Buddanna (supra) held that the assessee was entitled to the status of a Hindu undivided family provided he or she represents a family as understood under the personal law of Hindus and is capable, in nature or in law, to add a coparcener to the family, who will be entitled to claim partition, that the first condition was satisfied, that on the facts of the case, the normal presumption would be that the family had no potentiality to add a coparcener, that it had not been shown that there was a chance of adding a coparcener to the family and that the assessee could not, therefore, be given the status of HUF. On reference, the assessee contended that no opportunity had been given to him to prove that there was a possibility of adding a eoparcener to the HUF and on this their Lordships held: ...that there was no material on record to show that the assessee was unfit to add another issue. On the material, the normal presumption was that the family had the potentiality to add a coparcener. Since the finding that the assessee was incapable of adding a new coparcener to the family could not be sustained, the matter had to go back to the Tribunal for a fresh finding after the requisite enquiry. (p. 246) 26. In the case of Tolaram Bijoy Kumar v. CIT [1978] 112 ITR 750 (SC) the finding of Judicial Committee in the case of Ar. Arunachalam Chettiar (supra) found an approval, as observed at page 753 of the report.

27. In another case of the Allahabad High Court in Prem Kumar v. CIT [1980] 121 ITR 347, the assessee who was a bachelor and who formed a HUF with his father and brothers got a sum of Rs. 3,216 on account of his share with which he entered into a partnership. When he entered into the partnership though he was a bachelor but subsequently during the previous year relevant to the assessment year under consideration he married and he claimed that share income from the firm should be taxed in the hands of himself and his wife in which their Lordships held that- ...a HUF came into existence when the assessee married and the share income from the firm could be assessed in the hands of the assessee as HUF. (p. 347) 28. The observation of his Lordship, J.Y.V. Chandrachud, the Chief Justice of India, in the Supreme Court's decision in the case of Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 is as under : A joint Hindu family under the Dayabhaga is, like a Mitakshara family, normally joint in food, worship and estate. In both systems, the property of joint family may consist of ancestral property, joint acquisitions and of self-acquisitions thrown into the common stock. In fact whatever be the school of Hindu law by which a person is governed, the basic concept of a Hindu undivided family in the sense of who can be its members is just the same.

Generally speaking, the normal state of every Hindu family is joint and in the absence of proof of division, such is the legal presumption.

The joint Hindu family, with all its incidents, is a creature of law and cannot be created by act of parties, except to the extent to which a stranger may be affiliated to the family by adoption. (p.

776) 29. In the course of the aforesaid decision, his Lordship, the Chief Justice has observed as under and discussed several cases on the issue, the majority ratio of the same support the contention of the assessee : For our limited purpose, fundamentals do not any more require a study of Sastric texts, digests and commentaries because judicial decisions rendered over the last century and more have given a legalistic form to what was in a large measure a mingling of religious and moral edicts with rules of positive law. Hindu law today, apart from the piecemeal codification of some of its branches like the laws of marriage, succession, minority, guardianship, adoption and maintenance is judge-made law, though that does not detract from the juristic weight of Smritis like the Yajna-valkya Smriti nor from the profundity of Vijnaneshwara's commentary on it, the critique bearing the humble title of 'Mitakrshara'.

The appellant is governed by the Mitakshara School of Hindu Law but that is not of any particular consequence for the purposes of this appeal. The differences between the Mitakshara and Dayabhaga schools on the birth-right of coparceners and the rules of inheritance have no bearing on the issues arising in this appeal, particularly on the question whether a single male can constitute a joint or undivided family with his wife and unmarried daughter. A joint Hindu family under the Dayabhaga is, like a Mitakshara family, normally joint in food, worship and estate. In both systems, the property of the joint family may consist of ancestral property, joint acquisitions and of self-acquisitions thrown into the common stock. In fact, whatever be the school of Hindu law by which a person is governed, the basic concept of a Hindu undivided family in the sense of who can be its members is just the same.

