MODI J. - This is a reference by the Income-tax Appellate Tribunal, Delhi Bench, in pursuance of a direction made by a bench of this court under section 66(2) of the Indian Income-tax Act.
The material facts are these. The assessee is a Hindu undivided family consisting of two adult members, Braham Dutt Bhargava and Mahesh Dutt Bhargava, being brothers, and of their minor sons, each brother having three sons in number. The assessment year under consideration was 1952-53, the relevant accounting year being 1951-52. The dispute is about certain shares which originally belonged to the assessee family but which were settled in trust by the manager of this Hindu undivided family, Braham Dutt Bhargava, by a trust deed (exhibit A) dated September 3, 1951, to which the other brother, Mahesh Dutt Bhargava, was a consenting party. By this trust deed, the shares in question which were of the face value of Rs. 1,00,068-8-0, and the particulars whereof were given in the schedule annexed to the deed, were set apart by way of trust in pursuance of a declaration to that effect made by the manager, Braham Dutt Bhargava, on the occasion of the 'Yagyopavit Sanskar' of the three sons of Braham Dutt Bhargava and two sons of Mahesh Dutt Bhargava on July 6, 1951, the object of the trust being to meet the expenses of the education of the said sons of the two brothers and of such other son or sons of them who were in existence already, or who may hereafter be born, after their 'Yagyopavit Sanskar' had been performed. The first trustees appointed under the trust were Braham Dutt Bhargava and Mahesh Dutt Bhargava. While assessing the assessee family to income-tax for the year 1952-53, Income-tax Officer negatived the contention of the assessee that this income no longer belonged to the Hindu undivided family and included it in the total income of the assessee. In the opinion of the Income-tax Officer :
'this transfer of assets is defective in view of section 16(3) inasmuch as assets have been transferred for no consideration except probably for love and affection. Secondly, the trust also entitles the children yet to beget as beneficiaries. The trust thus created is therefore not definite and specific and is a sham to dwindle down the profit of the Hindu undivided family. Hence the gross dividend income is added back.'
The assessee went in appeal to the Appellate Assistant Commissioner, the contention being that the income from dividends of the shares in question had been wrongly included in the income of the appellants joint family by the Income-tax Officer. The learned Appellate Assistant Commissioner repelled the pleas which had prevailed with the Income-tax Officer and held that the assets comprising the trust had been put apart for the education of the children of the Hindu undivided family, and that from that income the settlors did not derive any direct or indirect income, and in this view of the matter exclude the dividend income from these shares as having nothing to do with the assessee family after the trust had been made on September 3, 1951. The Income-tax Officer preferred an appeal from the aforesaid order to the Income-tax Appellate Tribunal, Delhi Bench. Only one ground was raised in the memorandum of appeal filed before the Tribunal and that was this :
'In the facts and circumstances of the case, the Appellate Assistant Commissioner was not justified in directing that the dividend income settled in trust by the assessee be excluded from the income of the Hindu undivided family.'
By its order dated November 29, 1954, the Tribunal dismissed the appeal. The order was rather a short one. The learned Members held that the position was that, so far as the assessee family was concerned, the sum of Rs. 1,00,068 no longer belonged to it, and did not belong to it during the relevant year of account. Thereafter, the Commissioner of Income-tax preferred an application under section 66(1) of the Income-tax Act for referring the following two questions of law to the High Court :
'(1) Whether on the material before it the Tribunal was entitled to find that the assets comprised in the trust deed dated 3rd September, 1951, no longer belonged to the assessee family ?
(2) Whether on the facts and in the circumstances of the case the dividend income from the shares purporting to be settled on trust under the deed, dated 3rd September, 1951, is assessable in the hands of the assessee family ?'
The Tribunal by its order dated May 18, 1956, dismissed this application.
It may be pointed out at this stage that in the statement of facts accompanying the application under section 66(1), the Commissioner of Income-tax submitted that the position at which the Tribunal had arrived, namely, that the sum of Rs. 1,00,068-8-0 no longer belonged to the family, and did not belong to it during the relevant year of account, could be correct of the family, all of them being sui juris which they were not. It was pointed out that the purported settlement by trust could not take effect according to Hindu law, and the assets, therefore, covered by the trust, or the income therefrom, continued to belong to the family. This submission was opposed by the assessee, and it was contended that the points sought to be raised by the Income-tax Commissioner at that stage had not been raised earlier at all. In other words, the assessees contention was that it had never been challenged by the department of the Act that the trust was bad because it had not been created by all the members of the Hindu undivided family, as some of them were admittedly minors and that the manager or the adult members alone had no right to do so. It was further submitted that if this point had been raised at the proper time, the assessee would have availed himself of the opportunity of showing that the contention of the Income-tax Commissioner was not correct and that, at the worst, the impugned transfer of assets would be voidable at the instance of the other coparceners and not void and, therefore, the same would be good so long as it was not set aside at the instance of any of the other coparceners who alone could be aggrieved by it.
