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Commissioner of Wealth-tax, Gujarat Ii Vs. Kantilal Manilal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberWealth-tax Reference Nos. 5, 6 and 8 of 1970
Judge
Reported in[1973]90ITR289(Guj)
ActsIncome Tax Act, 1957 - Sections 5(1)
AppellantCommissioner of Wealth-tax, Gujarat Ii
RespondentKantilal Manilal
Appellant Advocate J.M. Thakore, Adv.
Respondent Advocate K.H. Kaji, Adv.
Cases ReferredVenkiteswaram Pai Rama Pai v. Luis. We
Excerpt:
.....(xiv) of wealth tax act, 1957 and section 6 of hindu succession act, 1956 - assessee assessed as hindu undivided family (huf) - whether one-third share of x in coparcenary property which inherited by y and z under section 6 liable to be excluded in determining net wealth of assessee - tribunal observed that jewellery belonging to huf at date of death of x was worth rs. 29270 - z by virtue of inheritance from x and settlement with y entitled to one-third share of jewellery and remaining two-third share belonged to assessee - value of jewellery owned by assessee amounted to less than rs. 25000 - held, tribunal rightly observed that value of jewellery owned by assessee less than rs. 25000 and exempted under section 5 (1) (xiv). - - but, so far as the decision of the tribunal..........it is necessary to state a few facts in order to appreciate this question. the assessee is a hindu undivided family and prior to 15th august, 1958, it consisted of kantilal manilal, his wife, pushpavati, a son, named dinesh, usha, wife of dinesh, and an unmarried daughter, rupande. dinesh died in a car accident in the united states of america on 15th august, 1958. since the parties were hindus, governed by the hindu succession act, 1956, the interest of dinesh in the coparcenary property devolved on his wife, usha, and his mother, pushpavati, by virtue of section 6 of that act. it appears that dinesh was also possessed of some separate property at the time of his death and this property too came to be inherited by his wife, usha, and his mother, pushpavati, under section 8 of the.....
Judgment:

Bhagwati, C.J.

1. These three references arise out of assessments to wealth-tax made on the same assessee for the assessment years 1960-61, 1961-62 and 1962-63. They raise identical questions of law and it would, therefore, be convenient to dispose of them by a common judgment.

2. The first question of law which has been referred for our opinion by the Tribunal pursuant to the direction given by this court is as follows :

'Whether, the deduction admissible is in respect of tax payable pursuant to the relevant return filed by the assessee or whether such deduction is admissible in respect of tax as finally determined on assessment ?'

3. The answer to this question is concluded by a decision given by us to-day in Wealth-tax Reference No. 3 of 1970 and other allied references. We must hold in accordance with that decision that the tax liability admissible as a deduction in computing the net wealth of the assessee must be taken to be the amount of tax as finally determined on assessment and not the amount of tax computed on the basis of the return filed by the assessee.

4. So far as the second question of law referred for our opinion is concerned, it is necessary to state a few facts in order to appreciate this question. The assessee is a Hindu undivided family and prior to 15th August, 1958, it consisted of Kantilal Manilal, his wife, Pushpavati, a son, named Dinesh, Usha, wife of Dinesh, and an unmarried daughter, Rupande. Dinesh died in a car accident in the United States of America on 15th August, 1958. Since the parties were Hindus, governed by the Hindu Succession Act, 1956, the interest of Dinesh in the coparcenary property devolved on his wife, Usha, and his mother, Pushpavati, by virtue of section 6 of that Act. It appears that Dinesh was also possessed of some separate property at the time of his death and this property too came to be inherited by his wife, Usha, and his mother, Pushpavati, under section 8 of the Hindu Succession Act, 1956. Soon after the death of Dinesh, Usha filed a suit against Pushpavati and other members of the Hindu undivided family for obtaining her share in the properties left by Dinesh which included his interest in the coparcenary property. This suit was ultimately settled between the parties and a sum of Rs. 10,70,000 was paid to Usha in full and final satisfaction of her claim to a share in the estate of Dinesh including his interest in the coparcenary property.

