Commissioner of Income Tax vs Harshvadan Mangaldas

S.B. Majmudar, J.—This reference at the instance of the Revenue poses for our consideration the following three questions :

(1) Whether, on the facts and circumstance of the case, the Tribunal was right in law in holding that, at the end of the partitions, dated December

28, 1964, December 29, 1967, March 26, 1971 and March 9, 1972, there survived a Hindu undivided family consisting of the assessee and his

daughter ?

(2) Whether, on the facts and circumstances of the case, the movable and immovable properties that, as a result of the said partitions, fall to the

share of the assessee constituted not his separate property but the joint property of the said Hindu undivided family ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income earned from the aforesaid

properties during the year under consideration was taxable in the hands of the Hindu undivided family comprised of the assessee and his daughter

?

which have been referred to us by the Tribunal u/s 256(1) of the Income Tax Act.

A few relevant facts leading to this reference deserve to be noted at the outset. The concerned assessment year is 1972-73. The respondent-

assessee is an individual. The financial year is the previous year. His total income was assessed by the Income Tax Officer as per his order at Rs.

2,65,050 as rounded off as against the total income of Rs. 2,55,040 declared as per the original return dated August 29, 1972. The assessee later

revised the return on June 6, 1974, and declared that whereas income amounting to Rs. 1,97,364 was taxable in his hands as an individual, the

amount of Rs. 1,24,622 was taxable in his hands as karta of the Hindu undivided family which comprised by himself and his daughter. The total of

the said two amounts maintained in the revised returns came to Rs. 3,21,986 as against the original total figure of Rs. 2,55,040. Regarding the

amount of Rs. 1,24,622, the assessee claimed that the said income arose from assets which had fallen to his share on four partitions effected on

December 28, 1964, December 29, 1967, March 26, 1971, and March 9, 1972. The said partitions of joint property belonging to the Hindu

undivided family comprised of the assessee, his wife, his son and his daughter had taken place as between the assessee and his son''s 1/3rd share

had been allocated to the assessee, his wife and his son, respectively, at the time of each partition.

The Income Tax Officer took the view that whatever property the assessee received as a result of the partial partition would constitute his

separate property and that his daughter, Aditi, would have no right therein.

The assessee went up in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, following the principles laid

down by the Supreme Court and various High Court in the decisions referred to before him, held that the assessee was entitled to claim the status

of a Hindu undivided family in respect of the properties received by him on partial partition and that the Income Tax Officer was not justified in

including the income received by the appellant on partial partition in the individual income of the appellant-assessee.

The Revenue went up in appeal to the Tribunal against the said decision of the Appellate Assistant Commissioner. The Tribunal noted, in the

light of the four partition deeds, that the properties were divided among the assessee, his wife and his son and that the assessee''s daughter, Aditi,

was also a member of the Hindu undivided family. The Tribunal considered the question which was purely one of law and that question was as to

whether income arising from the property falling to the share of the assessee as a result of the partitions, vide four separate deeds, was to be

assessed as the assessee''s individual income or the income of the Hindu undivided family made up of himself and his daughter. Having analysed the

case-law cited before the Tribunal by both the sides, the Tribunal concluded that the question whether the income from the property held by a sole

coparcener or by a male member was assessable in his hands as income from the joint Hindu undivided family property or as income form his

individual property fell in three categories. PRATAP NARAIN Vs. COMMISSIONER OF Income Tax, U. P., , GAJANAND SUTWALA Vs.

COMMISSIONER OF WEALTH-TAX, U. P., , Panna Lal Rastogi Vs. Commissioner of Income Tax, and N.V. Narendranath Vs.

Commissioner of Wealth-tax, Andhra Pradesh, , were held to constitute one category and Gowli Buddanna Vs. Commissioner of Income Tax,

Mysore, Bangalore, and BHARATKUMAR CHINUBHAI Vs. COMMISSIONER OF Income Tax, GUJARAT. COMMISSIONER OF

WEALTH-TAX, GUJARAT II v. DAHYABHAI CHIMANLAL SHETH., , were held to constitute the second category. The third category was

held to deal with cases where, on partition of joint family property, some property came to be allotted to a member who was not entitled to claim

partitions as such. Ultimately, the Tribunal came to the conclusion that the income from the property falling to the share of the assessee was

assessable in the hands of the assessee''s undivided family consisting of himself and his daughter and, accordingly, the Department''s appeal was

dismissed. As noted earlier, at the instance of the Revenue, the three questions earlier extracted have been referred by the Tribunal for our opinion.

At the time of hearing of this reference, various decisions of the Supreme Court and other High Courts including this court were cited before us.

From these decisions, a legal position has clearly emerged to the effect that even while a person who was earlier a member of the Hindu undivided

family receives property on partition of a Hindu undivided family, he continues to be a member but of a smaller-Hindu undivided female. It has to

be noted that a Hindu undivided family can consist of male as well as female and in some cases even of females.

We may refer to a few decisions on the point to highlight this position.