On the matter thus coming up before the learned Members of the Tribunal, they felt persuaded to hold that the question that the trust offended against the provisions of the Hindu law had never been raised at any time before them or before the income-tax authorities below, and, therefore, they dismissed the application under section 66(1). Thereupon an application was moved by the Income-tax Commissioner before this court, which came up before another bench of this court and was disposed of by it by its order dated November 8, 1957, in pursuance whereof the present reference has been made, as already stated above. It seems to have been urged on behalf of the assessee before the bench that the questions of law which were sought to be raised before the court had not been canvassed before the Tribunal at all or indeed any of the subordinate income-tax authorities. The learned judges (K.L. Bapna and D.M. Bhandari JJ.) repelled the objection thus :
'The grounds of appeal were not restricted to any objection under section 16(3) or that the trust was in any way defective but were wide enough to cover the contention that it was void for other reasons as well. The question as to the validity of the trust must have been agitated before the Income-tax Tribunal and the finding thereon is that so far as the family is concerned the sum of Rs. 1,00,068 no longer belonged to the family. The question whether these shares continued to belong to the family was obviously agitated and the decision was given against the Income-tax Officer. It cannot, therefore, be said that the validity of the trust was not in dispute before the Income-tax Appellate Tribunal.'
The learned judges further went on to observe as follows :
'The point in dispute was whether the trust sought to be created was valid so as to lead to a conclusion that the assets comprised no longer belonged to the assessee family. The Tribunal was quite right when it went on to observe that the trusts are to be regarded as gifts but did not appreciate the contention that a gift could not be made in a joint Hindu family by the karta alone. The same principle applied for the creation of the trust.'
In this view of the matter, the learned judges came to the conclusion that the first question as well as the second arose out of the decision of the Tribunal dated November 29, 1954. This is how the present reference has arisen before us for answer.
Even so, it has been strenuously argued on behalf of the respondent assessee, once again, that we had no jurisdiction to hear and dispose of the reference on the merits as the questions sought to be raised before us did not and do not arise out of the order of the Tribunal. We were taken through the entire history of the case with particular reference to the contentions which had prevailed with the Income-tax Officer and the most probable course which the case thereafter took, and it has been forcefully borne in upon us that at no stage was the question of the validity of the trust, in the sense that the 'karta' of the assessee joint Hindu family had no competence to make the trust under the Hindu law, had been raised or dealt with before the income-tax authorities.
Now it is well established by numerous decisions of the Supreme Court and the various High Courts in our country including our own (see Bansilal v. Commissioner of Income-tax and the cases cited therein) that the High Court is not an appellate or a revisional court from the decisions of the Appellate Tribunal in income-tax matters, and its jurisdiction is only advisory or consultative and is of a special character and strictly limited by the conditions laid down in section 66 which contains the entire law on the subject. What this section envisages is that where, after a case has been disposed of by the Tribunal in appeal under section 33(4) of the Income-tax Act, either the Commissioner or the assessee feels that some question of law has been wrongly decided, the decision of the Tribunal on such a question is not final, and the Commissioner or the assessee can ask the Tribunal to refer the question or questions of law to the High Court for its advice thereon. If the Tribunal in such a case refuses to make a reference on the ground that no question of law arises, then the aggrieved party has right to move the High Court, and the High Court on being satisfied that the decision of the Tribunal declining to make a reference is wrong can and should direct a case to be stated and referred. But it is important to remember that the question of law on which a reference can be asked for by the aggrieved party or compelled by the High Court must be a question arising out of the Tribunals order. What is a question of law in this context The answer, broadly speaking, is that such a question must have been pleaded before the Tribunal and further it must have been properly before it so that the Tribunal should have been in a position to apply its mind to the question sought to be raised. The position, therefore, must be that where a point of law has not been raised before the Tribunal at the proper stage and in a proper manner, or it was never taken up at all before the income-tax authorities so that the necessary materials for founding a definite conclusion thereon are absent or are available only in an imperfect or incomplete form, such a question cannot be held to arise out of the order of the Tribunal within the meaning of section 66(1) of the Act. And on a rational and harmonious interpretation of section 66(2), it is only to such a question that the provisions of this sub-section could be attracted. The indisputable position in law therefore is and must be that where a question of law is sought to be raised before the High Court and a reference compelled under section 66(2) from the Appellate Tribunal, the question must conform to the test set out above, and if so it does not, then the High Court would have no authority or jurisdiction in law to requisition a reference by the Tribunal. In this connection, it cannot be over-stressed that, properly speaking, a question of law not so raised before the Tribunal cannot be said to arise out of its question may seem to arise therefrom. This is the true character of the jurisdiction of the High Court under section 66 of the Income-tax Act.
