1. On applications made by the assessee under Section 27(1) of the Wealth Tax Act, Section 66(1) of the Income-tax Act and Section 25(1) of the Expenditure Tax Act, the Income Tax Appellate Tribunal has referred the following common question for our decision:--
"Whether on the facts and in the circumstances of the case, the assessee and his son constituted a Hindu undivided family for purposes of assessment under the Income Tax, Wealth Tax and Expenditure Tax Acts."
2. The Tribunal passed a consolidated Order in the appeals against the assessments respectively made under the Income-tax Act and Wealth Tax Act for the assessment years 1960-61 and 1961-62 and against the assessment under the Expenditure Tax Act for 1961-62. In all the appeals the Tribunal sustained the assessment made on the assessee in the status of an individual. The assessee late R. Sridharan, was a member of a Hindu undivided family, along with his father and brothers. On a partition between the assessee, his brothers and father, a block of shares in T. V. Sundaram Iyengar and Sons Private Limited and three other Limited Companies were allotted to his share. At the time of the partition he was not married. On June 24, 1956, he married an Austrian Lady, Rosa Maria Steinbchler, under the Special Marriage Act, 1954. A son, Kicolas Sundaram, was born to them on November 29, 1957. Initially the assessee was assessed to income-tax and wealth tax in the status of an individual on his own declaration. In 1959-60, the assessee claimed the status of a Hindu undivided family consisting of himself and Nicolas Sundaram. The assessee repeated his claim to be treated as a Hindu undivided family for the assessment years 1960-61 and 1961-62. The main contention of the assessee was that Nicolas Sundaram was a Hindu and the property held by him was ancestral property and that therefore he has to be assessed in the status of a Hindu undivided family. The Revenue negatived the contention, The appeal to the Appellate Assistant Commr. was unsuccessful. The Tribunal was of the view that although Section 21 of the Special Marriage Act preserved some of the rights in the family property to the children born of such wedlock, yet it did not clothe such issue with the character of a Hindu. The analogy of the status of a Hindu widow, recognition to which was statutorily given by the Hindu Women's Rights to Property Act, 1937, was, according to the Tribunal, inappropriate. Ultimately the Tribunal was of the view that there was no Hindu undivided family of Sridharan and his son which could claim to be taxed for the assessment years 1960-61 and 1961-62 as demanded by the assessee. Aggrieved against the said decision of the Tribunal, the reference in the manner stated above is before us for consideration.
3. The contentions urged by the assessee before the Revenue and the Tribunal were repeated before us. Mr. Swaminathan, appearing for the assessee, strenuously argued that in the light of the treatment of the various members of a Hindu joint family, either under the orthodox Hindu Law or by later statutory recognition thereof, it should be held in the instant case that Nicolas Sundaram is a member of a Hindu undivided family in which the assessee is the head. He would also urge that the father having openly recognised and treated his son as a member of the faint family, that by itself is a positive indicia that there existed a Hindu undivided family. Relying upon the definition of 'Hindu' in the various enactments such as the Hindu Succession Act, 1956, the Hindu Adoptions and Maintenance Act, 1956, and other such allied enactments, it was urged that Nicolas Sundaram Is a Hindu and he has to be treated as such. Mr. Swaminathan proceeds that if their is a Hindu undivided family consisting of the assessee and Nicolas Sundaram, then it is easy to appreciate the character of the property held by the assessee at or about the material tune, and in particular during the assessment years, as it ought to be treated, recognised and upheld to be ancestral property or joint family property. If therefore there is a joint family and the family owns ancestral or joint family property, then the question referred answers itself in favour of the assessee. The Revenue on the other hand represented by Mr. Balasubramaniam, contending contra would state that Section 21 of the Special Marriage Act, 1954, would not envisage a joint family as is ortho-doxically understood in traditional Hindu Law as between the assessee and his eon, and even otherwise the property [n the hands of the assessee which was secured by him at a partition, cannot be treated to be joint family property as is commonly understood. His contention in the main is that there is no substantial evidence to show that Nicolas Sundaram was brought up as a Hindu, and even otherwise the incursions made by the statute law on the personal law of the parties cannot be pressed into service BO as to compulsorily recognise Nicolas Sundaram as a Hindu and as a member of a Hindu undivided family and thereby and thereunder recognise the status of the assessee as a Hindu undivided family.
