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Thakur Gopal Singh Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberWealth-tax Reference No. 16 of 1966 and D.B. Civil Gift-tax Reference No. 38 of 1969
Judge
Reported in[1975]99ITR354(Raj); 1973()WLN14
ActsWealt Tax Act, 1957 - Sections 4 and 4(6); Gift Tax Act, 1958 - Sections 4 and 23; Rajasthan Land Reforms and Resumption of Jagirs Act, 1952
AppellantThakur Gopal Singh; Commissioner of Gift-tax
RespondentCommissioner of Wealth-tax; Thakur Gopal Singh
Appellant Advocate Zalam Singh Meratwal, Adv.
Respondent Advocate Sumerchand Bhandari, Adv.
Cases ReferredChinnathayi v. Kulasekara
Excerpt:
rajasthan land reforms & resumption of jagirs act, 1952 and wealth tax act, 1957 - jagir--character of--jagirdar was not absolute owner--jagir was a joint family property--character of compensation same as that of jagir.;the jagir was hereditary and the junior members of the family had their right and interest in the jagir in respect of maintenance and a possible right of succession.;the argument that the jagirdar was the absolute owner of the jagir is not acceptable. there is no manner of doubt left in our mind that the jagir of badnor was not the absolute property of the jagirdar and it belonged to the hindu undivided family.;the jagir which the assessee held belonged to the joint hindu family and it was not his self acquired or his separate property. the compensation awarded to him.....j.p. jain, j. 1. these are two references, one under the wealth-tax act and the other under the gift-tax act. the assessee in both the cases is the same and the basic question involved in both the references is common. we, therefore, propose to decide them by one common judgment.2. the facts leading to the wealth-tax reference are as follows: thakur gopalsingh was a jagirdar in the erstwhile state of udaipur. his jagir was resumed in 1954 under the provisions of the rajasthan land reforms and resumption of jagirs act, 1952. compensation in respect of the jagir was awarded to the jagirdar. the wealth-tax act, 1957 (act no. xxvii of 1957), came into force on the first day of april, 1957. the matter relates to the wealth-tax assessment years 1957-58 and 1958-59. the valuation dates for each.....
Judgment:

J.P. Jain, J.

1. These are two references, one under the Wealth-tax Act and the other under the Gift-tax Act. The assessee in both the cases is the same and the basic question involved in both the references is common. We, therefore, propose to decide them by one common judgment.