In the case of BHARATKUMAR CHINUBHAI Vs. COMMISSIONER OF Income Tax, GUJARAT. COMMISSIONER OF WEALTH-

TAX, GUJARAT II v. DAHYABHAI CHIMANLAL SHETH., , a Division Bench of this court consisting of P N Bhagwati C. J., and B. J. Divan

J., (as they then were), had to consider the question whether, on the death of the parents, their son and unmarried daughter can continue to be

members of the Hindu undivided family. The Department''s contention was that, after the death of the parents, especially the father, the son

remained as a sole coparcener and, therefore, the property which originally belonged to the joint family was required to be assessed to Income

Tax as property of the son as an individual and not as property of the Hindu undivided family consisting of the sons and his own sisters. Negativing

the contention of the Department, it was held that the properties sought to be taxed originally belonged to a Hindu undivided family and, on the

death of the parents, the same undivided Hindu family continued to subsist with the assessee and his two unmarried sisters as members and the

properties also therefore continued to belong to that Hindu undivided family. Nothing transpired to covert the character of the properties from joint

properties belonging to a Hindu undivided family into the absolute properties of the son. The properties were, therefore, liable to be assessed in the

hands of the son as properties of a Hindu undivided family and income received from them was also liable to be taxed in the hands of the son as

income of the Hindu undivided family. If the Hindu undivided family can consist of a brother and his unmarried sisters as per the aforesaid decision,

it necessarily follows that a father and his unmarried daughter can also form Hindu undivided family and income of such family can be brought to

tax as income of a Hindu undivided family.

In our view, the aforesaid decision of this court squarely answers the questions posed for our consideration against the Revenue.

However, as other decisions including decisions of the Supreme Court were cited for our consideration, we deem it fit to refer to them.

In the case of N.V. Narendranath Vs. Commissioner of Wealth-tax, Andhra Pradesh, , the Supreme Court was concerned with the question

whether the property received on partition by a coparcener as his share of joint family property when the coparcener was forming a joint family

with his wife and his minor daughter, can be treated to belong to a Hindu undivided family in the hands of the coparcener, the Hindu undivided

family consisting of himself, his wife and minor daughter or whether it can be assessed as individual property for the purpose of wealth-tax. For

answering this question, the Supreme Court considered the concept of a Hindu undivided family as employed in the Act. In the light of the

principles of Hindu law as applicable to the concerned assessee, it was held that, under the Hindu system of law, a joint family may consist of a

single male member and his wife and daughters and there is nothing in the scheme of the Wealth-tax Act to suggest that a Hindu undivided family as

an assessable unit must consist of at least two male members.

Even though the aforesaid decision is rendered in the context of tax liability under the Wealth-tax Act, the principles laid down therein get

squarely attracted to the facts of the present case. Even under the Income Tax Act, the expression ""Hindu undivided family"" is used in the same

sense in which a Hindu joint family is understood in the personal law of Hindus. It must, therefor, be held that the assessee in the present case did

constitute a joint Hindu family along with his unmarried daughter at the relevant time and it cannot be said that the joint family had ceased to exist as

far as these two members were concerned.

Mr. Raval, for the Department, however, placed great store on a later decision of the Supreme Court in the case of C. Krishna Prasad Vs.

Commissioner of Income Tax , Bangalore, . So far as the aforesaid decision is concerned, the Supreme Court was concerned with a situation in

which the assessee along with his brother and father had formed a Hindu undivided family up to October 30, 1958, when there was a partition

between them. In the partition, the assessee got some house properties and vacant sites. On the date of partition as well as during the relevant

previous year ending on March 31, 1964, the assessee was unmarried. Up to the assessment year 1963-64, the assessee was assessed in the

status of an individual. For the assessment year 1964-65, he claimed that he should be assessed in the status of a Hindu undivided family. The

question before the Supreme Court in the aforesaid decision was whether such claim of the assessee was justified. It was held that, on the facts of

that case, the assessee was rightly assessed in the status of an individual. Khanna J., speaking for the Supreme Court, in that decision, analysed the

concept of ""family"" and observed that ""family"" always signifies a group. Plurality of persons is an essential attribute of a family and a single person,

male or female, does not constitute a family. A family consisting of a single individual is a contradiction in terms. Section 2(31) of the Income Tax

Act, 1961, treats a Hindu undivided family as an entity distinct and different from an individual. Assessment in the status of a Hindu undivided

family can be made only when there are two or more members of the Hindu undivided family. ""It becomes obvious that, on the facts of the

aforesaid case, the assessee was a single person. He was not married and he had no other family members, male or female. It is in the background

of these facts that the Supreme Court held that he could not have been assessed as a member of a Hindu undivided family. We fail to understand

as to how that decision can be pressed into service in the facts of this case. In this case, the assessee along with his unmarried daughter constituted

a Hindu undivided family at the relevant time. There was plurality of persons and, consequently, the ratio of the aforesaid decision of the Supreme

Court in C. Krishna Prasad''s case [1974] 97 ITR cannot at all be applied to the facts of the present case. The Tribunal, therefore, rightly

distinguished the said decision and held that it was not applicable to the facts of the present case.

A similar view has been taken by other High Courts. We may only mention the latest decision of the Andhra Pradesh High Court in Tulsidas

Bolumal Vs. Commissioner of Income Tax, . It is not necessary to dilate upon the same in detail.

In view of the aforesaid settled legal position, it must be held that the claim of the Department that the assessee should be assessed as an

individual has to be repelled and was rightly repelled by the Tribunal. In this view of the matter, the questions referred to us are answered in the

affirmative. They are answered against the Revenue and in favour of the assessee. Reference is, accordingly, disposed of with no order as to costs.