1. This is an income-tax reference under Section 256(1) of the income-tax Act 1961. The case was heard by a Division Bench of those court and the learned Judges referred the question to a Full Bench in view of the conflicting opinions expressed by the Assam and the Allahabad High Courts with which view this Court concurred on the one hand and the Gujarat High Court on the other. We shall presently refer to this conflict. But before that, we shall extract the question which has been referred to us for our opinion, which is as follows-
"Whether on the facts and in the circumstances of the case, the appellate Tribunal was right in holding that the properties inherited by Karuppan Chettiar from his divided father constituted his separate and individual properties and not the properties of the joint family consisting of himself, his wife, sons and daughters and hence the income therefrom is not assessable in the hands of the assessee Hindu undivided family?"
The essential facts in this case have been stated in the order of reference thus :-
There was one Palaniappa Chettiar, who along with his wife Anandavalli Achi, their son Karuppan Chettiar and their daughter-in-law constituted a Hindu undivided family. There was a partition in this family on 22-3-1954 by and under which Palaniappa Chettiar was allotted certain properties as and for his share and he got separated. This partition was recognised by the Income-tax department under Section 25-A of the Income-tax Act 1922. Thereafter, Karuppan Chettiar, son of Palaniappa Chettiar, and his wife and their subsequently born sons and daughter constituted a Hindu undivided family which is the assessee in the present reference and has been assessed in that status. Palaniappa Chettiar, the father, died on 9-9-1963, leaving behind his widow Anandavalli Achi and Karuppan Chettiar, his son who is also the kartha of the assessee Hindu undivided family as his legal heirs. These two persons succeeded to the properties left by Palaniappa Chettiar under Section 8 of the Hindu Succession Act and divided the same between themselves. In the assessments made on the assessee Hindu undivided family for assessment years 1966-67 to 1970-71, the Income-tax Officer included in the computation of the total income, the income received from the properties inherited by Karuppan Chettiar from his father Palaniappa Chettiar. The assessee family appealed to the Appellate Assistant Commissioner contending that the said properties did not belong to the Hindu undivided family as such but only to Karuppan Chettiar as an individual and consequently the income derived therefrom could not be assessed as the income of the assessee Hindu undivided family. The Appellate Assistant Commissioner rejected this submission and thereafter the matter was taken on appeal to the Appellate Tribunal.
2. The Tribunal following a decision of the Allahabad High Court in Commr. of Income-tax U.P. v. Ram Rakshpal Kumar (1968) 67 ITR 164, held that the properties did not form part of joint family properties so that the income therefrom could be assessed as the income in the hands of the family consisting of Karuppan Chettiar and his sons and other members. It is this order of the Tribunal which is sought to be challenged by the Commissioner of Income-tax by raising the question set out already.
3. There is a direct authority on the question arising from the above facts of this court, in TC 276 of 1972 : (1977 Tax LR 1420) (Mad) (Addl. Commr. of Income-tax Madras II v. v. R. A. Manicka Mudaliar) which would enable us to answer the question in the affirmative. This decision followed the view expressed by the Allahabad High Court in the decision in Commr. of Income-tax U. P. v. Ram Rakshpal (1968) 67 ITR 164 and the Assam High Court in Ghasiram Agarwala v. Commr. of Gift-tax, Assam 69 ITR 235 : (AIR 1967 Assam 48). The decision of the Allahabad High Court was earlier to the decision of the Assam High Court, but the latter decision did not refer to the Allahabad decision. Since then. the Gujarat High Court had to deal with this matter in Commr. of Wealth Tax v. Harshadlal Manilal (1974) 97 ITR 86 when the question arose under the Wealth-tax Act and the same court again dealt with the question under the Income-tax Act in Commr. of Income-tax v. Babubai Mansukhbhai (1977) 108 ITR 417 (Guj)
4. We may pause here to point out that the question has not been discussed by the Assam High Court in Ghasiram Agarwala v. Commr. of Income-tax, 69 ITR 235 : (AIR 1967 Assam 48), and the conclusion that has been reached by that court on the principles of the ancient Hindu Law, with great respect appears to us to be erroneous and may require reconsideration. We do not wish to deal with that matter in this case. The Allahabad High Court in Commr. of Income-tax U. P. v. Ram Rakshpal (1968) 67 ITR 164 had dealt with the matter at great length and has given reasons for the conclusion that on the facts and circumstances of the case, Section 8 of the Hindu Succession Act (hereinafter called the 'Act') has provided for a devolution of interest when inheritance opens on the death of a grandfather, the son and the grandson being alive at the time of the death of the grandfather, which is quite different from the principle that obtained before the advent of the Act. This view of the Allahabad High Court has not been accepted by the Gujarat High Court. There is not much reasoning in the decision in Commr. of Wealth Tax v. Harshadlal Manilal (1974) 97 ITR 86. But the matter has been