4. The problem posed and the question referred has to be considered in the light of the historic development of the system of joint family amongst Hindus to whom the Mitakshara Law is applicable and having regard to the march of Hindu Law from time to time with particular reference to the inroads made on the personal law of Hindus by legislation. It has to be stated at the outset that certain doctrines of Hindu Law though seemingly inconsistent with the spirit and scheme of the Income Tax Act, yet a possible reconciliation can be made when a seeming or apparent conflict arises and find whether the intention of the Legislature when it enacted the fiscal enactment was to overlook the universal application of the accepted doctrine under the personal law of the parties. Of course, each case has to be decided on its own merits and the age-old rule that Courts lean towards the assessee in cases of doubt has to prevail.
5. The institution of a joint Hindu family is peculiar to Hindu jurisprudence and has its origin in ancient orthodox texts and writings of Smritikars. Though it originated in the propagation of the theory of despotism and autocracy in the father, yet by efflux of time, such a concept considerably sloped down so as to confer equal rights on his sons by birth. The induction of parceners by birth into the family considerably whittled down the absolute power of the father. Several other inroads into such unitary rights and privileges of the father, which incursions had to be made with the growth of society and the appreciation of the value of individual rights, resulted in the enlargement of the body constituting the joint Hindu family. This body which is a creature of law enfolds within it the lineal male descendants of a common ancestor and includes their mothers, wives or widows and unmarried daughters. Joint family status is ordinarily the result of birth or affiliation by adoption or marriage and need not necessarily be linked with the possession of joint family property. All members constituting the family have no equal rights, such as the daughter or a maintenance holder. The march of the personal law amongst Hindus has been from time to time refined by passive and provocative judicial precedents. From ancient times, even an illegitimate son was not in any sense considered as quasi nullius filius although he did not share and had no coparcenary right in the joint family estate. He had a recognised, though lower, status in the family of his father and he was bound to be maintained from and out of the family estate. In fact, the principle appears to be that the disqualification is only as regards the sharing of the family estate, but it did not involve the disqualification to be maintained out of that estate. The above principle is unexceptional in so far as Sudras are concerned. But in the case of the twice-born, judge made law recognised such an illegitimate son of a person belonging to a twice-born class as being entitled to maintenance which could also be made a charge on the joint family property. Such maintenance 5s in lieu of inheritance-- See Vellaiyappa Chetty V. Natarajan, 61 Mad LJ 522 at p. 526 = (AIR 1931 PC 294 at pp. 295-296) approved in Gur Narain Das v. Gur Tahal Das, . Though an illegitimate son may not strictly be a
coparcener in the Hindu family, yet he has undoubtedly the status of a member of such a family. There is therefore abundant authority to hold that even an illegitimate son is a member of the family consisting of the putative father and his status as such cannot be denied even by the twice-born class. If this is so, what would be the status of Nicolas Sundaram in the instant case? He cannot be called an illegitimate son, because he is the son born of lawful wedlock. Marriage between a member of the twice-born community and a Christian under the Special Marriage Act is recognised as valid in law. Therefore he is a legitimate son even viewing it with the lynx's eye of orthodox Hindu Law. The assessee (son?) therefore is a lineal descendant who could claim to have the status of being a member of the joint family of which the assessee is the head. At this stage the analogy of a Hindu widow and her rights both under the ancient texts and by virtue of the later, statutory law may also be considered BO as to appreciate the status of the assessee's; son. The catena of decisions cited at the Bar, Seethamma v. Veeranna Chetty, ; Parappa v. Nagamma,
; Subra-manian v. Kalyanarama lyer, ;
Ramalingam Pilial v. Ramalakshmi Ammal (1957) 2 Mad LJ 382 - (AIR 1958 Mad 228); Lakshmi Ammal v. Ramachandra Reddiar, and Satrughan v. Sabujpari, , do all afford a positive
indicia as to how and in what circumstances the widow is treated as a member of the joint family. Observed the Supreme Court in the last case;
"The Act seeks to make fundamental Changes in the concept of a coparcenery and the rights of members of the family in coparcenery property, the Act in investing the widow of a member of a coparcenary with the interest which the member had at the time of his death has introduced changes which are alien to the structure of coparcenary. The interest of the widow arises not by inheritance, nor by survivorship, but by statutory substitution: Lakshmi Perumallu v. Krishnavenamma relied on. By
the Act certain antithetical concepts are sought to be reconciled, A widow of a coparcener is invested by the Act with the same interest which her husband had at the time of his death in the property of the coparcenary. She is thereby introduced into the coparcenary, and between the surviving coparceners of her husband and the widow so introduced, there arises community of interest and unity of possession .........".