Section 2(9) of the Indian Income-tax Act, 1922, defines a 'person" to include, inter alia, a "Hindu undivided family'. under Sections 3 and 55 of that Act, a Hindu undivided family is a taxable unit for the purposes of income-tax and super-tax. The expression 'Hindu undivided family' finds reference in these and other provisions of the Act but that expression is not defined in the Act. The reason of the omission evidently is that the expression has a well-known connotation under the Hindu law and being aware of it, the Legislature did not want to define the expression separately in the Act. Therefore, the expression 'Hindu undivided family' must be construed in the sense in which it is understood under the Hindu Law CIT v. Gomedalli Lakshminarayan [1935] 3 ITR 367, 369, 370 (Bom.)- See particularly the judgment of Rangnekar J. at page 244.

There is no substance in the contention of the respondent that in the absence of an antecedent history of jointness, the appellant cannot constitute a joint Hindu family with his wife and unmarried daughter. The lack of such history was never before pleaded and not only does it find no support from the record but such an assumption ignores the plain truth that the joint and undivided family is the normal condition of Hindu society. The presumption, therefore, is that the members of a joint Hindu family are living in a state of union, unless the contrary is established (Mayne's Hindu Law and Usage, eleventh edition, page 323 ; Mulla's Hindu Law, fourteenth edition page 284). The strength of the presumption may vary from case to case depending upon the degree of relationship of the members and the farther one goes from the founder of the family, the weaker may be the presumption. But, generally speaking, the normal state of every Hindu family is joint and the absence of proof of division, such is the legal presumption. Thus, a man who separates from his father or brothers may, nevertheless, continue to be joint with the members of his own branch. He becomes the head of a new joint family, if he has a family and if he obtains property on partition with his father and brothers that property becomes the ancestral property of his branch qua him and his male issue. (p.

781) 30. There is divergence of opinion regarding the principles to be applied for determining the status of an individual or HUF for the purpose of taxation or for other purposes. Even on the basis of the principle that if there are two opinions on an issue, one favouring the assessee is to be preferred. For that purpose, it is necessary to understand the difference in the facts of the following cases and the principle of law enunciated therein : 1. CIT v. Gomedalli Lakshminarayan [1935] 3 ITR 367 (Bom.)-The joint Hindu family consisting of father, mother, son and his wife. The father died-the family consisted of the widowed mother, son and the wife. The point for consideration was whether the income earned by the family could be treated as the separate income of the son or the income of the HUF for the purposes of assessment to super-tax under the Act. It was held by the Bombay High Court that the income will be treated as the income of the HUF as the HUF consisted of the sole surviving male member and other family members who were entitled to maintenance.

2. Kalyanji Vithatdas v. CIT [1937] 5 ITR 90 (PC)-The point at issue was the correct status for the purposes of assessment of six partners of a firm. The partners represented the families of the branches, Moolji and Kalyanji who were not related. Moolji and Kalyanji had no ancestral funds. In the case of Moolji, Kalyanji and Purusottam the income from the firm was treated as their separate and self-acquired income even though they had sons. In the case of Purusottam, who had no son, the income was treated as self-acquired.

But the other two partners Kanji and Sewdas, sons of Moolji, had received their interest in the firm under a gift from their father.

The Privy Council assumed that the interest received by Kanji and Sewdas was ancestral property, so that if either Kanji or Sewdas had a son, the son would have taken an interest in the property by birth. Neither Kanji nor Sewdas had a son. Kanji's family consisted of himself, his wife and daughter, while Sewdas's family consisted of himself and his wife. The Privy Council held that the mere existence of a wife or daughter does not make ancestral property joint and held that the income of Kanji and Sewdas would belong to the individual and not to the HUF. 3. CIT v. A.P. Swami Gomedalli [1937] 5 ITR 416 (PC)-In this case, the decision of Bombay High Court in Gomedalli Laksminarayana's case (supra) (SI. No. 1) was reversed by the Privy Council following some of the observations in Kalyanji Vithaldas's case (supra) (SI. No. 2) without noticing the difference in the facts of both the cases. The Supreme Court in Gowli Buddanna's case (supra) considered the facts of the case at SI. Nos. 1 and 2 and observed that the distinction which had a vital hearing on the issues to be determined was not given effect to by the Judicial Committee in this case. Similar has been the observation of the Supreme Court in the case of N. V. Narendranath (supra) at page 194. Therefore, the Privy Council's decision in Kalyanji Vithaldas's case (supra) is not good law and the principles laid down by the Bombay High Court in the case of Gomedalli Lakshminarayart's (supra) was good law.

