1. This revision case is filed by the assessee M.P.K. Kandasami Chettiar against the order of the respondent the Commissioner of Agricultural Income-tax revising suo motu the assessment order of the Agricultural Income-tax Officer, Vellore.
2. The circumstances which have given rise to this revision case can be set down briefly. The assessee executed on 16th May, 1955, a registered document purporting to be a partition deed. We will refer to this document in somewhat greater detail a little later in this judgment. Under this document, he partitioned certain properties (which, according to the recitals in the document, he had obtained by self-acquisition and also by a will) between his wife and other members of the joint Hindu family including two sons and three daughters. The Agricultural Income-tax Officer, Salem allowed the assessee and the other sharers to compound the agricultural income-tax in respect of the properties thus partitioned separately. In the case of the assessee, for the assessment year 1958-59, composition was allowed by the Agricultural Income-tax Officer, Vellore, in respect of 53.50 acres of land. The same process of composition was repeated for the two succeeding assessment years 1959-60 and 1960-61. The Commissioner of Agricultural Income-tax took up the case suo motu in revision in exercise of the power under Section 34 of the Madras Agricultural Income-tax Act, 1955, and after giving notice to the assessee he proceeded to revise the assessment for 1960-61 after holding that such revision in respect of the two earlier years would be barred by time. In the view of the Commissioner of Agricultural Income-tax, so far as the partition deed allots a certain extent of land to the wife as well as the minor sons and daughters of the assessee, the document must be considered as effecting a conveyance by indirect transfer of that property by the assessee to his wife and minor children, and it would be hit by the provisions of Section 9(2)(a)(iii) and (2)(a)(iv) which refer to assets transferred directly and indirectly by the husband to the wife and minor children otherwise than for adequate consideration. These provisions are on the same terms as Section 16(3) of the Indian Income-tax Act, 1922. The Commissioner of Agricultural Income-tax was of the opinion that the assessee would be liable to pay agricultural Income-tax in respect of income from the lands ignoring the partition so far as the lands allotted to the wife and minor children are concerned, and he set aside the levy of agricultural income-tax and directed the Agricultural income-tax Officer, Vellore to re-assess them in accordance with the findings mentioned above. It is against this decision that the revision case is now filed by the assessee.
3. Learned Counsel, for the petitioner has taken us through the relevant deed of partition executed by Kandaswami Chettiar. The crucial point to note in this document is that Kandaswami Chettiar, after reciting that the schedule properties were obtained by him by self-acquisition and under a will, expressed that they had been there-to-fore in the common enjoyment of himself and the other members of his family including his wife and minor children aforesaid. He proceeds to say that the continued enjoyment of the properties in the same manner as before was not feasible because of misunderstandings among the members of the family. Then he refers to the fact that already there was a partition of the joint family house and movables and then he proceeds to allot shares in the schedule to the partition deed between himself, his wife and children. These recitals would show clearly that in the same document the assessee has expressed his intention to treat these properties as joint family properties and has proceeded thereafter to make a division of these properties between himself and the other members of the joint family. He has also, in substance, referred to the prior joint enjoyment of the properties between himself and the other members of the family. Particularly he has also referred to the fact of an earlier partition of the joint family assets showing that his intention was to treat the present document also as a continuation of the earlier partition of joint family assets. These circumstances, in our opinion, are sufficient to treat this as a case where the assessee as the manager of a joint Hindu family desired to impress upon the schedule properties, which no doubt were his self-acquisitions, with a joint family character, and thereafter to divide them between himself and the other members of the family.
4. There has been a well known line of decisions which hold that where an assessee who is the manager of joint Hindu family proceeds to impress upon his self-acquired properties with the character of joint family property and proceeds to divide them between himself and the other members of the family, it cannot be considered to be a case where he has effected an indirect transfer of his Self-acquired property in favour of wife or minor children so as to attract the provisions of Section 16(3) of the Indian Income-tax Act, 1922. The relevant decisions cited in this connection are M.K. stremann v. Commissioner of Income-tax : 41ITR297(Mad) , approved by the Supreme Court in Commissioner of Income-tax v. M.K. Stremann : 56ITR62(SC) , at page 66 of the report the Supreme Court observed:
When instructions are given that the self-acquired property is to be treated as joint family property, in our opinion, at that moment the property assumes the character of joint family property. On execution the deed becomes evidence of a pre-existing fact, i.e., of throwing the self-acquired property into the hotchpot.
No doubt, in that case the properties included an item of joint family property along which self-acquired properties were also added for the purpose of division. But it appears to us that this will not make any difference to the application of the principle above enunciated. In a decision of the Bombay High Court, reported in Damodar Krishnaji Nirgudi v. Commissioner of Income-tax (1963) 46 I.T.R. 1252, assessee possessed self-acquired property, but no ancestral property, and was being assessed as an individual in respect of his self-acquired property. He had a wife and a minor son. Under a registered deed to which the wife and the minor son were also parties, the assessee gave up his individual rights in his self-acquired property and declared that all his self-acquired property shall henceforth be the property of the joint family composed of himself, his wife and his minor son. Under the same deed this property was partitioned between himself, his wife and his minor son. The Bombay High Court, following other earlier decisions, including M.K. Stremann v. Commissioner of Income-tax : 41ITR297(Mad) , above cited, held that it was open to a member of a Hindu undivided family to throw his self-acquired property into the family hotchpot even though there was no joint or ancestral property and that such throwing of his self-acquired property into the hotchpot of the family did not amount to any transfer of such property to the assessee's wife or son, and the partition of the property in such circumstances did not amount to a transfer by the assessee of his property to his wife and child. We were also referred to an earlier decision of this Court reported in Subramania v. Commissioner of Income-tax : 28ITR352(Mad) , where we find the following observation:
The assessee and his son undoubtedly constitute members of a joint Hindu family. They might have started with no ancestral nucleus or other joint family property; but there was nothing to prevent the assessee from impressing upon any self-acquired property belonging to him the character of joint family property. No formalities are necessary in order to bring this about and the only question is one of intention on the part of the owner of the separate property to abandon his separate rights and invest it with the character of joint family property.
We have already given the crucial details of the deed of partition in this case, and, in our opinion they contain sufficient indicia to show that the assessee intended and did carry out his intention of impressing upon his self-acquired property the character of joint family property and thereafter divided it between himself, his wife and minor children. We are, therefore, of the opinion that the order of the respondent, Commissioner of Agricultural Income-tax, cannot be supported. We allow this petition and set aside the order of the Commissioner of Agricultural Income-tax and restore the assessment order of the Agricultural Income-tax Officer, for the concerned year. The appellant will get costs. Counsel's fee Rs. 100.