That being so, if the further contention which arises in this case, and complicates the issue, and which is pressed on us with great force, namely, that the questions on which the present reference has been compelled by another bench of this court (at the instance of the Income-tax Commissioner) did not and do not arise out of the Tribunals appellate order, is good and still open before us, then it seems to us, with utmost deference, that the contention of the assessee is not without considerable force.
Now so far as the Income-tax Officer himself was concerned, we have already quoted in extenso the reasons which prevailed with him in coming to the conclusion to which he did. He somehow thought, in the first place, that the case was governed by section 16(3)(b) of the Income-tax Act. But in saying so he obviously fell into error because the unit of assessment before him was not an individual but a Hindu undivided family. Section 16(3) applies to an individual assessee and not to a Hindu undivided family. That being so, it clearly seems to us that the question of the impugned transfer being defective on account of there being no valuable consideration has hardly any relevance. The only other reason which weighed with the Income-tax Officer was that the trust was also for the benefit of some of the beneficiaries who were yet to be born and, therefore, the trust was bad. So far as this ground is concerned it was repelled, and in our opinion rightly, by the Appellate Assistant Commissioner when he said that the view of the Income-tax Officer was no longer tenable by virtue of the provisions of the Hindu Disposition of Property Act, 1916, and this position has not been disputed before us. It was on account of these two reasons - and no other reason has at all been mentioned by him in his order - such as the incompetency of the karta of a joint Hindu family to make a gift under the Hindu law, that the Income-tax Officer came to the conclusion that the trust deed was defective or a sham transaction. The controversy centered around these two reasons and no others before the Appellate Assistant Commissioner also, to whom an appeal was carried on behalf of the assessee from the order of the Income-tax Officer. It seems to us that if the question of the competency of the manager of the assessee family to make a valid trust under the Hindu law had been raised, the learned Appellate Assistant Commissioner should not have failed to mention it in his order. From this order, there was an appeal before the Appellate Tribunal. The ground of appeal was a single one, namely, that in the facts and circumstances of the case, the Appellate Assistant was not justified in directing that the dividend income settled in trust by the assessee be excluded from the income of the Hindu undivided family. It is obvious that this ground was couched in a language which was delightfully vague and at large. And as we look at it, it seems to us to be a model of what a ground of appeal ought not to be according to any reputable principles of pleadings. Each ground of objection must be separately mentioned and must be clear, precise and specific, so as not to cause surprise to the opposite party. But all that apart, we find it extremely difficult to accept that, since the ground was not limited, therefore, the question of the validity of the trust because of the want of competency of the karta of a joint Hindu family to make one would be necessarily covered by it an consequently it was or must have been raised before the Tribunal. The learned members of the Tribunal have themselves categorically repudiated that any such question was raised before them and, so far as we can see, we do not find any good reasons for not accepting this statement of fact except at its face value. It is true that when an application under section 66(1) was made by the Income-tax Commissioner before the Tribunal, it was mentioned in the statement of facts accompanying that application that a valid trust could not be made because all the members of the family were not sui juris, and, therefore, the purported trust could not take effect according to Hindu law. But to say this, with all respect, is vastly different from saying that the same question was raised before the Tribunal when the matter came before it for decision under section 33(4) on November 29, 1954. We also think it fair to observe that if an important question like this should have been raised before the Tribunal, we should have expected the learned Members to deal with it with some greater particularity, if not in elaborate detail, than their order indicates or may be supposed to indicate as it stands. In these circumstances, we are extremely doubtful and, in any case, again speaking entirely for ourselves, we are far from satisfied that the question which the Commissioner of Income-tax has sought to raise before this court as regards the competency of the manager of the assessee family to make the trust in question, does arise out of the Tribunals appellate order, although such a question might well have been raised before the Tribunal in the circumstances of the case. Assuming, therefore, that the contention of the assessee, which goes to the root of our jurisdiction, was still open before us, we should have had no hesitation in deciding to answer the reference on this ground alone. But the question is not free from a certain amount of difficulty as to whether it is permissible to us as matter of law to re-examine and give effect to the objection raised before us in this regard at this stage, unaffected and uninfluenced by what another bench of this court did on the previous occasion when it invited a reference under section 66(2).