5. The assessee was assessed as a Hindu undivided family and in the course of its assessment to wealth-tax for the assessment years 1960-61, 1961-62 and 1962-63, a question arose whether one-third share of Dinesh in the coparcenary property which was inherited by Usha and Pushpavati under section 6 of the Hindu Succession At, 1956, was liable to be excluded in determining the net wealth of the assessee. This question was decided by the Tribunal in favour of the assessee and the Tribunal held that on death of Dinesh, his one-third share in the joint family properties devolved on Usha and Pushpavati and thus ceased to belong to the assessee and the assessee was, thereafter, entitled only to the remaining two-thirds share in those properties. The tribunal observed that jewellery belonging to the Hindu undivided family at the date of death of Dinesh was of the value of Rs. 29,270 and since Pushpavati, by virtue of inheritance from Dinesh and settlement with Usha, was entitled to an undivided one-third share in that jewellery and only the remaining undivided two-thirds share belonged to the assessee, the value of the jewellery owned by the assessee amounted to less than Rs. 25,000 and it was accordingly exempt from wealth-tax under section 5(1)(xiv). The revenue did not challenge the view of the Tribunal that one-third share in the properties belonging to the Hindu undivided family at the date of death of Dinesh was inherited by Usha and Pushpavati and, consequently, it ceased to be the property of the Hindu undivided family and was liable to be excluded in comparing the net wealth of the assessee. But, so far as the decision of the Tribunal according exemption to the jewellery was concerned, the revenue was dis-satisfied with it and it has, therefore, brought up that decision before us for our scrutiny by obtaining the present reference. The question is whether the view taken by the Tribunal that one-third share in the jewellery belonged to Pushpavati and Usha or after the settlement to Pushpavati alone and only two-thirds share belonged to the assessee and since that two-thirds share was of the value of less than Rs. 25,000, it was exempt from tax under section 5(1)(xiv), can be said to be incorrect.

6. Now it is common ground that at the date of death of Dinesh, the assessee Hindu undivided family consisted of Kantilal Manilal, Pushpavati, Dinesh, Usha and Rupande. Dinesh being a male coparcener had interest in the properties of the Hindu undivided family. On the death of Dinesh, his interest in the properties of the Hindu undivided family would have ordinarily, under Hindu law as it stood prior to the enactment of the Hindu Succession Act, 1956, gone by survivorship to the other coparceners. But, the Hindu Succession Act, 1956, made a radical departure in the devolution of interest of coparcener in property on his death. There are two sections of the Act which speak on this subject : Section 6 and section 30. Section 6 is very material and since the determination of the question before us turns almost entirely on the true interpretation of that section, we may reproduce it in full. It reads, omitting portions immaterial :

'6. When a male Hindu dies after the commencement of this Act, having at that time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with this Act :

Provided that, if the deceased had left him surviving a female relative specified in class I of the Schedule or a male relative, specified in that class who claims, through such female relative, the interest of the deceased in the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under this Act and not by survivorship. Explanation 1. - For the purpose of this 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......'

7. Section 30 provides for testamentary succession. Prior to the enactment of the Hindu Succession Act, 1956, a coparcener was not entitled to dispose of by will his interest in the coparcenary property but now he can do so by reason of section 30. We are not directly concerned in this case with testamentary succession and we need not, therefore, dwell longer on section 30, but in order to appreciate the true import of section 6, it will be necessary to bear in the coparcenary property in favour of any other person, though such person may not be a member of the Hindu undivided family.