6. Even so the position of an Idiot who cannot share but yet is considered as a coparcener on principle, is adumbrated in Amirthammal v. Vallimayil Ammal, (1942) 2 Mad LJ 292 = (AIR 1942 Mad 693) which is very instructive. If a person is a congenital idiot, that by itself is a disqualification for him to be a heir. But still he has all the status of an aurasa son. He is a parcener; he has a right by birth; he can induct persons into the joint family who could have varied rights of inheritance or succession therein.
7. If therefore a widow who by virtue of matrimony could be inducted into the family and can claim the status of a member thereto and indeed can call for a partition and if an idiot who is disqualified to be a sharer can yet be a coparcener and claim himself to be a member of the joint family, it would be hypertechnical and indeed a refinement without any fineness if it is to be said that a legitimate son born out of lawful wedlock and who is acknowledged by the father to be a Hindu, and who has rights of succession though not under the orthodox Hindu law or under the Hindu Succession Act to the estate of his father, cannot be terminologically called as a member of the family of his father.
8. This discussion apart, explanation (b) to Section 2 of the Hindu Succession Act, 1956, the Hindu Marriage Act, 11955, the Hindu Adoptions and Maintenance Act, 1956 and the Hindu Minority and Guardianship Act, 1956, whose language is in pari materia in each of the Acts, provides as follows:--
"Explanation -- The following persons are Hindus ............
(a) ... ... ... ...
(b) any child, legitimate or illegitimate, one of whose parents is a Hindu............ by religion and who is 'brought up as a member" of the tribe 'community' group or family to which such parent belongs or belonged."
The underlining (here in ' ') is ours. The later statutory law therefore expressly provides for the conferment of the status of a Hindu on a person even though such status is doubtful when the personal law of the parties is invoked. All such Acts provide that the expression 'Hindu' shall be construed as if it included a person who, though not a Hindu by religion, is nevertheless a person to whom this Act applies by virtue of the provisions contained respectively in such Acts. Ordinarily under the personal law, an illegitimate child would take after the religion of the mother. Particularly it is so in the case of regenerate classes. But as already stated, if such a son of a parent belonging to a twice-born class inducts the child into the Hindu family and brings him up as such, then the statute invests him with the status of a Hindu and recognises him as a Hindu. Mr, Balasubramanyam placed reliance upon the decision in Myna Boyee v. Ootaram, (1859) 8 Moo Ind App 400 (PC). That was a case where the illegitimate children born to a woman of the Brahmin caste through an Englishman were disentitled to claim inter se as between themselves rights of survivorship though they were considered as Hindus. This has no application to the facts of this case. Even so, the decision in Lingappa Goundan v. Esudasan, (1904) ILR 27 Mad 13 cited by the Revenue where the plaintiff therein was not' regarded as a Hindu by birth as his mother was a Christian, has no application for the reason that the later development of statute law recognises such a status in the child, by an overt act on the part of the father who is a Hindu, who takes him into the fold of the family and brings him up as his son and acknowledges him as his undivided son. Incidentally it may be metnioned that even under the Mitakshara Law, an illegitimate, son is entitled to maintenance as long as he lives, in recognition of his status as a member of his father's family and by reason of his exclusion from inheritance even among the regenerate classes -- See A. R. Raja Kumar v. Narayana Rap, . If this were so, it is not open to the Revenue to say that Nicolas Sundaram who is a legitimate son who is admittedly entitled to statutory rights of succession under the Special Marriage Act, 1954, cannot under 'any circumstances' be considered or deemed to have the status of a Hindu. It is not in dispute that the assessee is a Hindu. He has during the assessment year in question claimed the status of Hindu undivided family along with his son