discussed in the decision in Commr. Income-tax v. Babubhai Mansukhbhai (1977) 108 ITR 417, by B. J. Divan C. J. We need, therefore consider only the decision of the Allahabad High Court and the decision of the Gujarat High Court in Commr. of Income-tax v. Babubhai Mansukhbhai (1977) 108 ITR 417. Our attention was drawn to the decision of the Mysore High Court in Commr. of Income-tax v. Smt Nagarathnamma (1970) 76 ITR 352. But that Court was concerned with Section 6 of the Act and not with Section 8 of the Act. Therefore, this decision is not helpful in answering the question. Before dealing with the Allahabad High Court decision and the Gujarat High Court decision, we would like to refer to the salient provisions of the Act. Referring to the preamble to the statute, it is clear that what was intended by enacting the statute was to provide for intestate succession among Hindus. The preamble reads-
"An Act to amend and codify the law relating to intestate succession among Hindus." Now, turning to Section 4 of the Act, we find that only a limited overriding is intended by the passing of the Act. Section 4(1)(a) says-
"(1) save as otherwise expressly provided in this Act-
(a) any text, rule or interpretation of Hindu Law or any custom or usage as part of that law in force immediately before the commencement of this Act shall cease to have effect with respect to any matter for which provision is made in this Act."
It is seen from Section 4(1)(a) that the same limitation is contained in Section 4(1)(b) as well. From this, it is possible to conclude that the statute has no intention whatever of abrogating the principles of Hindu Law in toto or in a comprehensive manner and that it intends only to affect those principles to the extent to which provision had been made in the Act which abrogates or strikes a discordant note to the principles of the established Hindu Mitakshara law. When we look at Section 6 of the Act, we find that the main body of the section in specific terms refers to the principles of survivorship obtaining in Hindu Law and serves it. But to this section engrafted a provision which clearly makes an inroad into the principle of survivorship in certain circumstances. It is unnecessary to deal with those circumstances because we are not concerned with that provision. The section with which we are concerned in this case is Section 8 and we shall extract that section in toto:
"The property of a male Hindu dying intestate shall devolve according to the provisions of this Chapter-
(a) firstly, upon the heirs being the relatives specified in class 1 of the schedule;
(b) secondly, if there is no heir of class 1, then upon the heirs, being the relatives specified in class II of the schedule;
(c) thirdly, there is no heir of any of the two classes, then upon the agnates of the deceased; and
(d) lastly, if there is no agnate, then upon the cognates of the deceased".
From this section, it is clear that when a male Hindu dies intestate, his property shall first develop upon his heirs, being the relatives specified in class I of the schedule and what is said in this section and in Section. 9 will show that among the heirs specified in the schedule, those in class 1 shall take simultaneously and to the exclusion of all other heirs; those in the first entry is Class II shall be preferred to those in the second entry; those in the second entry shall preferred to those in the third entry; and so on in succession. The relatives specified in Class II will get a chance only if there is no heir of class I, and if there is no heir of any of the two classes, the agnates of the deceased will get the chance and lastly, if there is no agnates, the cognates of the deceased will take the property. We are not concerned in this case with the effect of succession opening to relatives specified in class II, or to agnates or cognates. There are heirs under class I and this is clear from the facts as already stated. The question is only, therefore as to how those heirs take the property under Section 8. If the mode of division provided by the section is different from that which obtained before the Hindu Succession Act came into operation, in accordance with the principles of Hindu Law in view of what is categorically stated in Section 4 of the Act, it is Section 8 of the Act that should prevail and not the principles of Hindu Law. If there is difference in the scope and effect regarding the mode of method of devolution that is provided in Section 8. It is Section 8 which should be applied and not the principles of Hindu Law. We should, therefore, try to formulate what are the principles of Hindu Law applicable in the circumstances of this case.
5. That is a case where a person who had obtained the property under partition died. His name was Palaniappa. When he died, his son Karuppan was alive. We are concerned with the property which Palaniappa had obtained in the partition. In that partition, Karuppan was also a party. We are concerned with the question of devolution of the property of Palaniappa which he obtained in the partition and which had devolved on some persons, after his death. Not only was Karuppan alive at the time of the death of Palaniappa, but at the time of his death, Karuppan's son was also alive. In such circumstances, under the Hindu Law, the property will devolve on the son and the grandson will also have an interest in the property; and the two together will form a Hindu undivided family (we are of course assuming that there were no female).
