Govindan Nair, C.J.
1. The first of these tax cases raises a question of assessment to gift-tax for the years 1968-69 and 1969-70, and the other case, T.C. No. 255 of 1974, is concerned with the assessment of wealth-tax for the year of assessment 1968-69. The assessee in both these cases is the same individual, one Raghava Mudaliar, who is admittedly the head of a Hindu undivided family.
2. The questions that have been referred to us in the two tax. cases, respectively, read as follows :
T.C. No. 176 of 1974
'Whether, on the facts and in the circumstances of the case, it has been rightly held that the sum of Rs. 1,50,000 and Rs. 1,05,000, respectively, would constitute gifts for the assessment years 1968-69 and 1969-70?' T.C. No. 255 of 1974 'Whether, on the facts and in the circumstances of the case, it has been rightly held that the sum of Rs. 1,53,016 belonged to the assessee and not to the Hindu undivided family and, therefore, is to be assessed as individual in his wealth-tax assessment for the assessment year 1968-69?'
3. The necessary facts to understand the implications of these questions may be stated very briefly. The assessee had been a racegoer for over a quarter of a century. On the 25th of February, 1968, he had been the happy recipient of a large, we would call it a huge sum of money, namely, Rs. 3,35,881, in what is called the jackpot in horse racing parlance. Soon after, there was a partition deed on March 6, 1968 (which is at page 31 of the typed set of papers) entered into among the assessee, his five sons and his wife. This partition deed dealt with, among other things, a house in which they were all living, a printing press and the sum of Rs. 3,35,881 which the assessee won at the races. The relevant paragraphs in the preamble dealing with these properties are important and we shall extract them as under :
'Whereas the parties hereto constitute members of a joint Hindu family of which the party of the first part is the manager and karta;
Whereas they own and possess the house and ground and premises No. 37/1, Irusappa Gramani Street, Triplicane, Madras-5, and a printing press, run under the name and style of Sri Saraswathi Printing Works in the above premises, as the joint family property and each of the parties hereto being entitled to 1/6th share therein ;
Whereas the said M, Raghava Mudaliar, out of the joint family money purchased on 25-2-1968, jackpot ticket in the Madras Race Course and got for the benefit of the said joint family a sum of Rs. 3,35,881 (Rupees three lakhs thirty-five thousand eight hundred and eighty-one only) by cheque No. 66/005339 of 26-2-1968, in his favour.'
4. With regard to the printing press, it has been accepted by the department that it constituted the HUF property. But the same status was not given to the sum of Rs. 3,35,881 mentioned in the last of the paragraphs in the preamble which we have extracted. From the above amount, a sum of Rs. 1,65,881 was deposited in the Indian Bank. The remaining sum of Rs. 1,70,000 was divided at the rate of Rs. 20,000 to each one of the assessee's five sons and Rs. 50,000 was the share of the wife of the assessee.
5. In T.C. No. 176 of 1974, we are concerned with the sum of Rs. 1,50,000 which has been set apart as the share of the five sons and the wife in the year of assessment 1968-69, and with the sum of Rs. 1,05,000 allotted to the five sons in the following assessment year 1969-70. In this connection, it is necessary to refer to another document dated August 8, 1968, by which there was a division of the balance of the amount that was deposited in the bank. A perusal of the document of August 8, 1968 (which is at page 35 of the typed set of papers) will indicate that a sum of Rs. 24,028 was utilised for the various purposes mentioned in that document, and out of the balance of Rs. 1,41,852.73, Rs. 21,000 was obtained by each one of the assessee's five sons, and the balance of Rs. 15,852.73 was stated to be utilised for the improvement of the joint family property, namely, the house at No. 37/1, Irusappa Gramani Street, Madras-5. The sum of Rs. 1,05,000, which is the subject-matter of the reference for the year 1969-70, is the sum total of the amount of Rs. 21,000 given to each of the five sons.
6. As far as the gift-tax assessments for the years 1968-69 and 1969-70 are concerned, the question is whether the amounts allotted to the sons by -the documents of March 6, 1968, and that dated August 8, 1968, are really gifts by the assessee to the sons or whether it represented the value of the property which belonged to the HUF, divided among the members of the undivided family. Similarly, the question regarding the wealth-tax for the year 1968-69 relating to the sum of Rs. 1,50,000, turns on the point whether the sum of Rs. 20,000 allotted to each of the five sons totalling Rs. 1,00,000 and the sum of Rs. 50,000 given to the wife of the assessee really represented the property of the HUF or the property of the assessee which he gifted to them to the credit of Rs. 20,000 to each of his five sons and Rs. 50,000 to his wife. In other words, the question is whether the sum of Rs. 3,35,881 was really joint family property or was of the assessee's individual property.
