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First Income-tax Officer Vs. M. Jeswantharaj - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Bangalore
Decided On
Judge
Reported in(1984)9ITD872(Bang.)
AppellantFirst Income-tax Officer
RespondentM. Jeswantharaj
Excerpt:
.....the huf property. thus, the property got by the assessee in partition on 30-10-1970 becomes joint family property in his hands after he got married in 1975. thus, the income from property got in partition has to be assessed in the hands of the assessee in the status of 'huf' in this year.4. in hirabai's case (supra) the bombay high court held that the effect of adoption obviously is, when the adoption is by a widow, to make the adopted son to be the member of the family of the deceased husband of the widow. by reason of adoption, interest in the property would arise from the date of such adoption, subject, however, that the other members of the family would not be divested of the estate vested in them. dealing with the rights of a widow, the bombay high court, after considering section.....
Judgment:
1. There was a bigger HUF consisting of two brothers, Shri J.Bhanwarlal and Shri Motilal. Shri Motilal died leaving behind his wife, Smt. Anchi Bai. In 1964 she adopted Shri Jeswantharaj, the assessee. On 24-10-1965 there was a partition between Smt. Anchi Bai and Shri J.Bhanwarlal. Under the said partition she got her husband's share of property. After that, the family consisted of herself and her adopted son, the assessee. Thereafter, there was a partition on 30-10-1970 between Smt. Anchi Bai and the assessee under which the assessee got 50 per cent share. The property got by the assessee in the said partition was treated as individual property till the assessment year 1977-78.

The assessee got married on 25-6-1975. During the assessment year 1978-79, he claimed that income from the properties got in partition on 30-10-1970 should be assessed in the status of HUF. The ITO held that the properties which came to the share of Smt. Anchi Bai became her absolute property by virtue of the provisions of Section 14 of the Hindu Succession Act, 1956. On 30-10-1970 when the assessee was given 50 per cent share of assets, it has to be treated as gift only and not a partition as claimed by the assessee and as such the assessee's status of HUF cannot be accepted. The income arising from the properties received by the assessee on 30-10-1970 is assessable in the status of individual only. On appeal, the AAC accepted the assessee's claim and directed the ITO to assess the assessee in the status of HUF.Against the same, the revenue has preferred this appeal.

2. The learned departmental representative submitted that after partition in 1965, Smt. Anchi Bai got absolute right in the property after the Hindu Succession Act. The property given to the assessee in 1970 can only be treated as a gift. Thus, the income from the property got by the assessee in 1970 has to be assessed only in the status of 'individual'. The learned Counsel for the assessee strongly urged that the assessee was adopted in 1964. After that there was a partition on 24-10-1965 between Shri Bhanwarlal and Smt. Anchi Bai. The property got by Smt. Anchi Bai belonged to the HUF of which the assessee is a coparcener. So, he had right in the HUF property. There was a partition in 1970 wherein the assessee got 50 per cent share of the HUF property.

The assessee got married in 1975. Thereafter, the property got by the assessee in 1970 became HUF property and so the status has been rightly taken as HUF by the AAC. He placed reliance on the decision in Hirabai v. Babu Manika Ingale AIR 1980 Bom. 315.

3. We have considered the rival submissions. As stated already, the assessee was adopted by Smt. Anchi Bai on 2-11-1964. Thereafter, the assessee became the adopted son and coparcener of the HUF. There was a partition between Shri Bhanwarlal and Smt. Anchi Bai on 24-10-1965 under which Smt. Anchi Bai got her husband's share of property. The property which she got on partition was HUF property. The members of the HUF were herself and her adopted son. Her adopted son had a right in the said property. In the case of adoption by a widow, the adopted child becomes absorbed in the adoptive family to which the widow belonged. In Smt. Sitabai v. Ramchandra AIR 1970 SC 343, the Supreme Court held that the child adopted by the widow becomes the adopted son of the husband of the widow and it is a necessary implication of Sections 12 and 14 of the Hindu Succession Act that a son adopted by the widow becomes a son not only of the widow but also of the deceased husband, and the adopted child becomes the child of both the spouses.