2. The facts leading to the wealth-tax reference are as follows: Thakur Gopalsingh was a jagirdar in the erstwhile State of Udaipur. His jagir was resumed in 1954 under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952. Compensation in respect of the jagir was awarded to the jagirdar. The Wealth-tax Act, 1957 (Act No. XXVII of 1957), came into force on the first day of April, 1957. The matter relates to the wealth-tax assessment years 1957-58 and 1958-59. The valuation dates for each year are September 30, 1956, and September 30, 1957, respectively. The compensation awarded in lieu of the jagir was not declared in the return of net wealth by the assessee and it was contended by him that the jagir was the ancestral property and it pertained to the Hindu undivided family consisting of himself, his wife and minor sons. Accordingly, it was urged that it was not taxable as individual in his hands. It was also asserted that the compensation was not ascertained on the valuation dates and it became quantified only in 1961. Thus, there being no ascertained wealth, it could not be included in the assessee's net wealth. These contentions did not find favour with the Wealth-tax Officer. He held that, in view of the fact that the rule of primogeniture was applicable, the jagir was the absolute property of the assessee and the compensation awarded to him in lieu of jagir will be treated as his assets and will be liable to wealth-tax. As regards the second contention, he was of the opinion that the compensation was ascertainable in view of the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, though it was payable in instalments. It cannot, therefore, be said that the property had no value on the valuation dates. The assessment for the year 1957-58 was thus madeby the Wealth-tax Officer on 28th February, 1962. The assessment for the year 1958-59 was made on similar lines by the Wealth-tax Officer by his order dated 31st August, 1962. The Appellate Assistant Commissioner of Wealth-tax, Udaipur Range, Udaipur, disposed of both the appeals of the assessee by his separate orders on February 13, 1963. The same contentions amongst others were raised before him. Reliance was placed by the assessee on a Privy Council case, Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore [1941] 9 ITR 695 and it was argued that the impartible estate is owned by the joint family and the income from the estate was assessable in the hands of the Hindu undivided family. On this authority it was also urged that the position under the Income-tax Act prior to the Privy Council case is the same as existed under the Wealth-tax Act in the relevant years. After the Privy Council case was decided, Section 9(4) was added in the Income-tax Act which provided that for the purpose of Section 9 the holder of an impartible estate shall be deemed to be the individual owner of all the property comprised in the estate. Learned Appellate Assistant Commissioner did not agree with the argument raised by the assessee and he held that the jagir obtained by the assessee was not by inheritance and it was given to him by His Highness after the death of the assessee's father. He was of the opinion that the jagir in the hands of the assessee was a fresh jagir and he was thus the full and absolute owner of the jagir. He also held that the compensation that has been awarded to the assessee was also his absolute property and the assessee being the sole owner is liable to tax under the provisions of the Wealth-tax Act. He also found no merit in the second contention that the compensation could not be included for the purpose of taxation as it was not quantified on the date of valuation. The assessee went in appeal before the Appellate Tribunal. The Appellate Tribunal agreed with the view taken by the department. In its opinion, the assessee succeeded to the jagir in his own right by the rule of primogeniture and, in his hands, he had the absolute domain over it. The bonds received by him as compensation on the resumption of the jagir were, therefore, the absolute property of the assessee. The Tribunal also held that though the compensation amount became ascertained in a subsequent year, yet there was some value in regard to the jagir which was resumed. According to it, the market value on the date of the valuation has to be taken note of while computing the net wealth of the assessee. It, therefore, remanded the case to the Wealth-tax Officer to ascertain the worth of the compensation amount on the date of the valuation. The appeals were decided by separate orders on November 19, 1963. The assessee submitted separate applications with regard to both the assessments and requested the Appellate Tribunal to refer the questions of law arising out of its order to this court. Both theapplications were consolidated and the following question was referred to this court:

'Whether, on the facts and in the circumstances of the case, the present worth on the valuation dates in question of the compensation payable under the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, for the Jagir of Badnore and the immovable properties comprised in the said jagir were includible in the net wealth of the assessee in his individual status '

3. The reference under the Gift-tax Act arises out of the following facts : The Garh situated at Badnore was a part of the jagir of Takur Gopalsingh, the assessee. It had been in the assessee's family for more than fourteen generations. After the jagir was resumed, the Garh was held to be the private property of the jagirdar and thus it continued to be with the assessee. The assessee sold the Garh to the Government of Rajasthan for Rs. 2,00,000 by a registered sale deed dated 31st March, 1960. He received the sale proceeds. The assessee claimed to have divided the amount of Rs. 2,00,000 amongst himself, his wife and his three sons, each getting a sum of Rs. 40,000. Entries to this effect were also made in the books of account showing the payment of Rs. 40,000 to each one of them. In the assessment year 1961-62, a question arose before the Gift-tax Officer whether the distribution of Rs. 2,00,000 involved a transfer and the assessee was liable to gift-tax. The assessee contended that the Garh of Badnore did not belong to him as an individual. Though it was a part of the impartible estate, yet it was ancestral and belonged to the Hindu undivided family of which he was the karta. He was not liable for any gift-tax as it did not amount to a transfer. The Gift-tax Officer by his order dated January 30, 1965, held that the assessee was the absolute owner of the Garh having inherited the same under the law of primogeniture. The transaction did not involve a partition but a transfer. He accordingly held him liable to tax. The matter went in appeal before the Appellate Assistant Commissioner of Income-tax. He agreed with the view taken by the Gift-tax Officer and by his order dated October, 28, 1966, dismissed the appeal. The assessee approached the Income-tax Appellate Tribunal (Delhi Bench C). The Tribunal accepted the contention of the assessee and held that the jagir of which the Garh formed part was the ancestral and impartible estate and it was governed by the law of primogeniture, but it cannot be said that it was held by the assessee in his status as an individual. Placing reliance on various authorities of the Privy Council and of the Supreme Court in Puskpavathi Vijayaram v. P. Visweswar AIR 1964 SC 118 it held that the jagir was owned by the Hindu undivided family though it was impartible in character and governed by the law of primogeniture. The transaction did not involveany transfer creating any liability for gift-tax as it was a case of partition among the members of the Hindu undivided family. Against this order, the department made an application to the Tribunal for making a reference to this court, but it was rejected. The Commissioner of Gift-tax then moved this court under Section 26(3) of the Gift-tax Act, 1958, requesting the Appellate Tribunal to state the case. This court, by its order dated 16th December, 1968, directed the Appellate Tribunal (Delhi Bench C), to refer the following question to this court and to submit the statement of the case :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal, Delhi Bench C, was right in holding that the Garh at Badnore was the property of the Hindu undivided family of which the assessee was the karta and that the distribution of a sum of Rs. 2 lakhs received by the assessee as the sale proceeds thereof amongst his sons, his wife and him self was not a transfer of assets within the meaning of the Gift-tax Act, 1958, and hence was not liable to gift-tax '

