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Commissioner of Income-tax Vs. Ghansham Dass Mukim - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 74 and 75 of 1975
Judge
Reported in[1979]118ITR930(P& H)
ActsIncome Tax Act - Sections 3(1)
AppellantCommissioner of Income-tax
RespondentGhansham Dass Mukim
Appellant Advocate D.N. Awasthy and; B.N. Jhingan, Advs.
Respondent Advocate B.S. Gupta, Adv.
Cases ReferredIn N. V. Narendranath v. Commissioner of Wealth
Excerpt:
.....will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 7. on the basis of the aforesaid findings, the appeals of the revenue failed before the tribunal. 14. that it does not take more than one male to form a joint hindu family with females is well established. the same is true of the decision in narendranath's case (see page 886). 17. thus, the contention of the department that in the absence of a preexisting joint family the appellant cannot constitute a hindu undivided family with his wife and unmarried daughter must fail. we fail to understand as to what was the legal bar in the way of smt......immediately prior to her death from the firm, m/s. rameshwar dass hari shankar, ahmedabad, to the joint hindu family of shri ghansham dass, the testatrix had bequeathed the property jointly to shri ghansham dass, his wife and his daughter in equal shares ? (iii) if the answer to question no. (ii) is in the negative, whether the bequest made by the testatrix in respect of the amount due to her from the firm m/s. rameshwar dass hari shankar, ahmedabad, the joint family property of the huf consisting of shri ghansham dass, his wife and his daughter ? (iv) if the answer to question no. (ii) is in the negative, whether the bequest made by the testatrix in respect of the amount due to her from the firm, m/s. rameshwar dass hari shankar, ahmedabad, the property of the individual, shri ghansham.....
Judgment:

Prem Chand Jain, J.

1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following questions of law for our opinion :

'(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the income of the assessee from the firm, M/s. Rameshwar Dass Hari Shankar, Ahmedabad, was not includible in the taxable income of Ghansham Dass, individual ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that by purporting to bequeath the total amounts due to her immediately prior to her death from the firm, M/s. Rameshwar Dass Hari Shankar, Ahmedabad, to the joint Hindu family of Shri Ghansham Dass, the testatrix had bequeathed the property jointly to Shri Ghansham Dass, his wife and his daughter in equal shares ?

(iii) If the answer to question No. (ii) is in the negative, whether the bequest made by the testatrix in respect of the amount due to her from the firm M/s. Rameshwar Dass Hari Shankar, Ahmedabad, the joint family property of the HUF consisting of Shri Ghansham Dass, his wife and his daughter ?

(iv) If the answer to question No. (ii) is in the negative, whether the bequest made by the testatrix in respect of the amount due to her from the firm, M/s. Rameshwar Dass Hari Shankar, Ahmedabad, the property of the individual, Shri Ghansham Dass ?'

2. The assessee is an individual having, according to his return, share income from three partnership firms, two namely, M/s. Rameshwar Dass Ram Saran Dass and M/s. Kirori Mal Devi Sahai, carrying on business at Delhi, and one, namely, M/s. Bharat Metal Industries, carrying on business at Bhiwani. The assessee's share in the said three firm's profits was 17%, 25% and 15%, respectively. The relevant previous years, as contemplated under Section 3(1)(f) of the I.T. Act (hereinafter referred to as 'the Act'), ended on March 31, 1969, and March 31, 1970, respectively, in respect of the said sources of income. The assessment was completed by the ITO on January 24, 1970, at a total income of Rs. 28,363 as against the income of Rs. 18,913 returned by the assessee for the assessment year 1969-70, and at a total income of Rs. 69,260 for the assessment year 1970-71, in the status of an individual. The assessee was also a partner in a fourth firm, namely, M/s. Rameshwar Dass Hari Shankar, which was carrying on business at Ahmedabad. In the profits of the said fourth firm, the assessee's sjiare was 25%.

3. The accounting year of the said Ahmedabad firm was from November 16, 1967, to July 26, 1968. The assessee's share income from the Ahmedabad firm for the said previous year ending on July 26, 1968, was Rs. 3,542. In respect of this share income of Rs. 3,542, the HUF, M/s. Ghausham Dass Gaja Nand of Bhiwani, filed a return for the assessment, year commencing on April 1, 1969. The ITO clubbed this share income with the assessee's share income from the other three partnership firms and completed the assessment accordingly, vide his order dated January 24, 1970 (annexure 'A'), relating to the assessment year commencing on April 1, 1969. For the assessment year 1970-71, the total income assessed by the ITO, to which the dispute in respect of this assessment year before the Tribunal related, was Rs. 31,765. Copy of the order of the ITO relating to the assessment year 1970-71 is annex.'B'.

