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Commissioner of Income-tax, Tamil Nadu-iv Vs. C.S. Ayyaswamy Iyer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 747 and 748 of 1976 (Reference Nos. 615 and 616 of 1976)
Judge
Reported in(1980)19CTR(Mad)236; [1981]132ITR97(Mad)
ActsIncome Tax Act, 1961 - Sections 64 and 64(2)
AppellantCommissioner of Income-tax, Tamil Nadu-iv
RespondentC.S. Ayyaswamy Iyer
Appellant AdvocateA.N. Rangaswamy, Adv.
Respondent AdvocateN.V. Balasubramaniam, Adv.
Cases ReferredIn Umaraparvathy v. Bhagavathy Amma
Excerpt:
.....(c) - in areas of southern india where 'pathnibhagam' prevails wife not entitled to share in joint family property on partition - no income from converted property could be attributable to any share of assessee's wife - only one-third share of assessee in interest credited to account of hindu undivided family in books of firm pertaining to converted property - only above said share assessable in hands of assessee for assessment years in consideration - question answered against revenue. - - 135, 136). it will be difficult to hold that in the south these families has any time a right to take a share on partition like other coparceners. 8. the learned counsel for the revenue contended that under the general principles of hindu law through a wife cannot herself demand a partition, if a..........the assessee was the karta. however, he held that by virtue of s. 64(2) of the i.t. act, 1961, the share income from the converted property of the assessee and his wife should be deemed to be the income of the assessee and assessed in his hands. 2. he accordingly held that 50% of the interest credited to the account of the huf amounting to rs. 8,825 and rs. 9,884 was assessable as the income of the assessee in react of the two assessment years above referred to. the assessee preferred an appeal contending that his share of the interest income of the family alone could be assessed in his hands. since the department did not question the finding of the aac that the declaration made by the assessee impressing the credit balance with joint family character was effective, the tribunal.....
Judgment:

Ramaswami, J.

1. The assessee is a partner in a firm styled, M. S. Natesa Iyer and Co. There was a credit balance of Rs. 1,47,088 in his current account in the books of the said firm as on March 31, 1970. By a declaration made as on that date, the assessee impressed the aforesaid amount with the character of joint family property. The joint family property consisted of the assessee, his wife and two major sons. For the assessment years ending March 31, 1971, and March 31, 1972, the joint family was credited with Rs. 17,650 and Rs. 19,769, respectively as being the interest on the aforesaid credit balance. The ITO held that since the HUF, of which the assessee was the karta, did not posses any property prior to the declaration made by the assessee by which he had impressed the credit balance in the firm with joint family character, the declaration was ineffective and therefore, the entirety of the interest credited to the account of the HUF for both the assessment years should be considered as the income of the assessee in his individual capacity and assessable in his hands. On appeal, the AAC, accepting the contention of the assessee, held that the declaration made by the assessee on March 31, 1970, has the intended effect and, consequently, the sum of Rs. 1,47,088 being the amount standing to the credit of the assessee in the books of the firm has become the property of the HUF, of which the assessee was the karta. However, he held that by virtue of S. 64(2) of the I.T. Act, 1961, the share income from the converted property of the assessee and his wife should be deemed to be the income of the assessee and assessed in his hands.

2. He accordingly held that 50% of the interest credited to the account of the HUF amounting to Rs. 8,825 and Rs. 9,884 was assessable as the income of the assessee in react of the two assessment years above referred to. The assessee preferred an appeal contending that his share of the interest income of the family alone could be assessed in his hands. Since the department did not question the finding of the AAC that the declaration made by the assessee impressing the credit balance with joint family character was effective, the Tribunal proceeded to consider the question of the assessability of the share of income of the wife of the assessee in the hands of the assessee. After referring to the relevant provision the Tribunal held that since in this part of the country a wife will not be entitled on the partition to a share in the joint family properties, as held by this court in Subramanian Chetti v. Arunachelam Chetti (1904)ILR28 Mad1 no income from the converted property could be attributable to any share of the assessee's wife and that, therefore, there is no question of applying the processions of s. 64(2) at all. In that view it held that the assessee's one-third of the interest credit on to the account of the HUF in the books of the firm pertaining to the converted property alone be assessed in the hands of the appellant for the two assessment years under consideration. At the instance of the revenue the following question has been referred :

'Whether, on the facts and in the circumstances of the Case, Rs. 8,825 and Rs. 9,884 being 50% of the interest radiated to the account of the Hindu undivided family of which the assessee is the karta in the books of the firm, M/s. M. S. Netasa Iyer and Co., for the accounting years ending March 31, 1971 and March 31, 1972, have to be assessed as income of the assessee for the assessment years 1971-72 and 1972-73, respectively under sections 64(2)(b) and 64(2)(c) of the income-tax Act, 1961 ?'

3. Under the processions of s. 64, as it them existed, in computing the total income of any individual there shall be included all such income as arises directly or indirectly to the spouse of such individual from assets transferred directly or indirectly to the spouse, by such individual other wise than for adequate consideration. Clause (2) of s. 64 provided that where in the case of an individual being a member of an HUF, any property having been the separate property of the individual has, at any time after the day of December 31, 1961, been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the joint family or throwing it into the common stock of the family (such property being hereinafter referred to as the converted property), then, notwithstanding anything contained in any other provision of the I.T. Act, or in any other law for the time being in force, for the purpose of the computation of the total income of the individual, the shall be deemed to have transferred the converted property through the family to the the members of the family for being held by them jointly. Clause (2) further provided that the share income of such property proportionate to the share of the member in the joint family property will be treated for the purpose of income-tax as the income of the member. Also, the share of income of the property proportionate to the share of the spouse and any minor son of the member in the family property will also be treated for the purpose of income-tax as the income of the member. The Explanation defined the interest to the spouse or any minor son of the individual in the property of the family as meaning the proportion in which the spouse or minor son would be entitled to share the property of the family if there had been total portion in the family as on the last day of the previous year of the family relevant to the assessment year for which the individual is to be assessed under sub-s.(2). The question, therefore, for consideration was what would have been the share of the wife of the assessee in the converted property if there has been a total partition in the family on the last day of the previous year.