4. In compliance with the above direction, the Income-tax Appellate Tribunal submitted the statement of case and referred the question stated above for answer of this court by its order dated 17th May, 1969.

5. Thus, in both the references, the basic question that arises for consideration is whether the jagir of the assessee was the property of the Hindu undivided family. The view of the Tribunal in the gift-tax case is different from the one taken by it in the wealth-tax case. It is admitted by the department in its application dated April 25, 1968, under Section 26(3) of the Gift-tax Act, 1958, that the fort at Badnore was a part of the jagir of Badnore. The said jagir had descended from generation to generation when it came to the hands of the assessee. It is also admitted that the succession to the jagir was governed by the rule of primogeniture. Thus, there is no controversy between the parties that the jagir of Badnore was ancestral and impartible and was governed by the rule of primogeniture. A copy of the patta of Samwat year 1929 of the jagir in question is on record. It shows that the jagir has been in the family of the assessee for nearly 100 years. A reference to the provisions of the Revenue Code, Mewar (Act No. V of 1947), shows that the jagirdar in the State of Udaipur was vested with all the revenue rights in the jagir lands. On the death of the jagirdar, the jagir was to pass to a male descendant of the original grantee as may be recognised by the Udaipur Darbar. It also provided that the jagirdar had no right to dispose of his jagir by will, mortgage or sale. Junior members and sons of the jagirdar were to be maintained from the income of the jagir. For non-payment of maintenance, such orders could be issued against the jagirdar to comply under the Code as may be necessary. It is thus clear that even under the Act of 1947 the jagir was hereditary and thejunior members of the family had their right and interest in the jagir in respect of maintenance and a possible right of succession. In the circumstances, it cannot, therefore, be said that a jagirdar in the State of Udaipur had the absolute domain over the estate and he held the same without any strings. The fact that the property is ancestral and its succession is governed by the rule of primogeniture does not mean that the estate is not capable of being the joint family property. As noticed above, the jagirdar is bound to maintain and defray the reasonable expenses of the junior members of the family from the jagir. In Baijnath Prasad Singh v. Tej Bali Singh AIR 1921 PC 62 their Lordships held that the fact that a raj is impartible does not make it separate or self-acquired property ; a raj, though impartible, may in fact be self-acquired or it may be family property of a joint undivided family ; if it is the latter, succession will be regulated according to the rule which obtains in an undivided joint family, so far as the selection of the person entitled to succeed is concerned, i.e., the person will be designated by survivorship, although then, according to the custom of impartiality, he will hold the raj without the others sharing it. The eldest of the senior branch would be the head of a joint family and he is entitled to succeed by survivorship. Their Lordship quoted with approval the following observations of Sir Barnes Peacock :

'The impartibility of the property does not destroy its nature as joint family property or render it the separate estate of the last holder, so as to destroy the right of another member of the joint family to succeed to it upon his death in preference to those who would be his heirs if the property were separate.'