Nicolas Sundaram. It is imperative to understand the necessary implications in such a claim made by the assesses. In our view, it obviously means what he says. According to the assessee, his son is in his family and obviously it also reflects his mind that his son is being brought up by him as a Hindu. Cryptically it was contended that there was no evidence that the child was being brought up as a Hindu within the meaning of the explanation cited above. If the assessee has taken his son into his family and has openly acknowledged him as a member thereto by claiming the status of a joint family, it would be unreasonable to still hold that the subject required further elucidation by way of evidence that the 'son is being 'brought' up by the lather as a member of the family to which the father belongs. It would be strange to insist upon evidence aliunde. The assessee when he declared that he and his son do form members of a Hindu undivided family, has done so obviously to preserve the solidarity of his family and indeed his religion. His lapse even if it is to be considered as one, in marrying outside the community, does not necessarily mean that he is not a Hindu and his legitimate son born of such a lawful wedlock even though in his fold, under his care and protection and brought up by him, is also not a Hindu. In fact, such a status in the son as a Hindu is preserved by the above statutory provisions. Nicolas Sundaram, in this case, satisfies the usual norma prescribed to enable one to claim maintenance from Ms father, (1) existence of a particular relationship, and (2) possession of property. Even viewing the status of Nicolas Sundaram from the point of view of a maintenance holder, Section 20 of the Hindu Adoptions and Maintenance Act, 1956, is certainly to his benefit and advantage. We have no hesitation in holding that the son of the assessee is a Hindu and having been unequivocally declared to be a member of the Hindu undivided family of which the assessee is the head, he ought to be deemed to be a member of the joint family consisting of the assessee and his son.
9. The Revenue however relies on Section 21 of the Special Marriage Act, 1954, and would say that such son born to the assessee could only claim rights of succession therein, and he cannot claim any interest in the property of the assessee as a member of an undivided Hindu family. If, as already opined by us, Nicolas Sundaram has to be considered to be a Hindu within the meaning of the statutory enactments referred to above, then the mere fact that his rights of succession to his father's property are concurrently provided for in a special enactment like the Special Marriage Act, 1954, would not be a bar for him to get himself associated with his father as a member of a Hindu Joint family. In fact, a Division Bench of the Bombay High Court in Francis Ghosal V. Gabri Ghosal, (1907) ILR 31 Bom 25 considering the impact of the Indian Succession Act, 1865, in similar circumstances was of the view:--
"The Indian Succession Act, 1865, does not affect rights of coparcenership as between those to whom it applies. The purpose of that Act was to amend and define the rules of law applicable to in-testate and testamentary succession. It is with the devolution of rights on intestacy that the Act deals......"
While respectfully adopting this view of the learned Judges therein, we would add that Section 21 of the Special Marriage Act, 1954, also does not affect the question at issue. The said section states that succession to the property of a person whose marriage is solemnized under this Act and to the property of the issue of, such marriage shall be regulated by the provisions of the Indian Succession Act Such provision which regulates the rights of succession after the lifetime of a person whose marriage is solemnized under the Special Marriage Act, 1954, cannot be deemed to affect or alter the joint family structure between an assessee and his eon. The discretion vested in the Hindu father: to treat his properties as joint family properties by an overt or a covert act of his by taking into his fold his Hindu sons so as to constitute properties as joint family properties is certainly supreme and unexceptionable and Section 21, in our view, does not interdict such a vested discretion in a Hindu father to do so.
