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Wealth-tax Officer Vs. Late H.H. Sir Sawai Man Singhji of - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1984)7ITD401(Delhi)
AppellantWealth-tax Officer
RespondentLate H.H. Sir Sawai Man Singhji of
Excerpt:
.....under the proviso to section 6 of the hindu succession act, 1956 but the huf consisting of the sons, widow, etc., continued to remain in existence in respect of the remaining property and was, therefore, assessable entity. the department's case all along has been that the property in the hands of the late maharaja was his individual property and, therefore, the said property passed by succession on his death on his heirs under the hindu succession act and they would be liable to be assessed on the share which they inherited from the late maharaja.however, since the returns had been filed in the status of huf, the assessments had been completed on protective basis.3. the assessee came in appeals before the commissioner (appeals) and challenged the assessments made on protective basis......
Judgment:
1. These six appeals by the WTO and the cross-objections thereto and also six appeals by the assessee pertain to the assessment years 1971-72 to 1976-77 and since all of them raise a single common question of law, they are being disposed of by this common order.

2. The cross-objections by the assessee are merely the duplication of the appeals filed by him except that in the cross-objection the grounds are slightly more explicit and detailed. Briefly the facts are that H.H. Sir Sawai Man Singhji of Jaipur died on 24-6-1970 leaving behind him a widow Maharani Gayatri Devi and four sons. There is an old dispute between the assessee and the revenue whether the property held by the late Maharaja was his individual property or the HUF property in his hands. So far as the Tribunal is concerned this point has been decided in favour of the assessee by holding that the property held by late Maharaja was HUF property. The assessee who is the son of late Maharaja and claims to be the karta of HUF filed the returns for all these years on the basis that after the death of late Maharaja only his share in the coparcenary property devolved by succession under the proviso to Section 6 of the Hindu Succession Act, 1956 but the HUF consisting of the sons, widow, etc., continued to remain in existence in respect of the remaining property and was, therefore, assessable entity. The department's case all along has been that the property in the hands of the late Maharaja was his individual property and, therefore, the said property passed by succession on his death on his heirs under the Hindu Succession Act and they would be liable to be assessed on the share which they inherited from the late Maharaja.

However, since the returns had been filed in the status of HUF, the assessments had been completed on protective basis.

3. The assessee came in appeals before the Commissioner (Appeals) and challenged the assessments made on protective basis. At the time of hearing before the Commissioner (Appeals), the matter was discussed in the light of ruling of the Supreme Court in Gurupad Khandappa Magdum v.Hirabai Khandappa Magdum [1981] 129 ITR 440 wherein the Supreme Court has discussed the provision of the Hindu Succession Act on the passing of the property belonging to the HUF on the death of the karta who had left surviving him a female relative specified in class I of the Schedule to the said Act. Since the case of the assessee on the facts was similar, i.e., the late Maharaja left behind a widow besides other heirs, the ruling of the Supreme Court in Gurupad Khandappa Magdum's case (supra), was directly applicable. After discussing the said ruling the learned Commissioner (Appeals) came to the following conclusion : By virtue of the proviso to Section 6 of the Hindu Succession Act, 1956 when a male Hindu dies after the commencement of the said Act and leaves a surviving female relative specified in class I of the Schedule or a male relative specified in that clause who claims through such relative the interest of the deceased in the Mitakshara coparcenary property, property shall devolve by testamentary or intestate succession, as the case may be, under the said Act and not by survivorship. Under Explanation 1 to Section 6 of the Hindu Succession Act, 1956 for the purpose of the said section the interest of a Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death irrespective of whether he was entitled to claim partition or not. What their lordships of the Supreme Court have pronounced as the correct position of law in this regard is that whether a partition had actually taken place is besides the point for the purpose of Explanation 1 ; that the Explanation compels the assumption of a fiction that in fact 'partition of the property had taken place, the point of time of the partition being the one immediately before the death of the person in whose property the heirs claim a share'. Their Lordships further pronounced that this fiction of partition 'has to be given its due and full effect'.

Their Lordships go on to say that- What is, therefore, required to be assumed is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. That assumption, once made, is irrevocable. In other words the assumption having been made once for the purpose of ascertaining the share of the deceased in the coparcenary property, one cannot go back on that assumption and ascertain the share of the heirs without reference to it. The assumption which the statute requires to be made, that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one'simagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased.

The allotment of this share is not a procedural step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional partition.