6. In another Privy Council case, Komammal v. Annadana Jadaya Gounder AIR 1928 PC 68 their Lordships observed :

' Impartible estates are the creatures of custom, and where no special custom is proved, the customary law of succession applies with such qualifications only as flow from the impartible nature of the subject, and consequently for purposes of succession, an impartible estate must be considered joint family property unless it were shown to be separate, and in order to establish that an impartible estate has ceased to be joint family property for the purpose of succession, it is necessary to prove an intention expressed or implied on behalf of the other members of the family to give up their chance of succession to the impartible estate.'

7. Sir Dinshah Mulla for the Board in the case of Shiba Prasad Singh v. Rani Prayag Kumari Debi stated the law in this regard as follows :

' The keynote of the whole position, in their Lordships' view, is to be found in the following passage in the judgment in the Tipperah case [1869] 12 MIA 523

'Where a custom is proved to exist, it supersedes the general law, which, however, still regulates all beyond the custom.'

Impartibility is essentially a creature of custom. In the case of ordinary joint family property, the members of the family have : (1) the right of partition ; (2) the right to restrain alienations by the head of the family except for necessity ; (3) the right of maintenance; and (4) the right of survivorship. The first of these rights cannot exist in the case of an impartible estate, though ancestral, from the very nature of the estate. The second is incompatible with the custom of impartiality as laid down in Sartaj Kuari's case [1888] ILR 10 All 272 (PC) and Rama Krishna v. Surya Rao [1899] ILR 22 Mad 383 (PC) and so also the third as held in Rama Rao v. Rajah of Pittapur [1918] ILR 41 Mad 778. To this extent the general law of the Mitakshara has been superseded by custom, and the impartible estate, though ancestral, is clothed with the incidents of self-acquired and separate property. But the right of survivorship is not inconsistent with the custom of impartibility. This right, therefore, still remains, and this is what was held in Baijnath's case. To this extent the estate still retains its character of joint family property, and its devolution is governed by the general Mistakshara law applicable to such property. Though the other rights which a coparcener acquires by birth in joint family property no longer exist, the birthright of the senior member to take by survivorship still remains. Nor is this right a mere spes successionis similar to that of a reversioner succeeding on the death of a Hindu widow to her husband's estate. It is a right which is capable of being renounced and surrendered. Such being their Lordships' view, it follows that in order to establish that a family governed by the Mitakshara in which there is an ancestral impartible estate has ceased to be joint, it is necessary to prove an intention, express or implied, on the part of the junior members of the family to renounce their right of succession to the estate. It is not sufficient to show a separation merely in food and worship. Admittedly, there is no evidence in this case of any such intention. The plaintiffs, therefore, have failed to prove separation, and the defendant is entitled to succeed to the impartible estate. Being entitled to the estate, he is also entitled to the improvements on the estate, being the immovable properties specified in items 9 to 19 of Sch. kha. These improvements, in fact, form part of the impartible estate.'

8. The last decision of the Privy Council in Shiba Prasad Singh v. Rani Prayg Kumari Debi has been quoted with approval by their Lordships of the Supreme Court in Pushpavathi Vijayaram v. P. Visweswar. According to their Lordships, it must be taken to be well-settled that an estatewhich is impartible by custom cannot be said to be separate or exclusive property of the holder of the estate. If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture, it will be a part of the joint estate of the undivided Hindu family. The right of survivorship is not inconsistent with the custom of impartibility. This right, therefore, still remains and it is by reference to this right that the property, though impartible, has, in the eye of law, to be regarded as joint family property. This decision of the Supreme Court has been considered by the Tribunal in both the cases, but the interpretation of this authority was different in each case.