Applying the above ratio, it has to be held that the assessee, Shri Jeswantharaj, who was adopted by Smt. Anchi Bai in 1964 became the adopted son of herself and her deceased husband, Motilal. He becomes a coparcener of the HUF and gets a share in the property. Smt. Anchi Bai does not get absolute right in the property got in partition on 24-10-1965 as that property was HUF property belonging to her and her adopted son who were members of the family at that time. Under Section 14 any property possessed by a female Hindu, whether acquired before or after the commencement to this Act, shall be held by her as full owner thereof and not as a limited owner. This section has no application to the present case as in the partition on 24-10-1965 the property got by Smt. Anchi Bai belonged to her as well as to her son as it was HUF property. Hence, she does not get absolute right in the entire property got on partition on 24-10-1965. She has only half share in the property. Subsequently, on 30-10-1970 there was a partition between Smt. Anchi Bai and the assessee under which each got 50 per cent share in the HUF property. Thus, the property got by the assessee in partition on 30-10-1970 becomes joint family property in his hands after he got married in 1975. Thus, the income from property got in partition has to be assessed in the hands of the assessee in the status of 'HUF' in this year.

4. In Hirabai's case (supra) the Bombay High Court held that the effect of adoption obviously is, when the adoption is by a widow, to make the adopted son to be the member of the family of the deceased husband of the widow. By reason of adoption, interest in the property would arise from the date of such adoption, subject, however, that the other members of the family would not be divested of the estate vested in them. Dealing with the rights of a widow, the Bombay High Court, after considering Section 14, observed as under : It is obvious that notwithstanding the fact that the property comes in the hands of the Hindu widow, it does not lose its character as the one that belongs to the Hindu joint family. This is more so when the Hindu widow can be the prospective mother because of the legal capacity to adopt a child to herself and to her deceased husband.

That capacity involves, as we have indicated earlier, to have an adoptive child to herself and to her husband and to confer him with the similar status as one that of the natural born child, which event has the legal effect of creating interest in the joint family property if such a property exists at the date when the adoption takes effect and it begins to operate on the principles of prospective furthering. The entire process is voluntary. Once the event is achieved the effect follows. Only because a particular legal effect ensues, the initial character of voluntary act does not cease to be so and has to be continued even for the purpose of the result from that perspective.

It was further observed that though Section 14(1) declares that the property shall be held by the female Hindu as a full owner thereof, it has not the effect of changing the basic character of the coparcenary property. As soon as a person is born or a child is born by the legal device, the resulting interest in his favour would ensue and the possibility of such interest coming into life and becoming operative is always there by reason of the character of the property. In Hirabai's case (supra) it was observed as under : ... We have, therefore, come to the conclusion, on the authority of these pronouncements coming from the highest Court and interpreting the terms of the enactment as we find that the character of coparcenary and its property is not affected, that its inalienable attributes are retained notwithstanding the declaration by which a Hindu female is placed in the same position as any other Hindu male would be with regard to such property. Such a view does not run counter, nor does it conflict with the express statement of law available in Section 14(1) of the Succession Act.

... Summarising, because of the incidents and inalienable attributes of the property and because of adoption implying the voluntary act of the taker and because we feel that there is no conflict with the provisions of Section 14 of the Succession Act and such taking and its effect, we are of the view that upon adoption, the adopted child gets interest in the joint family property from the date of its adoption.

Thus, it was held therein that the adopted child gets an interest in the joint family property from the date of his adoption. The above decision is directly on the point and squarely covers the instant case.

In our view, the assessee, Shri M. Jeswantharaj, after his adoption in 1964 became a member of the adoptive family and got interest in the joint family property from the date of his adoption. Thus, in the properties got by Smt. Anchi Bai in partition on 24-10-1965, the assessee as an adopted son got interest. Subsequently, those properties were partitioned between the assessee and Smt. Anchi Bai, each getting 50 per cent share. Thus, the property got by the assessee in partition on 30-10-1970 became joint family property. After his marriage on 25-6-1975, the family consisted of the assessee and his wife. Thus, the income from the properties got in partition in 1970 has to be assessed in the status of HUF. Thus, we uphold the order of the AAC.


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