8. Turning to section 6, the main part of that section provided that when a male Hindu dies after the commencement of the Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Act. This provision became necessary, because otherwise interest in coparcenary property being 'property' of a coparcener, its devolution on the death of the coparcener would have been governed by section 8. The legislature wanted to preserve devolution by survivorship except in cases covered by the proviso and, therefore, enacted the main provision in section 6. The proviso, however, set out certain exceptional cases in which the interest of a deceased coparcener in coparcenary property shall devolve not by survivorship but by testamentary or intestate succession, as the case may be, under the Act. If for example the deceased coparcener leaves him surviving a female relative specified in class I of the Schedule - and class I specifies both wife and mother-his interest in the coparcenary property would, according to the proviso, devolve by intestate succession. That is how the interest of Dinesh in the properties of the assessee Hindu undivided family devolved on Usha and Pushpavati on the death of Dinesh. But the question is : What would be the nature or quality of the interest which devolves Would it be of the same nature and quality as that possessed by the coparceners whilst alive Would there be unity of interest between the surviving coparceners and the heirs on whom the interest of the deceased coparcener devolved Would that interest be a fluctuating interest as in the case of coparcener Would the heirs step into the shoes of the coparcener wholly so far as his interest in the coparcenary property is concerned This spectrum of questions is answered by Explanation 1 which provides that, for the purposes of section 6, the interest of a coparcener shall be deemed to be the shares 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. It would, therefore, appear to be obvious that when the proviso says that the interest of a deceased coparcener in coparcener property shall devolve by intestate succession, what is meant is that the share in the coparcenary property which would have been allotted to him on partition, if a partition had taken place immediately before his death shall devolve on the heirs. The concept of a national partition is brought in for the purpose of defining the nature and quality of the interest which devolved by succession. It is the share which would have been allotted to the deceased coparcener on partition, if a partition had taken place at that time. The quantum of share is fixed : the proportion in which the share is to be counted are also crystallized. This specific share in definite ascertained properties, subject of course to payment of proportionate share of the debts and liabilities, devolves on the heirs by intestate succession. But, that does not affect the continuance of the Hindu undivided family. The fiction of partition is introduced for the limited purpose of defining the nature and quality of the interest which devolved by succession and it cannot be extended beyond of the interest which devolved by succession and it cannot be extended beyond its legitimate field. The Hindu undivided family, therefore, continues with the surviving coparceners as it would have done under ordinary Hindu law, but the share of the deceased coparcener in the properties of the Hindu undivided family having devolved on the heirs by intestate succession, that share goes out of the Hindu undivided family and the Hindu undivided family continues to be the owner of only the remaining share. The result is that in the properties which belonged to the Hindu undivided family at the date of death of the coparcener, the heirs have a defined share, namely, the share which the deceased coparcener whom they have succeeded would have had, if a partition had taken place immediately before his death and the remaining share belongs to the Hindu undivided family. Now, once this position is reached, it is clear that the Hindu undivided family and the heirs hold these properties as tenants-in-common. Where there are two or more co-owners of property, the co-ownerships may assume one of several forms : it may be coparcenary or joint tenancy or tenancy-in-common. These are the main three forms of co-ownership which are commonly in use in regal relationship in this country. Here coparcenary is out of question because the heirs in their capacity as such would indubitably not be coparceners with the other members of the Hindu undivided family. The only question, therefore, can be whether the Hindu undivided family and the heirs hold as joint tenants or as tenants-in-common. Now the two main features of a joint tenancy are the right of survivorship and the four unities, namely, unities of possession, interest, title and time. Both these features are absent in the case we are considering. There is neither right of survivorship nor unity of interest. The interest of neither the Hindu undivided family nor the heirs extends to the whole of the properties and there is no community of interest between them. What the Hindu undivided family and the heirs have are only defined shares in the properties which belonged to the Hindu undivided family at the date of death of the coparcener. There is common enjoyment of the properties between the Hindu undivided family and the heirs and the properties not having been divided amongst them in accordance with their respective shares neither of them is able to enjoy his share of the properties in severalty. The properties are thus clearly held by the Hindu undivided family and the heirs as tenants-in-common. This conclusion is considerably fortified by section 19 which provides that if two or more heirs succeed together to the property of an intestate which would include the interest of a deceased coparcener in coparcenary property, they shall take the property as tenants-in-common and not as joint tenants. The heirs would, therefore, take the share of the deceased coparcener in the properties of the Hindu undivided family between themselves as tenants-in-common and, a fortiori, it must follow that each of the heirs can (sic) the Hindu undivided family we are inclined to reach on principle is clearly supported by four decisions, one, a decision of the Calcutta High Court in Narayan Prasad v. Mutuni Kohain, the other, a decision of the Bombay High Court in Govindram Mihamal v. Chetumal Villardas, the third, a decision of the Mysore High Court in Commissioner of Income-tax v. Smt. Nagarathnamma, and the fourth, a Full Bench decision of the Kerala High Court in Venkiteswaram Pai Rama Pai v. Luis. We must, therefore, hold that Usha, Pushpavati and the assessee Hindu undivided family held the properties which belonged to the Hindu undivided family at the date of death of Dinesh as tenants-in-common. Usha and Pushpavati each having one-sixth share and the assessee Hindu undivided family having the remaining two-thirds share.

