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Commissioner of Income-tax, Gujarat-i Vs. Babubhai Mansukhbhai (Deceased) (by L.R. Harshadbhai B. Shah) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 41 of 1974
Judge
Reported in[1977]108ITR417(Guj)
ActsHindu Succession Act, 1956 - Sections 6, 8 and 30
AppellantCommissioner of Income-tax, Gujarat-i
RespondentBabubhai Mansukhbhai (Deceased) (by L.R. Harshadbhai B. Shah)
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate K.C. Patel, Adv.
Excerpt:
direct taxation - inherited property - sections 6, 8 and 30 of hindu succession act, 1956 - status of assessee in respect of properties inherited by him on death of his father in question - properties inherited were self acquired properties - assessee's father died intestate - when property passed by intestate succession from father to son even though it was self acquired property of father it would be stamped as joint family property in hands of son - held, correct status of assessee in respect of properties inherited by him on death of his father was as representing his hindu undivided family and not as individual. - - on behalf of the revenue it was submitted that in view of the decisions of the allahabad high court and mysore high court referred to above, the position in law was..........assessee that, according to the principles of hindu law as applicable prior to the passing of the hindu succession act, all properties inherited by a hindu male from his father are ancestral property in his hands as between himself and his male issues. it was also contended that under section 4(1)(a) of the hindu succession act, the provisions of hindu law would continue to apply for determining the nature of the property inherited by his son from his father qua his male issues. on behalf of the revenue it was submitted that in view of the decisions of the allahabad high court and mysore high court referred to above, the position in law was well-settled. the tribunal held that the income-tax officer had erred in assessing the income from properties inherited by the assessee on the death.....
Judgment:

C.J. Divan, C.J.

1. In this reference, at the instance of the revenue, the following question has been referred to us for our opinion :

'Whether, on the facts and in the circumstances of the case, the correct status of the assessee in respect of the properties inherited by him on the death of his father was as representing his Hindu undivided family or as an individual ?'