7. Going back to the preamble of the document dated March 6, 1968, there could be little doubt as is seen from the statement in para. 3 of the preamble of the document which we have extracted already that all the members of the family including the assessee treated the entire amount of Rs. 3,35,881 as the property belonging to the HUF and they divided the entire property by that document and by the document of August 8, 1968, and utilised the balance exclusively for the benefit of the HUF. It is true that there is a statement in para. 3 of the preamble extracted above that the ticket was purchased from out of the joint family money. There was an attempt made by the Tribunal to discredit that statement and the Tribunal doubted the possibility of joint family funds having been utilised forpurchasing the ticket. The Tribunal also observed that the winning of a prize is as a result of the individual act and luck of a person.
8. We shall extract paras, 11 and 12 of the Tribunal's order in which the matter is discussed.
'11. So far as the amount obtained on jackpot, there is nothing to show except a bare statement without supporting materials that it was with the association or combination of the members of the family that the ticket was purchased. While the assessee alone, according to his own statement, was going to race for the last 26 years, there is nothing to show that his sons had been associating in his racing activities. Be that as it may, the very receipt of a prize is a windfall and it is due to luck of an individual. It is unusual that for gambles or for race goings or bettings a joint family is being associated. It may be that after the receipt of the prize, a member of the family may like to pool the same among the members, but so far as the first receipt is concerned, it is purely an individual act and luck of a person. Therefore, we can straightaway negative the assessee's contention that at the very stage of the receipt of the winning, it would go to the joint family.
12. The next contention that will have to be considered is whether this arrangement could be said to be the same as a declaration of the intention of the assessee to have both the proceeds of the race winnings and the income from the business of the printing press to be impressed with the joint family character. So far as the sum of Rs. 1,70,000 out of the sum of Rs. 3,35,881 is concerned, it was divided as per the memorandum of the family arrangement entered into on 6-3-1968. There is nothing to indicate that the entire amount of Rs. 3,35,881 has been impressed with the character of joint family funds earlier or on the very same day of the family arrangement for effecting division of the same. As it is clear from the arrangement, there has been recital to the effect that this already belonged to the family and we have already rejected that contention. However, in view of the declaration in the wealth-tax and income-tax returns for the assessment year 1968-69 that the status is Hindu undivided family and that the printing press income is the family income, we are of the view that this declaration in the wealth-tax and income-tax returns can be understood as the assessee impressing this item of printing press as Hindu undivided family property. As regards the sum of Rs. 3,35,881, which represented the race winnings, though the assessee has declared in the wealth-tax return that a sum of Rs. 1,53,016 would be Hindu undivided family fund, so far as the income-tax return is concerned, the assessee has not declared the interest from the deposits in various banks relating to the sum of Rs. 1,55,881 (not divided and deposited in the bank) which is stated to be deposited in the Indian Bank Ltd., as noticed from the memorandumof family arrangement dated 6th March, 1968. We further find that the assessee himself is not clear as to the correct state of his action as we have already indicated he has assumed for the first time in the arrangement that the jackpot ticket was bought for the benefit of the family, and, therefore, would go to the benefit of the joint family whereas we do not find any material in support of that stand. In view of what we have stated above, we are of the view that so far as the jackpot winnings are concerned, they are his own individual funds and then they were divided among his sons and wife as per the arrangement. We, therefore, agree with the view of the authorities below in not treating this as one belonging to the family.'