9. There is yet another recent case of the Supreme Court in State of U.P. v. Rajkumar Rukmini Raman Brahma AIR 1971 SC 1690. In this case the malgujar, who was the proprietor of an impartible estate, executed a gujaranama in favour, of bis younger brother stating that, according to the law and custom of the estate, he being the eldest son of the Raja, became the owner of the estate on the death of the earlier Raja and that 'the younger sons have a right to maintenance and they are given a reasonable share of the estate in lieu of the right of maintenance'. The question arose whether the estate belonged to the joint Hindu family and the gujaranama executed by the estate holder involved a transfer by way of gift. Their Lordships considered various Privy Council cases and held that the estate was of the undivided Hindu family and could not be said to be the separate or the exclusive property of the holder of the estate. The following observations can be reproduced below profitably :

' Since the decision of the Privy Council in Shiba Prasad Singh v. Rani Prayag Kwmari Debi, it must be taken to be well-settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the estate. If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture, it will be a part of the joint estate of the undivided Hindu family. In the case of an ordinary joint family property the members of the family can claim four rights: (1) the right of partition; (2) the right to restrain alienations by the head of the family except for necessity; (3) the right of maintenance ; and (4) the right of survivorship. It is obvious from the very nature of the property which is impartible that the first of these rights cannot exist. The second is also incompatible with the custom of impartibility as was laid down by the Privy Council in the case of Rani Sartaj Kuari v. Deoraj Kuari [1888] LR 15 IA 51, ILR 10 All 272 (PC) and the First Pittapur case, The right of maintenance and the right of survivorship, however, still remain and it is by reference to these rights that the property, though impartible, has, inthe eye of law, to be regarded as joint family property. The right of survivorship which can be claimed by the members of the undivided family which owns the impartible estate should not be confused with a mere spes successions. Unlike spes successions the right of survivorship can be renounced or surrendered. It was held by the Judicial Committee in Collector of Gorakhpur v. Ram Sunder Mal that the right of maintenance to junior members out of an impartible estate was based on the joint ownership of the junior members of the family. In that case Lord Blanesburgh, after stating that the judgment of Lord Dunedin in Baijnath Prasad Singh v. Tej Bali Singh had definitely negatived the view that the decisions of the Board in Sartaj Kuari's case and the First Pittapur case were destructive of the doctrine that an impartible zamindari could be in any sense joint family property, went on to observe :

' One result is at length clearly shown to be that there is no reason why the earlier judgments of the Board should not be followed, such as for instance the Challapalli case [1900] ILR 24 Mad 147 (PC) (Mullikarjuna Prasada Nayadu v. Prasada Nayadu) which regarded their right to maintenance, however limited, out of an impartible estate as being based upon the joint ownership pf the junior members of the family, with the result that these members holding zamindari lands for maintenance could still be considered as joint in estate with the zamindar in possession.'

Lord Blanesburgh said:

' The recent decisions of the Board constitute a further landmark in the judicial exposition of the question at issue here. While the power of the holder of an impartible raj to dispose of the same by deed (Sartaj Kuari's case) or by will (the First Pittapur case and Protap Chandra Deo v. Jagdish Chandra Deo ), remains definitely established, the right of the junior branch to succeed by survivorship to the raj on the extinction of the senior branch has also been definitely and emphatically reaffirmed. Nor must this right be whittled away. It cannot be regarded as merely visionary. As was pointed out in Baijnath Prasad Singh's case , when before the Allahabad High Court in Dhanraj Singh v. ML Lakhrani Kuar : AIR1916All103 the junior members of a great zamindari enjoy a high degree of consideration, being known as babus, the different branches holding babuana grants out of the zamindari. Their enjoyment of these grants is attributable to their membership of the joint family, and until the decisions above referred to beginning in 1888 supervened, they had no reason to believe that their rights of succession were being imperilled by their estrangement from the zamindari in possession.'

In the present case there is the statement of Raja Anand Brahma Shah in the gujaranama deed that according to the law and custom of the estate, the eldest son of the Raja becomes the owner of the estate on the death of the earlier Raja and that the 'younger sons have right to maintenance and they are given reasonable share of the estate in lieu of right of maintenance'. In view of this admission of Raja Anand Brahma Shah it is not possible to hold that the transfer of the properties in the gujaranama deed was a transfer by way of gift. It is also not possible to contend that it was a sale of the properties for there is no money consideration. It is manifest that the transaction is by way of a settlement to the respondent by Raja Anand Brahma Shah in lieu of the right of maintenance of the respondent which is obligatory upon the holder of impartible estate. In our opinion, the gujaranama deed dated October 5, 1949, is not hit by the provision of Section 23 of the Act and the argument of the appellant on this aspect of the case must be rejected.'