4. On appeal, the AAC excluded the amounts of Rs. 3,542 and Rs. 31,765 from the assessee's taxable income for the assessment years under consideration.

5. Feeling aggrieved by the orders of the AAC, the revenue preferred appeals. The Tribunal noticed certain admitted facts which may be stated thus :

Gaja Nand and his wife, Smt. Manbhawati Devi, had three daughters, but no son was begotten by Gaja Nand. Ghansham Dass, the respondent, was adopted by Gaja Nand on May 4, 1950. The adoption deed, however, was executed on March 9, 1962. Smt. Manbhawati Devi died on November 15, 19967. She had a plot of land at Ahmedabad and some agricultural land at Bhiwani, as also certain quantity of gold and gold ornaments. She was also a partner in three partnership firms, to which reference has been made in the earlier part of the judgment. In the Ahmedabad firm, her share of profits was 25% and there were four partners. Her share income up to November 15, 1967, i.e., the date of her expiry, came to Rs. 1,124, and the balance brought forward to her credit in her account was Rs. 30,208.57. The total amount due to her thus came to Rs. 31,332.57. The said amount stood transferred to the account of the HUF of Messrs. Ghansham Dass Gaja Nand on November 16, 1967.

6. After taking into consideration the law and the facts, the Tribunal held that the will, annex.'J', was to be treated as having been executed by Smt. Manbhawati Devi, that the said will suffered from no legal infirmity ; that Ghansham Dass, the respondent, formed a HUF along with his wife and minor daughter ; that the property bequeathed by Smt. Manbhawati Devi, as per her will, annex.'J' in favour of the HUF headed by Ghansham Dass as karta, did not become the joint family property inasmuch as Smt. Manbhawati Devi not being a coparcener of the said family could not convert the property into joint family property of that family ; that the property bequeathed became the joint property of the three individuals, namely, Ghansham Dass, his wife and their minor daughter in equal shares ; that the one-third portion of the property bequeathed by Smt, Manbhawati Devi (to the extent of the amount due to her from M/s. Rameshwar Dass Hari Shankar, Ahmedabad) which came to belong to Ghansham Dass was thrown by him into the hotchpotch of the HUF headed by him, and that the said one-third portion became the property of the HUF. It was on this basis that the Tribunal inferred that the share income earned by Ghansham Dass as partner in the firm, M/s. Rameshwar Dass Hari Shankar, Ahmedabad, for the period subsequent to the death of Smt. Manbhawati Devi, namely, from November 16, 1967, was assessable as the income of and in the hands of the HUF.

7. On the basis of the aforesaid findings, the appeals of the revenue failed before the Tribunal.

8. On an application filed on behalf of the revenue, the Tribunal formed an opinion that questions of law did arise out of the order of the Tribunal and, accordingly, has referred the aforesaid questions for the opinion of this court.

9. It was contended by Mr. Awasthy, learned counsel for the revenue, that Smt. Manbhawati Devi could not legally create a HUF by making the will dated November 12, 1967. The precise contention of the learned counsel was that there was no HUF of Ghansham Dass, his wife and daughter, and that Smt. Manbhawati Devi could not bring about a HUF by making a will in favour of the HUF consisting of Ghansham Dass, his wife and unmarried daughter. The learned counsel had also submitted that there was no evidence to show that a HUF consisting of Ghansham Dass, his wife and unmarried daughter had come into being prior to the execution of the will.

10. As is evident from the tenor of the arguments, the learned counsel has proceeded on the assumption that prior to the making of the will, there was no HUF of Ghansham Dass with his wife and unmarried daughter in existence, and that the same was created through the will made by Smt. Manbhawati Devi.

11. From the aforesaid argument, it would be clear that it was not, nor it could be, disputed that Ghansham Dass could form a HUF with his wife and unmarried daughter. The stance taken by the learned counsel for the revenue was that in reality no HUF existed prior to the making of the will and that the same was created by Smt. Manbhawati Devi through the will. The argument, on the face of it, appears to be untenable. It may be observed at the outset that no such case was set up on behalf of the revenue before the Tribunal. The only plea that was put forth before the Tribunal was that the properties bequeathed by Smt. Manbhawati Devi in favour of the HUF consisting of Ghansham Dass, his wife and minor daughter could not, in law, acquire the character of joint family property in the hands of the said HUF. Thus, the case before the Tribunal proceeded on the assumption that there existed a HUF of Ghansham Dass, his wife and unmarried daughter. Moreover, even legally, such a plea is untenable as the plain truth is that the joint and undivided family is the normal condition of Hindu society. The presumption, therefore, is that the members of a Hindu family are living in a state of union unless the contrary is stated. Generally speaking, the normal state of every Hindu family is joint and, in the absence of proof of division, such is the legal presumption. According to para. 212 of the Hindu Law by Mulla, the joint and undivided family is the normal rule. On this aspect of the matter, the observations of their Lordships of the Supreme Court in Surjit Lal Chhabdba v. CIT : [1975]101ITR776(SC) , 781, may be quoted with advantage :