9. The question, however, still remains whether it could be said that in a particular property, namely, jewellery, which belonged to the Hindu undivided family at the date of death of Dinesh, Usha and Pushpavati had each one-sixth share and the assessee Hindu undivided family had the remaining two-thirds share, so that what would be brought in the computation of net wealth of the assessee Hindu undivided family was only two-thirds share of the jewellery and not the whole of it. We do not think this question presents any difficulty. When it is said that the Hindu undivided family, Usha and Pushpavati were tenants-in-common of definite ascertained properties belonging to the Hindu undivided family at the date of death of Dinesh, it must mean that they were tenant-in-common in respect of each of them had an undivided share in every item of those properties. It is true that none of them could predicate at any point of time that a particular identified part of any property belonged to him. So also it is equally true that if any of them sought to ascertain and separate his share in the properties, he would not get one-third share in specie from each of the properties : some properties may be given to him in lieu of his one-third share in the properties while some others may be given to the other tenants-in-common. But until partition takes place tenant-in-common. But until partition takes place and common enjoyment is converted into enjoyment in severalty, each tenants-in-common has an undivided share in every one of the properties. There can, therefore, be no doubt that the assessee Hindu undivided family had only two-thirds share in he jewellery and the remaining one-third belonged to Usha and Pushpavati in equal shares.

10. We may also look at the question from a slightly different angle. The whole of the jewellery could be taken into account in computing the net wealth of the assessee Hindu undivided family only if it could be shown that it was held wholly by the assessee Hindu undivided family. Now obviously the jewellery did not belong solely and exclusively to the assessee Hindu undivided family. Usha and Pushpavati as heirs of Dinesh had one-third share in the properties of the Hindu undivided family which included the jewellery while the assessee Hindu undivided family had only the remaining two-thirds. How then could it be said that the jewellery belonged wholly to the assessee Hindu family If at all it could be said consistently with law and fact that the jewellery belonged solely to one of two co-owners, why should it not be held that it belonged to Usha and Pushpavati rather than the Hindu undivided family We may ask ourselves the question : could it be said by the Hindu undivided family that the jewellery belongs wholly to it The answer would straightway be that it does not belong wholly to the Hindu undivided family but it belongs to the Hindu undivided family and Usha and Pushpavati. We must, therefore, hold that the Tribunal was right in taking the view that only two-thirds share in the jewellery was liable to be taken into account in computing the net wealth of the assessee Hindu undivided family and since it was of the value of less then Rs. 25,000, it was exempt under section 5(1)(xiv).

11. We, therefore, answer the second question referred to us in each of these references in the affirmative. The Commissioner will pay the costs of each reference to the assessee.


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