2. The facts giving rise to this reference are as follows : The assessment years under consideration are 1966-67 and 1967-68. The assessee who seems to have died during the pendency of the proceedings was one Dr. Bahubhai Mansukhbhai. The assessee's father, Mansukhbhai, died intestate on October 8, 1963, leaving certain self-acquired properties. On the death of Mansukhbhai these self-acquired properties devolved upon his widow and his son, that is, the assessee. The properties left by the deceased father of the assessee consisted of loans advanced by the deceased to certain parties and also bank deposits. The assessee inherited one-half share of the said loans and bank deposits. Income by way of interest on the one-half share amounted to Rs. 4,588 in the year of account relevant to assessment year 1966-67 and to Rs. 4,986 in the year of account relevant to assessment year 1967-68. The assessee contended before the Income-tax Officer that the interest income should be assessed as income of the Hindu undivided family consisting of the deceased himself, his sons and his wife. The Income-tax Officer rejected the contention of the assessee and following the decision of the Allahabad High Court in Commissioner of Income-tax v. Ram Rakshpal, Ashok Kumar : [1968]67ITR164(All) held that since the father had his individual properties, the question of treating the said individual properties in the hands of the assessee as Hindu undivided family properties did not arise. According to the Income-tax Officer, the Mysore High Court in the case of Commissioner of Income-tax v. Smt. Nagarathnamma : [1970]76ITR352(KAR) had also confirmed the view of the Allahabad high Court. Consequently, the Income-tax Officer assessed the income from interest in the hands of the assessee as his individual income and not the income of the Hindu undivided family. Against the decision of the Income-tax officer, the matter was taken in appeal by the assessee but the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer and dismissed the appeal. Against the order of the appellate Assistant Commissioner, the matter was taken in further appeal by the assessee to the Income-tax Appellate Tribunal and it was urged before the Tribunal on behalf of the assessee that, according to the principles of Hindu law as applicable prior to the passing of the Hindu Succession Act, all properties inherited by a Hindu male from his father are ancestral property in his hands as between himself and his male issues. It was also contended that under section 4(1)(a) of the Hindu Succession Act, the provisions of Hindu law would continue to apply for determining the nature of the property inherited by his son from his father qua his male issues. On behalf of the revenue it was submitted that in view of the decisions of the Allahabad high Court and Mysore High Court referred to above, the position in law was well-settled. The Tribunal held that the Income-tax Officer had erred in assessing the income from properties inherited by the assessee on the death of his father in the individual assessment of the assessee. The Tribunal held that the income from interest could not be assessed in the hands of the assessee in his individual capacity but it could be assessed in his hands as representing the Hindu undivided family. Thereafter, at the instance of the revenue, the above question has been referred to us. In Commissioner of Income-tax v. Ram Rakshpal, Ashok Kumar : [1968]67ITR164(All) , the learned judges of the Allahabad High Court were concerned with the following facts. One Durga Prasad and his son, Ram Rakshpal, and his grandson, Ashok Kumar, constituted a Hindu undivided family until 11th of October, 1948, when there was a partition in the family so that Durga Prasad separated from the joint family. After that, Durga Prasad carried on his own business in the name of Messrs. Murlidhar Mathura Prasad until his death on 29th of March, 1958, and Ram Rakshpal and his son, Ashok Kumar, carried on their own separate business under the name and style of Messrs. Ram Rakshpal, Ashok Kumar, who was the assessee-firm before the Allahabad High Court. Durga Prasad also left behind him a widow, Jai Devi, and a daughter, Vidyawati. Upon his death, Vidyawati took her 1/3rd share of the property left by Durga Prasad, but his widow, Jai Devi, and his son, Ram Rakshpal, entered into a partnership with 2/3rd of the assets of the business known as Murlidhar Mathura Prasad which was, as already indicated, the separate business of Durga Prasad. A partnership was entered into between Jai Devi and Ram Rakshpal and its terms were incorporated in a deed which was duly registered on 23rd April, 1958. In the assessment year 1959-60, immediately following the death of Durga Prasad, the question arose whether the income from the one-third share which had come to Ram Rakshpal from Durga Prasad should be assessed as part of the income of the Hindu undivided family of Ram Rakshpal, Ashok Kumar or as income from the separate property of Ram Rakshpal. The Income-tax Officer assessed it as the income of the Hindu undivided family applying the well-recognised principle of Hindu law that the property left by the grandfather in the hands of the father is ancestral property in which the grandson has a right by birth. It was on these facts that the Allahabad High Court held that in view of the provisions of the Hindu Succession Act, 1956, the income from assets inherited by a son from his father from whom he has separated by partition cannot be assessed as the income of the Hindu undivided family of the son. Beg J., delivering the judgment of the Division Bench of the Allahabad High Court, has referred to the provision as it prevailed prior to the enactment of the Hindu Succession Act. The Division Bench there held that in view of the provisions of section 6 and section 8 of the Hindu Succession Act, the old position no longer prevailed and the income from assets inherited by a son from his father must be held to be his individual and not the income of the Hindu undivided family consisting of himself and his son. Main reliance in support of this conclusion was placed by the Allahabad High Court on the provisions of sections 6 and section 8 of the Hindu Succession Act.

3. The Allahabad High Court accepted the principle that if it had not been for the Hindu Succession Act, on the death of a father whatever was inherited by his son by way of succession become ancestral property in the son's hands and this ancestral property in the hands of the son belonged to the copercenary or the joint Hindu family consisting of the son and his own male issue. If there was no male issue at the time when the son got the property by inheritance, then he could use it as he liked but once a grandson to the original propositus was born, the user of the property in the hands of the son became restricted because the grandson would by his birth get a right in this property. We may note that under section 4, sub-section (1), of the Hindu Succession Act, it has been provided :

'Save as otherwise expressly provided in this Act, -

(a) any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of this Act shall cease to have effect with respect to any matter for which provision is made in this Act;

(b) any other law in force immediately before the commencement of this act shall cease to apply to Hindus in so far as it is inconsistent with any of the provisions contained in this Act.'

4. Therefore, we have to examine whether anything has been provided in the language of any of the sections of the Hindu Succession Act which derogates from the provision of Hindu law regarding the property which comes to a Hindu son in a Mitakshara family on the death of his father by succession.