The Commissioner (Appeals) accordingly annulled the assessments and both the department and the assessee are aggrieved by this common order.

4. The contention of the learned departmental representative is that the protective assessments should not have been annulled. The assessee's contention, on the other hand is that even according to the Supreme Court ruling in Gumpad Khandappa Magdum's case (supra), for ascertaining the shares that would have fallen to deceased Maharaja, it was not necessary to assume a total partition of the HUF. Their contention is that the remaining family is still existing and the assessments of the HUF should have been treated as substantive rather than protective.

5. We have heard the learned counsel for the assessee and the departmental representative. The learned counsel for the assessee placed reliance on the Allahabad High Court decision in the case of Maharani Raj Laxmi Kumari Devi v. CED [1980] 121 ITR 1002, a case under the Estate Duty Act, 1953 in which the Allahabad High Court held that Section 6 does not effect a partition by operation of law and provisions of the Hindu Succession Act did not destroy the existence of the coparcenary at the time of Maharaja's death. The interest of the sons of the deceased Maharaja were rightly aggregated in the principal value of the estate of the deceased. It was urged that in the case before the Supreme Court the question of an actual partition being assumed between the other members of the HUF did not really arise for decision. According to the learned counsel the interpretation of that ruling should be, that so far as the widow is concerned, the actual partition be assumed on the death of the Maharaja but for other coparceners there was only a notional partition. In this case the late Maharaja has left four sons and a wife and a grandd-aughter, i.e., daughter of deceased daughter, when he died. The assessee-HUF filed returns in respect of four sons who were coparceners and their mother, i.e., the widow of the late Maharaja. In respect of the share falling to the four sons and the widow on succession it was split up amongst the sons and the mother and they filed returns in respect of their own shares as individuals or smaller HUFs. It was conceded that so far as the widow of the late Maharaja was concerned her share on a notional partition would be one-sixth in her own right and one-sixth out of one-sixth share of the Maharaja as an heir under the Hindu Succession Act and that she would not be a member of the HUF. On the other hand, the stand of the learned departmental representative was that late Maharaja was always individual though the Tribunal had held that his status was that of HUF and the matter is in reference before the High Court. The department is entitled to make a protective assessment and authorities were cite"d in support of this proposition. It was urged that even on the interpretation placed by the learned Commissioner (Appeals) on the Supreme Court ruling in Gurupad Khandappa Magdwn's case (supra), the annulment of the assessments was improper.

6. We have considered the rival contentions. We have also carefully read the ruling of the Supreme Court in the case of Gurupad Khandappa Magdum (supra) and also the Full Bench of the Bombay High Court ruling in the case of Sushilabai Ramchandra Kulkarni v. Narayanrao Gopalrao Deshpande AIR 1957 (Bom.) 257 which was approved by the Supreme Court in Gurupad Khandappa Magdum's case (supra). The question that falls for determination is whether on the notional partition which has to be assumed under Explanation 1 to Section 6 there would also be a partition between the other coparceners of the family or not. The learned Commissioner (Appeals) held that there would be a total partition. The facts of the case before the Supreme Court were that Khandappa died leaving a widow, two sons and three daughters. The widow filed a suit in Civil Court claiming that on the death of her husband she became entitled to one-fourth share in the joint family properties because if there had been a partition between her and sons she would have got share equal to sons. She was also entitled to one-sixth share in the one-fourth share of her husband in the coparcenary properties as an heir and, therefore, she claimed 1/4+1/24=7/24 share of the properties. The Supreme Court analysed Explanation 1 to Section 6 and held that it was necessary first to decide as to what was the widow's share in the properties left by her husband and secondly, what was her husband's share in the coparcenary properties. So far as widow's share in the properties left by her husband is concerned, it was held that it was one-sixth since he left two sons and three daughters besides the widow. The next step, equally important, though not equally easy to work out, was to find out the share which the deceased had in the coparcenary properties. Their Lordships observed that Explanation 1 to Section 6 creates a fiction by providing that the interest of a Hindu Mitakshara coparcener would be deemed to be the share in the property that would have been allotted to him if the partition of the property had taken place immediately after his death. One must, therefore, imagine a state of affairs in which a little prior to Khandappa's death, a partition of the coparcenary properties was effected between him and other members of the coparcenary. The plaintiff not being a coparcener was not entitled to demand partition, yet if a partition were to take place between her husband and two sons, she was entitled to take a share equal to a son. Therefore, the share of Khandappa would work out to one-fourth, the widow and two sons getting remaining one-fourth each.