4. N. V. Narendranath''s case (supra)-The family originally consisted of the appellant, his father and his brothers and the properties were joint family property. Partition took place between the appellant, his father and brothers. At the time of partition, the family of the assessee consisted of self, wife, two minor daughters and no son. The point arose, whether the properties received at the time of the partition will bear the character of the joint family property or will become the absolute property of the appellant. It was held by the Supreme Court that even though there was no son the properties received, as a share on the partition of joint family properties, will belong to the HUF of the appellant, his wife, minor daughters and cannot be taxed as his individual property for the purposes of wealth-tax.

5. CIT v. Rm. Ar. Ar. Veerappa Chettiar [1970] 76 ITR 467 (SC)-'A' with his three wives, son 'B' and the son's wife were members of an HUF. The son died in 1934. The father died in 1938 leaving behind two widows and the daughter-in-law. The point for consideration was-whether the three widows held the properties as HUF or in any other capacity. The Supreme Court held that under the Hindu law it is not predicted of a Hindu joint family that there must be a male member. So long as the property, which was originally of the joint Hindu family, remains jointly in the hands of the widows and is not divided among them, the joint family continues and the income will be assessed as the income of the HUF.31. Besides drawing assistance from the above cases in support of the assessee's contention, we have a very recent decision of this Tribunal in the case of Keshav Shukla (supra). In the said case, the learned members held that since unmarried daughters had a right to be maintained and to be married out of joint family property, the assessee owned the property received by him on partition as the karta of the family consisting of himself and his unmarried daughters, in the following words : 7. We have carefully examined the facts on record and the rival submissions. Admittedly, the capital in the firm which has been partitioned between the assessee, his son and his wife was the property of the HUF, and, therefore, its nature would not get altered in the hands of the assessee if it can be shown that he still forms a family along with other members, who have not separated from him. In the present case, admittedly, the four unmarried daughters of the assessee are still there and they continued to be the members of his family. The unmarried daughters have a right to be maintained and to be married out of the joint family property. The assessee, therefore, owns the property received by him on partition from his son and his wife not in his individual capacity, but as the karta of the family consisting of himself and his unmarried daughters. The correct position in law of the property received on partition by a member of the family been considered and pronounced by their Lordships of the Privy Council in Attorney-General of Ceylon v. AR. Arunachalam Chettiar [1958] 34 ITR(ED) 42. The above decision of the Privy Council has been approvingly quoted and relied upon by the Hon'ble Supreme Court while disposing of the appeal in the case of N. V. Narendranath v. CWT [1969] 74 ITR 190. At page 197, this is what their Lordships have stated with regard to the nature of property received on partition by a member of the HUF : ...As pointed out by the Judicial Committee in Arunachalam's case [1958] 34 ITR (ED) 42 it is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as 'joint property of the undivided family'. Applying this test, it is clear, though in the absence of male issue, the dividing coparcener may be properly described in a sense as the owner of the properties, that upon the adoption of a son or birth of a son to him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it and the partition only cuts off the claims of the dividing coparceners. The father and his male issue still remain joint. The same rule would apply even when a partition had been made before the birth of the male issue or before a son is adopted, for the share which is taken at a partition by one of the coparceners is taken by him as representing his branch. Again, the ownership of the dividing coparcener is such 'that female members of the family may have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it. See Aruna-chalam's case. It is evident that these are the incidents which arise because the properties have been and have not ceased to be joint family properties....