10. In view of the law referred to above and the facts of this case as already noticed, the argument that the jagirdar was the absolute owner of the jagir is not acceptable. There is no manner of doubt left in our mind that the jagir of Badnore was not the absolute property of the jagirdar and it belonged to the Hindu undivided family. In our opinion, the order passed by the Appellate Tribunal in the wealth-tax case is not correct and the view taken by the Appellate Tribunal in the gift-tax case is the right one.

11. Mr. Bhandari, learned counsel for the department, has placed reliance on Umrao Singh v. Bhagwati Singh : AIR1956SC15 . In that case Maharaja Sumer Singh, the last jagirdar of Indergarh (District Kotah, Rajasthan), died without leaving a male issue on July 24, 1949. One Maharaja Umrao Singh instituted a suit against the respondent, Maharaja Bhagwati Singh, and three others on the allegation that the plaintiff was the sole heir of the deceased and Shri Bhagwati Singh alleging himself to be an adopted son of the late Maharaja was trying to succeed to his estate. It was alleged that Maharaja Bhagwati Singh was never adopted by the deceased Maharaja Sumer Singh, the last jagirdar. The plaintiff sought a declaration to the effect that he was the real successor to the gaddi of Indergarh. The district judge held that the civil court had no jurisdiction to entertain the suit and that it was the Rajpramukh of Rajasthan who had the exclusive right to decide the question of succession relating to the jagir in question and the civil court had no jurisdiction in the matter. The decision was upheld by the High Court and the appeal was also dismissed by the Supreme Court holding that the jurisdiction of the civil court was impliedly ousted for entertaining suits of this nature. In the course of the judgment, their Lordshipsobserved:

'As above pointed out, no averment has been made in the plaint that the jagir was a hereditary one and was not resumable after the death of the last holder. No facts have been placed on record defining the incidents of this jagir. Ordinarily a jagir is an assignment in land or money for the support of a certain dignity and for the troops annexed thereto. It is either conditional or unconditional.

The assignment is for a stated term, and more usually, it is for the lifetime of the holder, lapsing on his death, to the State although not unusually renewed to his heir, on payment of a nazarana or fine. It is sometimes specified to be a hereditary one. In Gulabdas Jugjivandas v. Collector of Surat [1878] ILR 3 Bom 186 their Lordships of the Privy Council held that a jagir must be taken prima facie to be an estate only for life, although it may possibly be granted in such terms as to make it hereditary.

In the absence of any evidence to the contrary it has to be assumed that the Indergarh jagir was resumable after the death of the last holder and it was in exercise of sovereign rights that the Maharao of Kotah recognized the adoption of Bhagwati Singh and the Rajpramukh of Rajasthan in exercise of the same right recognized him as an heir to the last jagirdar. Even if the jagir was of a hereditary nature, it seems clear that the Maharao of Kotah was admittedly the sole arbiter for determining the question of succession to the gaddi according to law and custom and that exclusive power, by the binding force of the covenant, has passed to the Rajpramukh of Rajasthan.

In this view of the case the rule laid down by their Lordships of the Privy Council in Sultan Sani v. Ajmodin, ILR [1893] Bom 431 is attracted to this case. Therein their Lordships expressed the opinion that the question to whom a saranjam or jagir shall be granted upon the death of its holder is one which belongs exclusively to the Government, to be determined upon political consideration, and that it is not within the competency of any legal tribunal to review the decision which the Government may pronounce.'

12. The facts of this case are distinguishable and, in our opinion, thisauthority has no application to the present case. In that case the plaintiffhimself came forward with the plea that the succession to the gaddi ofIndergarh was determined by the Ruler of Kotah in his capacity as sovereign. It was not even alleged in the plaint that the jagir was hereditary,in nature or that the sanction of the Maharao was a mere formality. Thepresent proceedings do not arise out of a suit. It is also well-known thatsanction of the Ruler to the succession was a mere formality. Instancesin which succession of the eldest male lineal descendant was not recognisedby the Ruler have been extremely rare. In the suit before their Lordshipsof the Supreme Court the question whether the jagir was or was not jointHindu family property did not arise. The suit was dismissed on the ground that the civil court had no jurisdiction to entertain it. This finding was mainly based on the plaintiff's own assertion in the plaint. We are of the opinion that the jagir in the present case was an impartible Hindu estate and was joint family property.