This very question was raised by the learned Attorney-General before their Lordships of the Supreme Court in Commissioner of Income-tax v. Arunachalam Chettiar, wherein an analogous situation arose before the Madras High Court, a reference having been compelled from the Appellate Tribunal by a bench of that High Court, but which another bench hearing the reference refused to answer. Their Lordships, however, declined to make any pronouncement on the procedural point raised before them and observed that whether the High Court was precluded or not from answering a reference having directed the Tribunal to state a case under section 66(2) the Supreme Court surely could entertain the question of the competency of the reference, and in this view of the matter the question was left undecided. The point, however, is not without significance that their Lordships were not prepared to hold that the High Court had acted erroneously in rejecting the reference.
If it may be permissible for us to venture any opinion on this vexed matter, we should like to say, with all deference, that though, as a broad rule, the bench called upon to decide a reference under section 66(2) should respect the opinion of the previous bench compelling the reference as to whether the question or questions of law did arise out of the appellate order of the Tribunal, and ordinarily decline to reopen the matter, nevertheless it may become its duty to re-examine the issue in an appropriate or extreme case when called upon to answer the reference on the merits for the very important reason that the responsibility for answering the reference must necessarily devolve on it and, if in the performance of such duty, it finds, on what is bound to be a closer examination of the whole case, that there are no or quite imperfect materials for answering the question of law which is the subject-matter of the reference under section 66(2), then it would be a travesty of justice if it must still be precluded from rejecting the reference, regardless of the ground that on closer scrutiny it transpires that the question of law was not and could not have been raised, and that even if it so turns out, it must be compelled to answer the reference on the merits. We would leave this matter at that.
Be that as it may, we consider it safer to tackle the reference on the merits in so far as we may. The crucial question raised before us is whether the trust or the gift made by the manager of the assessee Hindu undivided family with the consent of the only other adult member of the family by which a provision was made for the education of the sons of the two brothers is unlawful or void ab initio. For, if it is ab initio void, then there may be something for the view that the property still continues to form part of the assets of the assessee Hindu undivided family. But if at the worst it is voidable, then it clearly seems to us that the transaction must hold good, until on impeachment by any other member of the family it is held to be bad. The question which arises for determination in these circumstances is, whether a gift made by the karta of a joint Hindu family of the kind we have before us is altogether void. We may make it clear that it was throughout assumed before us that the same principles would govern the making of a valid trust as are applicable to the making of a gift by a member of a joint Hindu family.
Learned counsel for the department placed strong reliance on the following passage from paragraph 258 of Principles of Hindu Law by D.F. Mulla, 12th edition :
'According to the Mitakshara law as applied in all the States, no coparcener can dispose of his undivided interest in coparcenary property by gift. Such transaction being void together there is no estoppel or other kind of personal bar which precludes the donor from asserting his right to recover the transferred property. He may, however, make a gift of his interest with the consent of the other coparceners.'
It was, therefore, contended that Braham Dutt Bhargava, the author of the trust, being a member of a Hindu coparcenary, had no authority whatsoever in law to make the impugned gift. We have carefully examined this argument and have not felt persuaded to accept it as correct. It seems to us that, accepting the law which has been quoted above as correct, it only deals with the power of a coparcener to make a gift. Surely, the powers of a father or other manager of a coparcenary or a joint Hindu family cannot be said to rest on the same footing as that of an ordinary member of the coparcenary or a joint Hindu family. In this connection we may refer to paragraphs 225 and 226 of Mullas book. According to the law set out in paragraph 225, it is open to a father to make gifts even of ancestral movable property without the consent of his sons for the purpose of performing indispensable acts of duty, and for purposes like gifts through affection, support of the family and relief from distress : see Bachoo Hurkisondas v. Mankorebai. Then in paragraph 226, it is laid down that a Hindu father or other managing member has power to make a gift within reasonable limits of ancestral immovable property for pious purposes. But the alienation must be by an act inter vivos and not by will. The law laid down in paragraph 258, therefore, must be read as subject to these other provisions. Again, there is authority for holding that an alienation or a gift by a manager of a joint Hindu family is not necessarily void but it is only voidable at the instance of the other members of the joint Hindu family who alone are affected. Thus it was held in Pugalia Vellor Ammal v. Pooch Ammal, after a fairly elaborate discussion of the relevant texts and decided cases, that a gift made by an uncle who was the manager of a joint Hindu family consisting of himself, his son and his niece (brothers daughter) to the last mentioned person was valid. Again it was held in Jagesor Pande v. Deo Dat Pande that an alienation by the manager of a joint Hindu family without necessity was not absolutely void but was only voidable at the instance of the persons whose interests were affected by it, namely, the coparceners in the property. Reference may also be made in support of this view to Imperial Bank