10. Reference was made to Section 5 of the Hindu Succession Act wherein it is said that the Act does not apply to any property, succession to which is regulated by the Indian Succession Act, 1925, by reason of the provisions contained in Section 21 of the Special Marriage Act, 1954. This, however, overlooks the fact that if a Hindu father possessed of property declares that a legitimate son born to him is also a member of his own family, that by itself does not militate against the principle of exclusion provided for in Section 5 of the Act. What Section 5 of the; Hindu Succession Act effectively means is that as regards succession in the instant case, even though the son is legitimate and can be deemed to be a Hindu, his rights to succeed to the estate of his; father, on intestacy, have to be governed, by the provisions of the Special Marriage! Act, 1954. But, as already stated this would not in any way injunct a Hindu parent from treating a legitimate son of his born in lawful wedlock as per the provisions of the Special Marriage Act, 1954, as an undivided member of the Hindu joint family. This joint family Ss created by the father by an option exercised for that purpose by himself and no sooner such option is exercised by him, there springs from it a Hindu joint family, which has to be recognised and whose legal entity has to be given effect to In accordance with the provisions of the Hindu Law both traditional and statutory and a fortiorari by the taxing statute as well.
11. Having thus come to the conclusion that Nicolas Sundaram belongs to the family of the assessee by reason of the treatment meted out by the assessee and his unequivocal intention and declaration to treat him as his son and as a member of the Hindu undivided family, it is for consideration whether the property in the hands of the assessee and at his disposal during the assessment years, was impressed with the character of ancestral property or should it be deemed to be the property of the assessee and liable to be assessed as was done by the Revenue. Considerable light was thrown at the Bar on this aspect and the discussion was almost full and complete. It is unnecessary for us to delve into the historical development on the concept as we have a few decisions of the Supreme Court entirely covering the ground. Strong reliance was placed by Mr. Balasubramaniam on Kalyanji Vithaldas v. Commr. of Income-tax, (1937) 5 ITR 90 = (AIR 1937 PC 36) which disapproved the ratio of the Bombay High Court in Commr. of Income-tax, Bombay v. Lakshminarayan, (1935) 3 ITR 367 = (AIR 1935 Bom 412). It is very significant that the Supreme Court in Gowli Buddanna v. Commr. of Income-tax, expressly approved the decision of the Bombay High Court in (1935) 3 ITR 367 = (AIR 1935 Bom 412) and observed:--
"Property of a joint family, therefore, does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess, In the case in hand the property which yielded the income originally belonged to a Hindu undivided family. On the death of Buddappa, the family which included a widow and females born in the family was represented by Buddanna alone, but the property still continued to belong to that undivided family and income received therefrom was taxable as income of the Hindu undivided family."
On the salient question whether there should be more than one male member to form a Hindu undivided family as a tax unit under the taxing Statutes, the Court said:
"The plea that there must be at least two male members to form a Hindu undivided family as a taxable entity also has no force. The expression "Hindu undivided family" in the Income-tax Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under a Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members."
In the case under review the assessee acquired the property at a partition. During the accounting years relevant to the assessment years, a lineal descendant of his, has come into existence. He is a Hindu. Notwithstanding the collateral statutory rights of succession guaranteed to the minor son under Section 21 of the Special Marriage Act, 1954, he does not cease to be a member of the joint family. We have held him to be such a member. If this has to be accepted, as it ought to be there is no difficulty in rejecting the contention of the Revenue that the Instant case is only reflective of facts where there is only a sole surviving coparcener and none else. In fact, the Supreme Court in left open the question whether the Hindu
undivided family may for purposes of the Income-tax Act be treated as a taxable entity when it consists of a single member, male or female. Emphasis was apparently laid on the presence of a single member and no more. Rightly the Revenue drew our attention to an earlier decision of the Supreme Court in the same volume in T. S. Srinivasan v. Commr. of Income-tax, where the Court held the view that in
such a case:
"...... Till the child was born, the income which accrued or arose to, or was received by, the appellant was his income, as no Hindu undivided family was then in existence, and this position could not be displaced by the birth of the son, which brought into existence a Hindu undivided family."
We are of the view that the opinion expressed by the Supreme Court in the last case to the effect:
"The doctrine that under Hindu law a son conceived or in his mother's womb is equal in many respects to a son actually in existence, in the matter of inheritance, partition, survivorship and the right to impeach an alienation made by his father, is not one of universal application and it applies mainly for the purpose of determining rights to property and safeguarding such rights of the son. This doctrine does not fit in with the scheme of the Income-tax Act, and It was not the intention of the legislature to Incorporate the special doctrine into the Act."