13. The question referred in the wealth-tax case consists of two parts : one is whether the marked value of the compensation on the date of the valuation is includible in the net wealth of the assessee. The jagir was admittedly resumed in 1954 and admittedly the compensation was ascertained some time in 1961. If the compensation had been determined in 1961, it cannot be said that it was of no value on the date of valuation. In our opinion, the market price of the compensation on the date of valuation can be taken into account in computing the net wealth of the assessee. Our answer to this part of the question is in the affirmative.

14. The second part of the question is whether the compensation payable under the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, could be assessed in the hands of the assessee in his individual status. We have already held above that the jagir which the assessee held belonged to the joint Hindu family and it was not his self-acquired or his separate property. The compensation awarded to him or the market price of the compensation on the date of valuation could be assessed for wealth-tax purposes only as that of Hindu undivided family. The character of compensation cannot be different from what it was of the jagir.

15. The fact that the assessee had been assessed on the income of the estate for income-tax purposes as an individual is of no importance. In view of the provisions contained in Section 9(4) of the Income-tax Act of 1922 (Section 27(2) of the new Act) the holder of the impartible estate has to be deemed to be the individual owner of all the properties comprised in the estate. There was no corresponding provision in the Wealth-tax Act of 1957 in the relevant assessment years. Corresponding to Section 9(4) of the Indian Income-tax Act, 1922, Section 4(6) was introduced in the Wealth-tax Act with effect from April 1, 1965. Thus the position under the Wealth-tax Act during the relevant assessment year was similar to the one that existed in regard to the income-tax law prior to the introduction of Section 9(4). The Privy Council case. Commissioner of Income-tax v. Dewan Bahadur Krishna Kishore will apply with full force to the present case. Their Lordships held that where in a family governed by the Mitakshara, by custom, the rule of primogeniture controls the devolution of impartible property, the custom of impartibility does not touch the succession since the right of survivorship is not inconsistent with the custom; hence the estate retains its character of joint family property and devolves bythe general law upon that person who, being in fact and in law joint in respect of the estate, is also the senior member in the senior line. Hence, a holder of the estate receiving income from house property cannot be said to be owner of such property. It is the joint family that is the owner and, therefore, he cannot be assessed as an individual in respect of such income under Section 9.

16. The contention of Mr. Bhandari is that the nature of the jagir in the present case was not hereditary but was a fresh grant. There is nothing to warrant this suggestion. He placed reliance on Sikander Jehan Begum v. Andhra Pradesh State Government : AIR1962SC996 . This was a case from Hyderabad and was governed by the Hyderabad Atiyat Inquiries Act, 1952. In the present case, no such law was placed before us governing the jagir of the assessee. Qanoon Mal Mewar (Act V of 1947), referred to above, as well does not lend support to this contention. That apart, the succession of Thakur Gopal Singh opened much prior to 1947. Again, Qanoon Mal Mewar, as its preamble shows, was enacted after modifying the existing law with a view to consolidate the law relating to jagirs in force in the erstwhile State of Udaipur.

17. Another submission of the learned counsel for the department is based on a decision of the Andhra Pradesh High Court in Rani Bhagya Laxmamma v. Commissioner of Wealth-tax : [1966]62ITR601(AP) . On the basis of this authority it has been argued that though the provision corresponding to Section 9(4) of the Indian Income-tax Act, 1922, did not exist in the Wealth-tax Act in the relevant years, the fiction that the holder of the impartible estate shall be deemed to be the individual owner of all the properties comprising the estate for purposes of wealth-tax will apply. We have already noticed above that the provision in Section 4(6) of the Wealth-tax Act was enacted corresponding to Section 9(4) of the Income-tax Act with effect from April 1, 1965. We are not at all impressed by the submission that the fiction can be made applicable in assessing wealth-tax in the years 1957-58 and 1958-59. From a perusal of Section 9(4) of the Indian Income-tax Act, 1922, it is abundantly clear that the fiction was created for purposes of Section 9 alone. Its applicability cannot be extended to the Wealth-tax Act till a similar provision was made in that Act. The reasoning advanced by Mr. Bhandari does not appear to be sound. With all respect, we are unable to subscribe to the view expressed by their Lordships of the Andhra Pradesh High Court in the case above referred to.