7. Their Lordships then posed the next somewhat different problem which was to determine whether the plaintiff's share in coparcenary property was 1/24 or 1/4 plus 1/24, i.e., 7/24. Their Lordships made the following observations in this regard : We see no justification for limiting the plaintiff's share to 1/24th by ignoring the 1/4th share which she would have obtained had there been a partition during her husband's lifetime between him and his two sons. We think that in overlooking that 1/4th share, one unwittingly permits one's imagination to boggle under the oppression of the reality that there was in fact no partition between the plaintiff's husband and his sons. Whether a partition had actually taken place between the plaintiff's husband and his sons is beside the point for the purposes of Explanation I. That Explanation compels the assumption of a fiction that in fact 'a partition of the property had taken place', the point of time of the partition being the one immediately before the death of the person in whose property the heirs claim a share. (pp. 445-46) In order to ascertain the share of heirs in the property of a deceased coparcener it is necessary in the very nature of things and as the very first step, to ascertain the share of the deceased in the coparcenary property. For, by doing that alone can one determine the extent of the claimant's share. Explanation 1 to Section 6 resorts to the simple expedient, undoubtedly fictional, that the interest of a Hindu Mitakshara coparcener 'shall be deemed to be' the share in the property that would have been allotted to him if a partition of that property had taken place immediately before his death. What is, therefore, required to be assumed is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. That assumption, once made, is irrevocable. In other words, the assumption having been made once for the purpose of ascertaining the share of the deceased in the coparcenary property, one cannot go back on that assumption and ascertain the share of the heirs without reference to it. The assumption which the statute requires to be made that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one's imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased.

The allotment of this share is not a procedural siep devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in then ational partition. (p.

447) On page 448 it was held that even assuming that two interpretations of Explanation I are reasonably possible, their Lordships must prefer that interpretation which will further the intention of the Legislature and remedy the injustice from which the Hindu women had suffered over the years. That was a case where a suit was filed by a Hindu widow after the coming into force of the Hindu Succession Act. The question, however, arises whether the effect of this ruling is only limited to the case of a widow and if there are more than one coparceners, the remaining coparceners would remain joint and continue to form a HUF.The reading of the second quotation reproduced above in Gurupad Khandappa Magdum's case (supra) would show that the partition which has to be legally assumed under Explanation 1 to Section 6 is to be treated as a real partition. It has to be treated and accepted as complete reality, something that cannot be recalled just as a share allotted to coparcenary cannot jointly be recalled. In the face of such clear words used by the Supreme Court it seems really difficult to hold that the Supreme Court meant only to apply this ruling in the case of a widow who came before them and not in the case of remaining coparceners, where there were more than one as in the case before us.

8. In fact before this judgment of the Supreme Court was delivered there was a conflict of opinion between the different High Courts on the question of assumption to be made in applying Explanation 1 to Section 6. The entire case law has been discussed by the Bombay High Court in Sushilabai Ram-chandra Kulkarni (supra) the opposite stand taken by the plaintiff's counsel and defendant's counsel are reproduced in para 8 of the said ruling. Their Lordships in the Bombay High Court's case did not express any concluded opinion on the question whether the legal fiction in Explanation 1 to Section 6 should be carried to its logical conclusion because it was possible to decide that appeal on the facts of the case without deciding that issue.

However, in the case before the Supreme Court, their Lordships have clearly expressed their opinion that the notional partition must be treated as an actual partition between the deceased and his sons and one should not permit one's imagination to boggle under the oppression of the reality that there was in fact no partition. Therefore, though there was actually no partition during the lifetime of the late Maharaja. We have to assume that there was such a partition to determine not only the share of late Maharaja but also of his widow and his sons and the partition must be treated as complete partition.

9. The point that was decided by the Allahabad High Court in Maharani Raj Laxmi Kumari Devi's case (supra) was under the Estate Duty Act and their Lordships have sought to explain the Supreme Court ruling supra in a manner different to that which commends to us. We respectfully follow the Supreme Court ruling and held that the Commissioner (Appeals) was correct in holding that on the death of late Maharaja, his HUF came to an end and thereafter his family got partitioned.

Therefore, the assessment of the assessee-HUF was unsupportable either as a substantive assessment or protective assessment which was, therefore, rightly annulled.

10. In the result the departmental appeals are dismissed and so also the appeals and cross-objections by the assessee. The order of the Commissioner (Appeals) is confirmed.


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