of India v. Maya Devi. In this case B obtained a decree against A and attached a house alleging it to be the property of A. The plaintiff who was As wife objected in execution proceedings on the ground that the house had been gifted to her by her husband and was her exclusive property. The executing court overruled the objection. Thereupon, the plaintiff filed a suit for declaration. B resisted the suit both as to the factum and the validity of the gift. The trial court held that the property was ancestral and so it could not gifted by A. It further held, however, that B being a stranger to the family had no locus standi to object to the validity of the gift and in this view of the matter the suit was decreed. On appeal to the High Court, a strong contention was raised that the property was ancestral and that the gift thereof by A to the plaintiff was absolutely void and not merely voidable at the instance of the minor son, donor. In other words, it was contended that the alienation was a nullity in the eye of law under which no title whatsoever passed to the plaintiff and B could treat it as As property. This contention was repelled by the High Court and it was held that, under the Mitakshara law, it was true that the manager of a joint Hindu family could not alienate joint family property except for family necessity or with the consent of the coparceners if they were adults, but it was held to be equally well-settled that an alienation by him was not unlawful or void ab initio but was merely voidable at the option of the other coparceners who alone were affected by his unauthorised act. It was further observed that the well-known rule of Hindu law that the karta of a joint Hindu family may make gifts of small portions of joint family property for religious purposes could not be accepted to be a legitimate foundation for the inference that all other gifts by the karta were null and void, and that what the rule properly means is that the karta is authorised to make a gift of a reasonable portion of the join family property for religious purposes without the consent of the other coparceners and under certain circumstances even despite their objection - the foundation of the rule being that the gift would be binding because the object underlying it is pious, and that to such a gift, the consent of the family was not necessary. It was further held that from that it did not follow that all other gifts made by the manager would be null and void, and the true rule was and is that where the gift does not answer the limits or the purposes referred to above, the transaction would be voidable at the instance of the other coparceners concerned.
This review of the legal position, in our opinion, is sufficient to establish two broad proposition. The first is that a gift by the manager of a joint Hindu family of the family property at any rate to a member or members thereof is voidable and not void ab initio. The second is that such a gift can be attacked only by the members of the family whose interests are affected thereby and not by strangers. If this is the correct position under the Hindu law in the matter of gifts by managers of joint Hindu families, as we think it is, the sweeping proposition contended for by learned counsel for the department that the gift or the trust made by the manager of the assessee family, Braham Dutt Bhargava, with the consent of the only other adult member of the family being his brother, Mahesh Dutt Bhargava, is void ab initio cannot be accepted as correct. At the worst, this gift may be voidable and, therefore, it must be allowed to stand intact until it may be impeached by the other members of the family, which may or may not happen at all. We may also point out in this connection that whether a gift by a manger of a joint Hindu family of the family property can be avoided by the other members of the family affected thereby would depend upon the surrounding circumstances of the case, such as the total assets of the family, the proportion of the property gifted to the total assets, the manner in which the interest of some of the members of the family may be affected and so on and so forth. It seems to us that it is hardly for the department to question the validity of a transaction like this, which, after all is said and done, may be, and indeed appears to us to be, a transaction which is entirely for the benefit of the other members of the family. It is pertinent to point out at this juncture that, in any view of the matter, there is no information available to us on the record on some of the points to which we have referred above and which would go to establish the voidability of a gift or otherwise. It may also be permissible to point out in this connection that, if the contention as to the validity of the gift had been raised by the department assuming but not conceding that they could raise it, they should have themselves brought or elicited from the assessee family the requisite information surrounding the impugned transaction. This they signally failed to do. We also wish to point out that we cannot be oblivious of the fact that what the managing member or the karta of the Hindu undivided family did in this case with the consent of the only other adult member of the family was to set apart a portion of the family assets for the education of their respective sons existing or to be born, and the savings, if any, were to be accumulated as a reserve, eventually to be distributed among all the beneficiaries on the youngest of them attaining majority. Ex facie this is an arrangement which is entirely for the benefit of the minors and we are not at all satisfied on any authority or principle that such a transaction should be held to be necessarily void ab initio.
It only remains for us to mention in passing that it was not the case of the department before us that this transaction was a sham or a fictitious one and, therefore, the property under gift still belonged to the family. In these circumstances, and for the reasons mentioned at length above, our answers to both the questions raised before us are against the department and we hold accordingly. The respondent will have his costs from the petitioner.
Questions answered accordingly.