5. Under section 6 provision is made for devolution of interest in coparcenary property. When a male Hindu dies after the commencement of the Hindu Succession 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 Hindu Succession 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 the Act and not by survivorship. Similarly, under section 30 of the Hindu Succession Act, provision is made for the testamentary succession and it has been provided that any Hindu may dispose of by will or other testamentary disposition any property, which is capable of being so disposed of by him, in accordance with the provisions of the Indian Succession Act, 1925, or any other law for the time being in force and applicable to Hindus. Explanation to section 30 says that the interest of a male Hindu in a Mitakshara coparcenary property shall, notwithstanding anything contained in the Act or in any other law for the time being in force, be deemed to be property capable of being disposed of by him or by her within the meaning of the sub-section. The result is that it is open to any Hindu to dispose of by will or other testamentary disposition his share in the Mitakshara coparcenary property. This right of disposing of his share in the Mitakshara coparcenary property was not available to a Hindu prior to the coming into force of the Hindu Succession Act. Similarly, under section 6 if at the time of his death a male Hindu had an interest in a Mitakshara coparcenary property, then ordinarily the interest in the coparcenary property would devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Hindu Succession Act but 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, then the interest of the deceased in the Mitakshara coparcenary property is not to devolve by survivorship but as on testamentary or intestate succession, as the case may be, under the provisions of the Hindu Succession Act. It will noticed that both section 6 and section 30 deal with the undivided share of a Hindu in a Mitakshara coparcenary property. They do not deal with his individual self-acquired property. Therefore, it is obvious that what has been provided for in section 6 and section 30 of the Hindu Succession Act can in no way affect the character of the property in the hands of the son when the son gets the property by inheritance from his own father. Neither section 6 nor section 30 deals with such a situation. Under section 8 of the Act it has been provided that the property of a male Hindu dying intestate shall devolve according to Chapter II upon the heirs, being the relatives specified in Class I of the Schedule. If there is no heir of Class I, then upon the heirs, being the relatives specified in Class II of the Schedule ; and if there is no heir of any of the two classes, then upon the agnates of the deceased and if there is no agnate, then upon the cognates of the deceased. The result, therefore, is that so far as the property is concerned, it devolves according to the provisions of the Chapter in which section 8 is located but that does not again deal with the character of the property in the hands of the person to whom the property devolves by succession. With respect to the learned judges of the Allahabad High Court, it is impossible to read into the words of section 8 any provision which interferes with the scheme of Hindu law as it prevailed prior to the enactment of the Hindu Succession Act. Neither section 6 nor section 8, nor section 30 affect this principle of Hindu law as to in what capacity or in what character the son would enjoy the property once he received it from his father in succession.

6. We find the following observations in Sir Dinshaw Mulla's Commentaries on Hindu law, Fourteenth edition, at page 847 :

'It may be appropriate to draw attention to certain general principles of inheritance governing the old law before stating the object and effect of the ruled laid down in this section and the far-reaching changes brought about by it (section 6). the Mitakshara recognises two modes of devolution of property, namely, survivorship and succession. The rule of survivorship applies to joint family property ; the rule of succession apply to property held in absolute severalty. The Dayabhaga recognises only one mode of devolution, namely, succession. It does not recognise the rule of survivorship even in the case of joint family property. The reason is that while every member of a Mitakshara joint family has only an undivided interest in the joint property, a member of a Dayabhaga joint family holds his share in quasi-severalty, so that it passes on his death to his heirs as if he was absolutely seized thereof, and not to the surviving coparceners as under the Mitakshara law. The essence of a coparcenary under the Mitakshara law is unity of ownership. The ownership of the coparcenary property is in the whole body of coparceners. According to the true notion of an undivided family governed by the Mitakshara law, no individual member of that family, whilst it remains undivided, can predicate, of the joint and undivided property, that he, that particular member, has a definite share, e.g., one-third or one-fourth. His interest is a fluctuating interest, capable of being enlarged by deaths in the family, and liable to be diminished by births in the family. It is only on a partition that he becomes entitled to a definite share. No female can be a coparceners under the Mitakshara law. Even a wife though she is entitled to maintenance out of her husband's property and has to that extent an interest in his property, is not her husband's coparcener. Nor is a mother a coparcener with her sons.