6. The question is whether when succession opens under Section 8, Karuppan and his son will take the property in the same manner. Clearly, this is not so. When we search for the relatives mentioned in class I of the schedule, which is attracted by virtue of Section 8, we find no sons are mentioned at all. though the grandson of a deceased son is mentioned. What would be the effect when such a grandson comes into the picture need not be dealt with in this case. But where the son as well as his son are the persons concerned, by applying Section 8, we have to come to the conclusion that the father along, namely Karuppan in this case would inherit the property to the exclusion of the grandson. This being the effect of the statutory provision, no interest would accrue to the grandson in the property which belonged to Palaniappa. Even assuming Palaniappa's property was ancestral property in the hands of Karuppan, still because of the effect of the statute, Karuppan's son would not have an interest in the property. This was directly derogatory of the law established according to the principles of the Hindu Law and this provision in the statute must prevail in view of unequivocal expression of the intention in the statute itself which said that to the extent to which provisions had been made in the statute, those provisions should override the established provisions in the texts of Hindu Law. This is what M. H. Beg J. as he then was, said in the decision in Commr. of Income-tax v. Ram Rakshpal, (1968) 67 ITR 164(All). Commenting of this, Divan C. J. in Commr. of Income-tax v. Babubhai Mansukhbahi (1977) 108 ITR 417 at p. 420 (Guj) made the following observations :
"The Division Bench there held that in view of the provisions of Section 6 and Section 8 of the Hindu Succession Act, the old position no longer prevailed and the income from assets inherited by a son from his father must be held to be his individual and not the income of the Hindu undivided family consisting of himself and his son. Main reliance in support of this conclusion was placed by the Allahabad High Court on the provisions of Sections 6 and 8 of the Hindu Succession Act. The Allahabad High Court accepted the principle that if it had not been for the Hindu Succession Act, on the death of a father whatever was inherited by his son by way of succession became ancestral property in the son's hands and this ancestral property in the hands of the son belonged to the coparcenary or the joint Hindu family consisting of the son and his own male issue.........................
After discussing the matter at some length the learned Chief Justice observed at p. 422-
"................With respect to the learned Chief Justice of the Allahabad High Court, it is impossible to read into the words of Section 8 any provision which interferes with the scheme of Hindu Law as it prevailed prior to the enactment of the Hindu Succession Act. Neither Section 6 nor S. 8 nor Section 30 affects this principle of Hindu Law as to in what capacity or in what character the son would enjoy the property once he received it from his father in succession".
Proceeding further, the learned Chief Justice, referred to a passage from Mulla's Principles of Hindu Law, 14th Edn. Edited by S. T. Desai. Illustration (a) at page 849 of the commentary is then extracted and the learned Chief Justice agreed with the Commentary and the illustration. With very great respect, we are unable to agree with the view expressed by the learned Chief Justice. The passage quoted from the commentary did not deal with the effect of section 8 of the Act. What has been illustrated also is the position under the Hindu Law untrammeled by statutes and it occurs in the commentaries to Section 6 of the Act which deals with survivorship and the saving by Section 6 of that principle to the extent to which it had been done. This passage is of no assistance in determining the impact of Section 8 on the principles of devolution of property on the death on the principles of inheritance. We have dealt with the effect of Section 8 earlier and it is clear that here Karuppan alone took the properties of his father Palaniappa which the latter had obtained in the partition, and irrespective of the question whether it was ancestral property in the hands of Karuppan or not, he would exclude his son. Since the existing grandson at the time of the death of the grandfather has been excluded, we think that an after-born son of Karuppan will also not get any interest which Karuppan inherited from his father. Thus, the principles of Hindu Law are not applicable. It is impossible to visualise or envisage any Hindu undivided family in regard to the property which Karuppan got. This is the view that we have taken in the decision in T. C. No. 276 of 1972 : (1977 Tax LR 1420) (Mad) Addl. Commr. of Income-tax Madras v. V. R. A. Manicka Mudaliar to which one of us was a party. We respectfully agree with the view expressed in that decision and answer the question referred to us in the affirmative i.e. in favour of the assessee and against the Department. The revenue will pay the costs of the assessee including counsel's fee Rs. 500.
7. Question answered in affirmative.