4. In Subramanian Chetti v. Arunachelam Chetti ILR (1904) Mad 1 this court held that if a total partition has taken place, the assessee wife would not have been entitled to any share in view of the customs prevailing in this port of the country. This decision, as already stated, was noticed by the Tribunal. Apart from this decision, we may also refer to a few more cases where it has been held that so far as the Mitakshara law as applied in Southern India is concerned, a wife is not entitled to any specify share on partition in an HUF. In Seethamahalakshmamma v. Chalamaiah, : AIR1974AP130 , a full Bench considered this question in detail with reference to the original Hindu texts, commentaries and textbooks writers It was ultimately held (pp. 135, 136).

'..... It will be difficult to hold that in the South these families has any time a right to take a share on partition like other coparceners. In any case, prior to Smruti Chandrika, there must have been for a sufficiently long time the usage, not to give any share in partition to the wife or mother. Thus, even if-but we do not so hold-by some interpretation it is found that Mitakshara advocates the allotment of shade on partition between father and sons or between barters to such formalism it has for all intents and purposes fallen into disuse in the South Since time immemorial Smruti Chandrika and Saraswati Vilas, however, are explicit and rule out the idea of a share in partition to the mother or the wife.'

5. The Supreme Court in Lakshmi Chand v. Ishroo Devi, : [1977]3SCR400 quoted with approval a passage in Mulla's Hindu Law, 14th Edn., page 403, wherein it was stated (p. 1699) :

'In Southern India the practice of allotting shares upon partition to females has long since become obsolete'

and observed that :

'In Madras though Mitakshara law is applicable it has been held that on a partition between the sons and the father, the mother is not entitled to any share.'

6. In Umaraparvathy v. Bhagavathy Amma : AIR1972Mad151 , it was held that even in areas of Southern India where pathnibhagam prevails, a female member cannot claim any share in the property on partition.

7. It is, therefore, clear from these authorities that the assessee's wife would not have been entitled to any share in the property that has been impressed with joint family character even on partition and that, therefore, no income could have been derived by her which has to be included in the assessment of the assessee.

8. The learned counsel for the revenue contended that under the general principles of Hindu law through a wife cannot herself demand a partition, if a partition does take place between her husband and his sons, she is entitled to receive a share equal to that of a sons and to hold and enjoy that share separately even from her husband. The counsel further stated that though this principle of Hindu law has not been applied in this part of the country and by custom it was held that this principle is not applicable, since the income-tax law is an all India enactment, Hindu law should be interpreted in such a way, in so far as the income-tax provisions are concerned, as does not make any distinction between one area and the other. In their connection, the learned counsel for the revenue relied on the non obstinate clause in clause (2) of s. 64, where it is stated 'notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force.' We are unable to agree with the contention of the learned counsel. The procession in clause (2) of s. 64 are to be applied in respect of only those matters mentioned therein, notwithstanding anything contained in any other law for the time being in force, i.e., for the purpose of computations of the total income of the individual, notwithstanding any other law for the time being in force, a declaration impressing the individual property into a joint family property shall be deemed to be a transfer, and, further the income derived by the wife or the minor children of such individual shall be deemed to have arisen to the individual himself. The non abstained close does not go beyond these purposes mentioned in the said sub clause. It could not be intended, nor could it be considered as having any reference to the Hindu law of succession itself or to change the law of Misstate share inheritance. In fact, if the argument of the learned counsel for the revenue is to be accepted, no distinction can be made between Mitakshara law or the Dayabagha law or the various schools, of thought, which any applicable in various parts of the country. Neither the interpretation of clause (2) of s. 64 warrants such a contention of the revenue, nor could any such intention be attributed to the Legislature.

9. The learned counsel for the revenue then relied on the decision T. S. Srinivasan v. CIT : [1965]56ITR455(Mad) . In that case there was a partition and in that petition certain share were allotted to the assessee's wife and his two minor daughters. With reference to that allotment, in passing, this court observed that such allotment could be validly made and is not opposed to the principles of Hide law. The cannot in any way, be constructed as saying that under the Hide law the wife is entitled to claim a share in the joint family properties, in this part of the country. Though the decision clearly shows that the wife will not be entitled to claim a share as a of right, on partition, there will be nothing illegal if the members of the joint-family considered it necessary to give a share to the mother or the wife concerned. In fact, in such as allotment it need not necessarily be the actual share itself even the entirely of the property could be allotted, but that does not mean the under the Hindu law she will be entitled to claim the entirety of the property. This decision relied on by the learned counsel is, therefore, not applicable to the facts of this case. The learned counsel for the revenue also wanted to contend that if once all allotment is made, the income derived from the property allotted might be includible in the assessee's hands and that, therefore, we must construe that for purposes of application of s. 64 she (the wife) is entitled to claim a share in the property. This is a far-fetched construction. But, suffice it to say that the principle laid down in that case in no way suggests that the law has to be construed in any way differently from that of Hindu law as understood in this part of the country.

10. We are, therefore, of opinion that the Tribunal was right in holding that only one-third share of the assessee in the interest credited to the account of the HUF in the books of the firm pertaining to the converted property can be assessed in the hands of the assessee for the two assessment years under consideration. We accordingly answer the reference in the negative and against the revenue. The assessee will be entitled to his costs. Counsel's fee Rs. 500, one set.


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