'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 Hindu family are living in a state of union, unless the contrary is established (Mayne's Hindu Law and Usage, 11th edn., p. 323 ; Mulla's Hindu Law, 14th edn. p. 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, in 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.

It is true that the appellant cannot constitute a coparcenary with his wife and unmarried daughter but under the Income-tax Act a Hindu undivided family, not a coparcenary, is a taxable unit. A Hindu coparcenary is a much narrower body than the joint family. It includes only those persons who acquire by birth an interest in the joint or coparcenary property and these are the sons, grandsons and great-grandsons of the holder of the joint property for the time being, that is to say, the three generations next to the holder in unbroken male descent. Since under the Mitakshara law, the right to joint family property by birth is vested iff the male issue only, females who come in only as heirs to obstructed heritage (sapratiband-hadaya), cannot be coparceners. But we are concerned under the Income-tax Act with the question whether the appellant's wife and unmarried daughter can with him be members of a Hindu undivided family and not of a coparcenary. In the words of Sir George Rankin, who delivered the opinion of the Judicial Committee in Kalyanji's case [1937] 5 ITR 90 : 'The phrase 'Hindu undivided family' is used in the statute with reference, not to one school only of Hindu law, but to all schools ; and their Lordships think it a mistake in method to begin by pasting over the wider phrase of the Act the words 'Hindu coparcenary', all the more that it. is not possible to say on the face of the Act that no female can be a member.'

12. Outside the limits of coparcenary, there is a fringe of persons, males and females, who constitute an undivided or joint family. There is no limit to the number of persons who can compose it nor to their remoteness from the common ancestor and to their relationship with one another. A joint Hindu family consists of persons lineally descended from a common ancestor and includes their wives and unmarried daughters. The daughter, on marriage, ceases to be a member of her father's family and becomes a member of her husband's family. The joint Hindu family is thus a larger body consisting of a group of persons who are united by the tie of sapinda-ship arising by birth, marriage or adoption. 'The fundamental principle of the Hindu joint family is the sapindaship. Without that it is impossible to form a joint Hindu family. With it as long as a family is living together, it is almost impossible not to form a joint Hindu family. It is the family relation, the sapinda relation, which distinguishes the joint family, and is of its very essence.' [(Karsondas Dharamsey v. Gangabai ILR [1908] Bom 479). See also Hindu Law in British India by S. V. Gupte, 2nd edn., p. 59].

13. The joint Hindu family, with all its incidents, is thus 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. But the absence of an antecedent history of jointness between the appellant and his ancestors is no impediment to the appellant, his wife and unmarried daughter forming a joint Hindu family. The appellant's wife became his sapinda on her marriage with him. The daughter too, on her birth, became a sapinda and until she leaves the family by marriage, the tie of sapindaship will bind her to the family of her birth. As said by Golapchandra Sarkar Sastri in his Hindu Law (8th edn., p. 240), 'those that are called by nature to live together, continue to do so' and form a joint Hindu family. The appellant is not by contract seeking to introduce in his family strangers not bound to the family by the tie of sapindaship. The wife and unmarried daughter are members of his family. He is not by agreemant making them so. And as a Hindu male, he himself can be the stock of a fresh descent so as to be able to constitute an undivided family with his wife and daughter.

14. That it does not take more than one male to form a joint Hindu family with females is well established. In Gowli Buddanna v. Commissioner of Income-tax : [1966]60ITR293(SC) , one Buddappa, his wife, his two unmarried daughters and his adopted son, Buddanna, were members of a Hindu undivided family. On Buddappa's death a question arose whether the adopted son who was the sole surviving coparcener could form a joint Hindu family with his mother and sisters and. could accordingly be assessed in the status of a manager of the Hindu undivided family. Speaking for the court, Shah J, observed :

'The plea that there must be at least two male members to form a Hindu undivided family as a taxable entity also has no force. 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 Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members.'