9. It is seen from the above extract that there is no specific finding entered by the Tribunal that the statement in the document that the ticket was purchased with the joint family money, cannot be accepted. There is nothing on record to indicate that the ticket was purchased from out of any other fund. All that the Tribunal has said is that 'Be that as it may'. Having said so, it treated the nature of the receipt as a 'windfall' and attributed that to the personal act and luck of the assessee. Having said so, it came to the conclusion that the assessee's contention that at the first stage of the receipt of the winning, it would go to the joint family, should be negatived. This cannot be treated as a finding on a question of fact, but merely a conclusion based on reasoning that the windfall resulted from the personal act and luck of the assessee. In other words, there is no specific finding by the Tribunal that the statement in the document is unacceptable. The further argument before the Tribunal was that even assuming that the amount was not at the time of the receipt a joint family fund, still in view of the declaration contained in the document of March 6, 1968, and the declaration contained in the return of wealth-tax for the year 1968-69, a clear intention has been evinced to treat the entire amount as joint family funds or, to put it more exactly, that the funds had been impressed with the character of joint family funds. The Tribunal rejected the contention on the basis that it had already been found that the recital that it belonged to the joint family at the inception was not acceptable, and that the interest from the deposit of Rs. 1,65,881 (the figure referred to in the last paragraph at page 31 of the typed set of papers, but wrongly referred to in the order of the Tribunal as Rs. 1,55,881) had not been shown as the income of the HUF in the return of income for the year. A perusal of the document of August 8, 1968, indicates that no interest on the amount of Rs. 1,65,881 was available for division in August, 1968. The total of the amount dealt with therein only amounted to Rs. 1,65,880.73 which when rounded off comes to Rs. 1,65,881. Apparently there was no interest. Whatever that be, even if there had been any interest, a wrongful omission to show it as an income is too slender a groundto negative a categorical expression of intention in the declaration contained in the return. The Tribunal has not said that this declaration is wanting in any aspect. We would also like to say that unless the interest amount exceeded a certain limit, it would not be taxable at all and there is no need to file a return regarding the same. Harping upon the interest to negative the effect of the declaration would be an unjust procedure which cannot be sustained. No other reason has been stated by the Tribunal.
10. We think that the question whether the amount of Rs. 3,35,881 has been treated as the Hindu joint family fund or not has to be answered with reference not only to what is stated in the document of March 6, 1968, but by reference to what is stated in the document of August 8, 1968, and what is stated in the declarations that are contained in the returns that have been filed and the intrinsic effect of the document dated August 8, 1968, and these would indicate to what purposes these funds have been utilised. When these aspects are taken into consideration, there is no doubt that at all stages from the very beginning, whenever there was an opportunity, the fund had been treated only as that belonging to the Hindu joint family. The reason why it was so treated, we consider, is immaterial in such circumstances. The reason which prompted a member to treat funds which might belong to him as that of the Hindu joint family is not material. The question is only whether there is a clear indication of the intention to treat the funds as that of the HUF funds. There is such an intention clearly discernible from the beginning as seen from the statements in the documents dated March 6, 1968, and August 8, 1968.
11. Counsel on behalf of the revenue vehemently argued before us that the finding that has been rendered is a finding on a question of fact and there being no question referred to us regarding the correctness of that finding, we are not entitled to go behind that finding. But we are unable to discern any finding on a question of fact in this case. As we have already stated, the conclusion at the end of para. 11 of the order that from the inception the funds did not belong to the HUF stemmed from the notion that the amount earned or obtained was a 'windfall' due to the personal act and luck of the assessee. It was not said that the declaration in the return which was referred to is not sufficient expression of intention about the character of the fund. The statement has been brushed aside or ignored on the basis that the interest from the amount of Rs. 1,65,881 has not been shown as the income of the HUF in the return filed for income-tax purposes by the assessee. As we have already stated, it is not known whether there was any interest income in excess of the permissible amount. So. what the Tribunal has done is to only brush aside a declaration of intention specifically made which would have clearly enabled the Tribunal to posit that the amounts were HUF funds. In suchcircumstances, we are not able to discern from the order of the Tribunalany finding on a question of fact which would deter us in dealing with thequestion referred to us. Whether the sum of Rs. 1,50,000 in the year1968-69 and the sum of Rs. 1,05,000 in the year 1969-70 represented, theamounts granted by the assessee to the other members of the HUF or notwould depend entirely on the question whether the sum of Rs. 3,35,881out of which these amounts came belonged to the joint family or not. Wehave no doubt at all that at all relevant times, the sum of Rs. 3,35,881 hasbeen treated only as the HUF funds. The income-tax authorities are notentitled to question such treatment and they cannot question the motivebehind that nor can they change the character or nature of the fund bysaying that reasons which prompted for so treating the amount did not existor that they are not valid reasons for so treating. We are, therefore,obliged to answer the question referred to us in T.C. No. 176 of 1974 in thenegative, that is, in favour of the assessee and against the revenue. Wedo so.
12. In the light of what we have discussed it is clear that every part ofthe sum of Rs. 3,35,881 was property which belonged to the HUF: and,therefore, represented the wealth of the HUF and that no portion of thatwealth or for that matter the specific sum of Rs. 1,53,016 concernedin T.C. No. 255 of 1974 can be the individual property of the assessee. Wetherefore, answer the question referred to us in T.C. No. 255 of 1974 alsoin the negative, that is, against the revenue and in favour of the assessee.In both these cases, the assessee will be entitled to his costs one setincluding counsel's fee Rs. 500.