does not militate against the ratio in as the facts in those two cases are different. Whilst in the former case the Supreme Court was confronted with a case where the sole surviving coparcener had no eon at least for a part of the accounting year, in the latter case it was not so; particularly in the case under review the son was there during the entire year. In fact, the claim for being assessed as a Hindu undivided family was made long after the birth of the lineal descendant. Adopting the ratio of the Supreme Court in we hold that the claim of the assessee to be reckoned as a Hindu undivided family is well merited and founded and has to be accepted. In fact, under similar circumstances the Mysore High Court in Commr. of Wealth Tax v. D. C. Basappa, (1966) 51 ITR 790 (AIR 1964 Mys 204) the Allahabad High Court in Pratap Narain v. Commr, of Income-tax, (1967) 63 ITR 505 (All), Commr. of Income-tax v. Beni Prasad Tandon, (1968) 70 ITR 20 (SN) (All) and the Patna High Court in Panna Lal Rastogi v. Commr. of Income-tax, are all of the same view that the character of the property in the hands of a sole surviving coparcener, on the induction of a lineal descendant or in the presence of a person who has to be treated as a member of the joint family, has to be impressed with the character of joint family property.
12. The decision in K. R. Ramachandra Rao v. Commr. of Wealth Tax, ; Mukat Beharilal Bhargava v. Commr. of Income-tax, (1964) 53 ITR 613 (Raj) and Commr. of Wealth-tax v. Narendranath, relied on by the Revenue if they are intended to
sustain "a general proposition of law that the property in the hands of a sole surviving coparcener, under no circumstance can be characterised as joint family property, we are afraid that they are no longer good law after the Supreme Court has laid down a contrary tenet in unmistakable terms in .
13. No doubt is in a line with the reasoning of the Supreme Court in . The case related to a single
coparcener with no lineal descendant and no other person either female or others entitled to claim maintenance. In the instant case, however, the facts are entirely different. The Rajasthan High Court in (1964) 53 ITR 613 (Raj) relied upon (1937) 5 ITR 90 (AIR 1937 PC 36) the ratio in which is of doubtful value after the pronouncement of the Privy Council in Attorney-General of Ceylon v. Arunachalam Chettiar, (1958) 34 ITR (ED) 42. No reference has been made in this case to Attorney-General of Ceylon v. Arunachalam Chettiar, (1958) 34 ITR (ED) 42. In any event after the elucidation of the facts in (1937) 5 ITR 90 - (AIR 1937 PC 36) by Shah, J., in it is clear that that case
concerned itself; With the:
"income assessed to tax which belonged separately to four out of six partners; of the remaining two it was from an ancestral source, but the fact that each such partner had a wife or daughter did not make that income from an ancestral source income of the undivided family of the partner, his wife and daughter."
It is not safe, therefore, to rest our conclusions on the decision reported in (1937) 5 ITR 90 = (AIR 1937 PC 36). With great respect to the learned Judges who decided we are bound to say that the principle laid down therein is opposed to that set in .
14. Even the dicta in and that in
are reconcilable. Though one may gain the impression that the principle excerpted above and contained in eliminates the
application of the Hindu Law doctrine which concedes the right of a son in the womb of the mother being equal in many respects to a son actually in existence, it was stated so in the peculiar facts of that case where there was no lineal descendant upto a particular point of time during the accounting year, during which the Department rightly treated the assessee therein as an individual. In the later decision of the Supreme Court in the true content of the doctrine has been brought out and stated succinctly thus:
"..... Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members."
In the case under consideration, Nicolas Sundaram has to be treated as a male lineal descendant of the assessee. Even otherwise, as a son who should at least be maintained by the assessee, his claim to be engrafted into the Joint family as its member cannot be lightly brushed aside. Taxing statutes ought not to be so astutely considered so as to ignore physical facts and literally be strained against the assessee. Fiscal statutes have to be interpreted for the benefit of the assessee, if Courts are confronted with any doubt regarding Its strict application.
15. The Tribunal therefore, was in error in holding that there was no Hindu undivided family of Sridharan and his eon whereby the assessee could claim to be assessed and taxed as such either under the Income-tax Act, Wealth Tax Act or the Expenditure Tax Act We therefore, answer the question in the affirmative and in favour of the assesses with costs. Counsel's fee Rs. 250.