15. In N. V. Narendranath v. Commissioner of Wealth-tax : [1969]74ITR190(SC) , the appellant filed returns for wealth-tax in the statuts of a Hindu undivided family which at the material time consisted of himself, his wife and two minor daughters. The claim to be assessed in the status of a Hindu undivided family rested on the circumstance that the wealth returned consisted of ancestral property received or deemed to have been received by the appellant on partition with his father and brothers. The High Court held that as the appellant's family did not have any other male coparcener, the assets must be held to belong to him as an individual and not to the Hindu undivided family. That decision was set aside by this court on the ground that a joint Hindu family could consist under the Hindu law of a single male member, his wife and daughters and that it was not necessary that the assessable unit should consist of at least two male members.

16. In both of these cases, Gowli Buddanna : [1966]60ITR293(SC) and Narendranath : [1969]74ITR190(SC) , the assessee was a member of a pre-existing joint family and had, in one case on the death of his father and in the other on partition, become the sole surviving coparcener. But the decision in those cases did not rest on the consideration that there was an antecedent history of jointness. The alternative argument in Gowli Buddanna's case (page 226) was an independent argument uncorrelated to the pre-existence of a joint family. The passage which we have extracted from the judgment of Shah J. in that case shows that the decision of this court did not proceed from any such consideration. The court held in terms categorical that the Hindu undivided family as an assessable entity need not consist of at least two male members. The same is true of the decision in Narendranath's case (see page 886).

17. Thus, the contention of the department that in the absence of a preexisting joint family the appellant cannot constitute a Hindu undivided family with his wife and unmarried daughter must fail. The view of the High Court that the appellant has 'no son and, therefore, no undivided family' is plainly unsound and must also be rejected. Accordingly, the question whether the income of the Kathoke Lodge can be assessed in the hands of the appellant as a karta or manager of the joint family must be decided on the basis that the appellant, his wife and unmarried daughter are members of a Hindu undivided family.'

18. In view of the law enunciated by their Lordships of the Supreme Court, it is clear that Ghansham Dass could form a HUF with his wife and unmarried daughter. There is no evidence in the instant case, nor was it the stand of the revenue before the Tribunal, that no HUF of Ghansham Dass with his wife and unmarried daughter existed ; rather the case proceeded on the assumption that such a HUF did exist, and the main point that was pressed before the Tribunal was that the properties which were bequeathed by Smt. Manbhawati Devi could not in law acquire the character of joint family property in the hands of the HUF. Further, the argument that the HUF was created through the will does not find support from the will executed by Smt. Manbhawati Devi. The bare reading of the same shows that the testatrix treated the HUF of Ghansham Dass with his wife and unmarried daughter in existence, and it was in favour of an existing HUF that the will was made. Thus, the contention of the learned counsel for the revenue that the HUF was the creation of the will is wholly untenable.

19. In this view of the matter, the, answer to question No. (i) is returned in the affirmative, i.e., against the revenue.

20. Having recorded the above answer on question No. (i), it has now to be found out whether the Tribunal was legally justified in holding that the property in question, though legally bequeathed by Smt. Manbhawati Devi in favour of Ghansham Dass, his wife and their minor daughter, did come to belong jointly to the said three individuals and it did not acquire the character of joint family property of the HUF constituted by the said three individuals. The contention of Mr. Awasthy, learned counsel for the revenue, was that the property bequeathed by Smt. Manbhawati. Devi would be deemed to be joint family property and that the same could not be treated as the joint property of the three individuals, i.e., Ghansham Dass, his wife and their unmarried daughter. This contention of the learned counsel for the revenue was not controverted by Mr. B. S. Gupta, learned counsel for the assessee. Even otherwise, we find that the property bequeathed by Smt. Manbhawati Devi would become the joint family property. Smt. Manbhawati Devi was competent to make a will and under that will she bequeathed some property in favour of the HUF. We fail to understand as to what was the legal bar in the way of Smt. Manbhawati Devi in bequeathing some property in favour of the HUF. In our view, the Tribunal committed an error in observing that as Smt. Manbhawati Devi was not a coparcener, the property bequeathed by her could not become the property of the HUF.

21. In this view of the matter, we hold that the property bequeathed by Smt. Manbhawati Devi acquired the character of joint family property of the HUF constituted by Ghansham Dass, his wife and unmarried daughter. Consequently, question No. (ii) is answered in the negative.

22. In view of our finding on question No. (ii), question No. (iii) is answered in the affirmative and question No. (iv) in the negative. The assessee will be entitled to costs which we assess at Rs. 250.


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