(Judgment of the Court was delivered by the Honourable the Chief Justice).
This is a reference by the Income-tax Appellate Tribunal, Calcutta Bench, under Section 66 of the Indian Income-tax Act. The Tribunal has not accurately set out the facts, but these are not in dispute and they may be stated very shortly.
The assessee is joint with his three sons. In 1922 he started at Negombo in Ceylon a business in partnership with a stranger to the family. On the 7th May 1924 he embarked on a cloth business in Colombo. Here he had no partner. In the month of July 1924 his father gave him a sum of Rs. 25,000 and in the month of June of the following year a sum of Rs. 8,221. The assessee was one of the three brothers and each received the same amount. In the statement of the case it is said that the gift to the assessee in June 1925 was a sum of Rs. 24,665. This was the amount which was divided by the father between his three sons. Another mistake in the statement of the facts made in the order of reference is that the assessee commenced his business in Colombo after the death of his father. His father died in 1934.
On the 26th May 1938 a deed of partnership was executed by the assessee and his two elder sons who were majors. The third son was a minor but it The provided that he was to be taken into the partnership on attaining majority was father and the three sons were each to have a one-fourth share in the profits.
For the years 1939-40 and 1940-41 the assessee was assessed to income-tax on the basis that he was the head of a joint Hindu family and that the partnership business belonged to the family. The income-tax authorities took the view that the money which the assessee had received from his father in 1924 and 1925 constituted ancestral property in his hands and this opinion was accepted by the Appellate Tribunal. The assessee then asked the Tribunal to make this reference. The application was opposed by the Commissioner of Income-tax but the Tribunal considered that a question of law did arise and has referred four questions. These read as follows :-
'(a) Whether on the facts and in the circumstances of the case the gifts of money made by Velayudham Chettiars father must be taken in law as impressed with the character of ancestral property in the hands of Velayudham Chettiar.
(b) Whether on the facts and in the circumstances of the case the business carried on at Colombo in part with money gifted by Velayudham Chettiars father was a business of the Hindu undivided family of Velayudham Chettiar and his sons, the income therefrom being assessable as the income of the undivided family.
(c) Whether there were any materials to justify the finding that part of the capital for the partnership business at Negombo started in 1922 by Velayudham Chettiar came from gifts made by Velayudham Chettiars father and that the Negombo partnership was an adjunct or part of the sole Colombo business, the two together forming one business.
(d) Whether the assessment made on the income of the sole business at Colombo and partnership business at Negombo was rightly made on the applicant in the status as a Hindu undivided family or whether the applicant was liable to be assessed only in respect of his share of income under the partnership deed dated 26th May 1938.'
The last three questions turn on the answer to be given to the first question.
There is ample authority of this Court in support of the decision of the Tribunal that the gift of the Rs. 25,000 in July 1924 and that of the Rs. 8,221 in June 1925 constituted ancestral property in the hands of the assessee.
In Nagalingam Pillai v. Ramachandra Tevar, it was held that where a father gives his self-acquired property to his son he takes it as ancestral property unless it is apparent that he intended the gift to be merely personal to his son. This case was decided by Shephard and Benson, JJ. In delivering the judgment of the Court Shephard, J., said :-
'As the father is at liberty to make any disposition he pleases or to leave his self-acquired property to descend as ancestral property; so when making any disposition in favour of his son, he is at liberty to preserve for the property the quality of ancestral property. Whether in any given case the property was intended to pass to the son as ancestral property or as self-acquired property, must be a question of intention turning on the construction of the instrument of gift. Following the principle laid down in Mahomed Shumsool v. Shewukram, I think that if there are no words indicating the contrary intention, the natural inference should be that the father intended his sons to make his property as their ancestral estate.'
This decision has been accepted as good law by this Court in Rajah of Ramnad v. Sundara Pandiaswami Tewar, Krishnaswami Naidu v. Seethalakshmi Ammal, Indoji Kithaji v. Kothapalli Ramacharlu, Shyama Bhai v. Purushothama Doss Janakiram Chetty v. Nagamoni Mudaliar, Visveswara Rao v. Varahanarasimham, and Ramachandra Aiyar v. Ranganayaki Ammual.
Mr. T. R. Venkatarama Sastri, on behalf of the appellant, has suggested that we should refer to a Full Bench the question whether the law was correctly stated in Nagalingam Pillai v. Ramachandra Tevar, because some other High Courts have expressed a contrary opinion. We are not prepared to adopt this course. The decision in Nagalingam Pillai v. Ramachandra Tevar, has been followed in this Province for nearly forty years and we do not consider it proper, especially in view of the many occasions on which it has been affirmed to refer the matter to a Full Bench. In Lal Ram Singh v. Deputy Commissioner of Partabgarh, the attention of the Privy Council was drawn to the conflict of authority but their Lordships did not consider that that case called for its decision. They left the matter open until a more fitting opportunity arose. So far as we are concerned, we are bound by Nagalingam Pillai v. Ramachandra Tevar, and as it has not been overruled by the Privy Council we must follow it.
As the Tribunal was right in holding that the money which the assessees father gave to him must be regarded as ancestral property in his hands, the first question must be answered in the affirmative.
Learned Counsel are agreed that in this view there is no necessity for as answer to any of the remaining three questions.
The assessee must pay the Commissioners costs, Rs. 250/-.
Reference answered accordingly.