It was generally felt that radical reform was required in the Mitakshara law of coparcenary and that where one of the coparceners died it was necessary that not only in case of his separate property but also in respect of his undivided interest in the coparcenary property there should be equitable distribution of that share between his male and female heirs and particularly between his son and daughter. Some of the indicia of the ancient joint family system had become extinct in consequence of inroads made upon the coparcenary, inter alia, by liberal interpretation of texts relation to partition, by rules founded on equitable considerations affecting payment of debts incurred personally by any member of the coparcenary and by the Hindu Women's Rights to Property Act, 1937, which conferred new rights on widows of coparceners. The highest authorities on Hindu law took the view that the Mitakshara coparcenary had lost a number of its characteristics and should, therefore, be abolished. The power of free disposition of property is recognised in every system of law and it was time for Hindu law to fall in line. Probably the best solution would have been to abolish the ancient legal formulae of acquisition of right by birth and devolution by survivorship since the logical way was to assimilate the Mitakshara to the Dayabhaga in this respect. This could also have had the merit of equable treatment of the nearest female heirs of a coparcener and of bringing about uniformity in the law in all parts of India. But there was some strong sentiment in favour of the retention of the Mitakshara coparcenary even in an attenuated form and the rules laid down in this section are a compromise having some of the merits and all the demerits which attend such adjustive legislation.'

7. The illustrations set out at page 849 of the report clearly indicate what is the effect of the enactment of the Hindu Succession Act. Illustration (a) is as follows :

'A governed by the Mitakshara school inherits certain property from his father. A has a son B. The property so inherited being ancestral must be held by A in coparcenary with B. A must hold the property in coparcenary with B, even if B is born after he inherits the property, because B acquires an interest in it by birth. If a dies intestate leaving him surviving his son B, his undivided interest in the coparcenary property will devolve upon B by survivorship and not by succession. The property in the hands of B being ancestral each son of B will upon his birth take an interest in it equal to that of his father' and it has been pointed out by illustration (c) that it would be now competent to A to dispose of by will in any manner he likes his interest in the coparcenary property. We agree with the commentaries of Sir Dinshaw Mulla and, in our view, they set out the correct legal position. With respect to the learned judges of the Allahabad High Court, we are unable to agree with the conclusion reached by them in Commissioner of Income-tax v. Ram Rakshpal : [1968]67ITR164(All) , that in view of the provisions of the Hindu Succession Act, the income from assets inherited by a son from his father from whom he got himself separated by partition, cannot be assessed as income of the Hindu undivided family of the son.

8. We find that in Commissioner of Wealth-tax v. Chander Sen : [1974]96ITR634(All) , the Allahabad High Court has adhered to the view that it had taken in Commissioner of Income-tax v. Ram Rakshpal : [1968]67ITR164(All) . The decisions which have been cited in the reference are different but we find that the principle of Commissioner of Income-tax v. Ram Rakshpal : [1968]67ITR164(All) is followed in Commissioner of Wealth-tax v. Chander Sen : [1974]96ITR634(All) .

9. On going through the decision of the Mysore High Court in Commissioner of Income-tax v. Smt. Nagarathnamma : [1970]76ITR352(KAR) , we do not find anything on the facts or in the discussion of the case which would indicate that any departure from the conclusion that we have reached was intended by the Mysore High Court and, therefore, it is not necessary for us to deal with that case.

10. It may be pointed out that in Commissioner of Wealth-tax v. Harshadlal Manilal : [1974]97ITR86(Guj) , it was held that under the ordinary Hindu law when the property passes by intestate succession from father to son even though it was a self-acquired property of the father, in the hands of the son the property would be stamped with the character of joint family property. As we have observed above, no difference is made to that legal position by any of the provisions of the Hindu Succession Act.

11. In the result, therefore, we hold that the correct status of the assessee in respect of the properties inherited by him on the death of his father was as representing his Hindu undivided family and not as an individual. We answer the question referred to us as follows : The correct status of the assessee in respect of the properties inherited by him on the death of his father was as representing his Hindu undivided family. In view of the special circumstances of the case, there will be no order as to costs.


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