8. Applying the above principles to the facts of the present case, it is seen that what was received by the assessee on partition was part of joint Hindu family property and that he had unmarried daughters who had the right of being maintained by the family. The property, therefore, which has been received by the assessee belongs to him as the head of the family consisting of himself and his daughters and to the existing family a son can always be added either by birth or by adoption and, therefore, the incidents of HUF property are not taken away merely because the assessee's wife and assessee's son have been separated after partition with regard to the share capital in the firm in which the assessee was formerly representing the entire family, consisting of himself, his son, his wife and his daughters, as karta. The fact of the case of Purshottam Das Rais (supra) were altogether different inasmuch as there were no family members with whom Shri Purshottam Das Rais could form a family after partition had taken place between him, his wife, his sons and his mother. Shri Purshottam Das was left all alone and it is common ground that a single person does not constitute family. It was in the context of the facts of that case that their Lordships had pointed out that on the partition of the family income received by each of the divided members from divided property was received by him as an individual (sic) and he was assessable with regard to such income as individual. The facts of the present case are materially different insofar as the divided father still has unmarried daughters to support and maintain and the responsibility of those daughters cannot be foisted by him on his divided son or for that matter on the divided wife. The obligation to maintain the unmarried daughters and marry them is fastened on the family of which, at the relevant time, the assessee is the karta. The Commissioner was, therefore, in our opinion, in error in presuming that the facts of the present case were governed by the ratio of the case of Purshottam Das Rais (supra). In view of this, we quash the order of the Commissioner under Section 263 and allow the appeal.(pp. 559-60) 32. The decision in the case of C. Krishna Prasad (supra) was relied upon by both the sides. The reliance of the departmental representative on the said case in its support is misplaced because of difference of facts. The observations of their Lordships of the Hon'ble Supreme Court find place supporting the contention of the assessee as follows : ...In view of the above it cannot be denied that the appellant at present is the absolute owner of the property which fell to his share as a result of partition and that he can deal with it as he wishes. There is admittedly no female member in existence who is entitled to maintenance from the above-mentioned property or who is capable of adopting a son to a deceased coparcener....(p. 497) Reliance of the learned departmental representative on P.L. Karuppan Chettiar's case (supra) is also misplaced.

33. We have for our guidance another case of the Madras High Court in the case of CIT v. M. Balasubramaniam [1981] 132 ITR 529 in which large number of decisions of several High Courts and the Supreme Court on the issue most of which we have dealt with above were discussed and in that case, their Lordships have made the following observations of the report : In the present case at the time when the property was given, there was no joint family, as the assessee was not even married. Where on the partition of an HUF a bachelor got certain properties, the Supreme Court in C. Krishna Prasad v. CIT [1974] 97 ITR 493 held that 'family' always signified a group and that plurality of persons was an essential attribute of a family, that a single person, male or female, did not constitute a family and that a family consisting of a single individual was a contradiction in terms. It was pointed out that the assessment in the status of an HUF could be made only when there were two or more members of the HUF. If in the present case the property had been obtained on partition, then as a result of the marriage and the subsequent birth of the daughter, it would have been possible to hold that the income belonged to the HUF or that the assets belonged to an HUF as in Narendranath's case [1969] 74 ITR 190 (SC). But that is not the position here. The property had been obtained only under a gift. The legal incidence of the property obtained may change on the birth of the son, but until that event happened, the assessee would have to be assessed only as an individual. (p. 539) In the light of the above discussion, the assessee's income from dividend, interest from banks and annuity refunds could not be subjected to tax in his hands as individual.

34. Coming to the ground Nos. 6 and 7, which pertain to charging of interest under Sections 139(8) and 215, the only submission of the learned counsel for the assessee was that this ground may be treated as consequential to the ground we have discussed above. Therefore, in this respect, we confirm the action of the Commissioner (Appeals) to the extent that no appeal lies in respect of the ITO's action against the levy of interest under Sections 215 and 139(8), but in case the assessee gets relief in consequence to our finding given above regarding exclusion of income from property acquired by him on partition, the same will be granted to the assessee.


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