18. Our answer to the second part of the question is, therefore, in the negative.

19. Next question that arises is whether the distribution of the sum ofRs. 2,00,000 received by the assessee as the sale proceeds of the garh soldby him to the Government of Rajasthan amongst his sons, his wife and himself was or was not a transfer of assets within the meaning of the Gift-tax Act, 1958. We have held above that the jagir held by the assessee belonged to the Hindu undivided family of the holder of the estate though, by rule of primogeniture, he held it in his hands without sharing it with the others. His sons and his wife constituting the joint Hindu family with him had rights and interest in the jagir, though limited. The fort at Badnore was a part of the jagir and, as such, it was also the property of the Hindu undivided family. The assessee had partitioned this amount among five persons including himself. After the resumption of jagir the garh had been held to be the private property of the assessee under Section 23 of the Act but it continued to remain the property belonging to the Hindu undivided family. The character of this property in the hands of the jagirdar will be impartible. It is not disputed, however, that after the death of the present jagirdar, the garh and such other jagir property as has not been resumed will devolve upon his heirs according to the personal law applicable to the jagirdar as the Hindu Succession Act, 1956, has now come into force. The property will cease to have the character of impartiality on the death of the assessee. Their Lordships in Chinnathayi v. Kulasekara : [1952]1SCR241 observed:

'...A member of a joint family owning an impartible estate can on behalf of himself and his heirs renounce his right of succession ; but any such relinquishment must operate for the benefit of all the members and the surrender must be in favour of all the branches of the family or in favour of the head of the family as representing all its members.

The test to be applied is whether the facts show a clear intention to renounce or surrender any interest in the impartible estate or a relinquishment of the right of succession and an intention to impress upon the zamindari the character of separate property.'

20. Mr. Bhandari, learned counsel for the department, has urged that even if the impartible character of the estate is renounced by the holder of the estate, he himself becomes the full owner of the estate and he has no right to partition the said property among the members of the family because they have no pre-existing interest in the estate. He, however, concedes that, as the holder of the impartible estate, Thakur Gopal Singh had a right to give away the whole property or a part of it even to a stranger. But, according to him, he cannot divide the property among the members of the family. In our opinion, by renouncing his rights in the impartible estateand by a similar relinquishment of the right of succession by other heirs who are likely to succeed, the impartible character of the estate is destroyed. We have held above that every member of the family has some interest in the estate and it cannot be said that the other members of the family have : [1952]1SCR241 , no existing interest in the estate though it was impartible and remained in the hands of the senior member of the family. After renouncing his interest in the estate, and surrender of right of succession, the property remained as that of the Hindu undivided family and it can certainly be divided among the members of the family and such a division will not constitute a transfer.

21. In the present case, the relinquishment is for the benefit of all the members of the family. The only person interested in retaining the impartible character of the garh or the price received by the sale of it is Thakur Gopal Singh, the former jagirdar. For, as has been pointed out above, on his death his wife and his sons will inherit the property equally as it is joint family property. None of the sons is entitled to inherit the whole of the property as it will lose its impartible character on the death of the present holder. In the instant case, therefore, there is no question of the son entitled to succeed to the impartible estate giving his consent to the partition. Thakur Gopal Singh having relinquished his right of keeping the sale price obtained by the sale of the garh as impartible property it became open to the partitioned amongst the members of the joint family. We accordingly agree with the view taken by the Appellate Tribunal that the partition of Rs. 2,00,000 did not involve any transfer and the provisions of the Gift-tax Act were not attracted. Our answer to the question posed in the gift-tax case is, therefore, in the affirmative.

22. The references are accordingly disposed of as indicated above. In the circumstances of the case, there will be no order as to costs.


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