Commissioner of Income Tax vs Smt. Radhambal Ammal

G. Ramanujam, J.—These are six petitions u/s 256(2) of the income tax Act, 1961 (''the Act'') for issuing a direction to the Tribunal to state

a case on the following common question of law:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the status of the assessee should be taken as

Hindu undivided family?

The assessee in all these cases is one and the same person. Up to the assessment year 1966-67, the assessee submitted returns under the Act

showing his status as an individual and the authorities had assessed him only as an individual on the basis of the returns submitted by him. However,

for the assessment year 1970-71, the assessee filed a return showing his status as the karta of the HUF. That was not accepted by the ITO and

the assessments for that year and for the earlier years 1967-68 and 1968-69 were made on the assessee treating him as an individual. Aggrieved

by the said assessments, the assessee took the matter in appeal to the AAC, who held that the status claimed by the assessee as the karta of a

HUF has to be accepted in view of the terms of the will executed by the assessee''s adoptive father bequeathing certain properties in favour of the

assessee and others. Aggrieved by the decision of the AAC, the revenue took the matter in appeal to the Tribunal. The Tribunal agreed with the

view taken by the AAC and held that the assessee should be taken as the karta of the HUF and assessed as such and not as an individual.

Aggrieved by the decision of the Tribunal, the revenue sought a reference on the above question u/s 256(1) before the Tribunal. The Tribunal

having rejected the reference application on the ground that no question of law arises, the revenue has come forward with these petitions.

As would be clear from the question set out above, the issue in controversy is as to what is the status of the assessee. Though the assessee himself

chose to be assessed as an individual prior to 1966-67, from the years 1967-68 to 1973-74, he claimed that he should be assessed only as the

karta of the HUF and not as an individual and that claim has been accepted by the Tribunal. According to the learned counsel for the revenue, the

status of the assessee has to be determined with reference to the terms of the will under which he got the properties from his adoptive father and all

the other relevant circumstances but the Tribunal in this case has erroneously assumed that the property got from the adoptive father is ancestral.

In this case, the question whether the conclusion arrived at by the Tribunal that the assessee should be assessed in the status of a karta of the HUF

and not as an individual, is reasonable or not has to be determined with reference to the terms of the will executed by the adoptive father of the

assessee and all the surrounding circumstances. The learned counsel for the revenue does not dispute the fact that the Tribunal in this case has

determined the status of the assessee after a consideration of the terms of the will as also the surrounding circumstances. He would, however, say

that the Tribunal has not properly interpreted the terms of the will and, therefore, it has to come to a wrong conclusion that the status of the

assessee is HUF and not an individual. Therefore, the question arises as to whether the Tribunal has properly interpreted the terms of the will in this

case?

One Raja S. Ramanatha Reddiar had no male issue. He adopted one Venugopala Reddiar (the assessee in this case) as his son and had also made

a will dated 7-2-1932 in which he settles certain properties absolutely on his wife and some other properties by way of settlement for charitable

purposes and appointed the assessee as a residual heir for the rest of the properties. In the will, the testator has stated that if another son was born

to him before his death, the assessee and the other son were to share the properties jointly. In the will it is mentioned that most of the properties

were self-acquired. The letters of administration were obtained in favour of the assessee in relation to the properties covered by the will from the

Rangoon High Court in 1946. In 1947, the widow of the testator filed a suit in Civil Suit No. 34 of 1957 in Rangoon questioning the validity of the

adoption. That suit was, however, compromised and as per the terms of the compromise, the widow conceded that the adoption is valid and the

assessee undertook to pay a sum of Rs. 25,000 and to pay maintenance at the rate of Rs. 400 to the widow of the testator. According to the

AAC as well as the Tribunal, insofar as the testator had not given the residue of the properties absolutely to the assessee, he should be taken to

hold the property on behalf of the family especially when the testator has directed that if a son is to be born to him before his death, the assessee

will have to share the properties jointly with that son. In the will the testator, while giving certain properties to his wife, specifically says that she will

have those properties absolutely with full powers of alienation, but when he bequeaths the properties to the assessee, he does not say that he will

take the properties absolutely, but say that he will hold the properties and share the same with another son who may be born to the testator before

his death. It is no doubt true that no son was in fact born to the testator before his death and, therefore, the said clause directing the assessee to

share the properties along with the son to be born jointly, did not come into operation. The question whether a son was born or not is immaterial as

the intention of the testator on the date of the execution of the will alone will be taken to be material for the purpose of deciding the nature of the

estate taken by the assessee. The testator while giving the properties to his wife specifically stated that the wife will take the properties absolutely

with powers of alienation, but when he gave the properties to the assessee, he has not specifically stated that the properties are to be taken by the

assessee, but on the other hand says that he will keep the properties and share the same along with a son to be born to the testator before his

death. The Tribunal, after construing the said terms of the will, held that the intention of the testator is to give the properties to the assessee not as

self-acquired properties, but as joint family properties and, therefore, the assessee should be taken to have got the properties under the will in his

status as a HUF and not in his individual capacity.

The learned counsel for the revenue contends that all the properties covered by the will are self-acquired properties of the testator and, therefore,

the same character will be retained in respect of the properties given to the assessee. The terms of the will show that all the properties covered by

the will are not self-acquired properties. Though most of the properties are stated to be self-acquired in the will, the other properties have not been

described as self-acquired. It is for that reason, the Tribunal has stated that there was certain ancestral property which forms the nucleus.

However, it is unnecessary for us to go into the question as to whether all the properties covered by the will are the self-acquired properties of the

testator. Even assuming that all of them were self-acquired properties, still it is open to the testator to give the same in favour of the assessee

absolutely as representative of the HUF. In this case, the testator while giving the property to his wife has stated that she will take the properties

absolutely with full power of alienation, but when he gives the properties to the assessee, the testator says that the assessee will take the property

and hold the same for himself and for the benefit of the son to be born. From this, the intention of the testator is clear that he is not giving the

properties absolutely to the assessee with full power of alienation. Even without any reference to the presumption arising from a gift by a parent to

his son, which makes the properties in the hands of the son ancestral, in the absence of any contrary intention expressed in the will by the testator,

in this case the testator has made his intention clear by saying that the assessee will take the properties and share the same along with a son to be

born. Thus, giving due regard to the terms of the will, the conclusion arrived at by the Tribunal that the assessee is to be assessed in his capacity as

HUF and not as an individual, appears to be reasonable and consistent with the terms of the will. In this view of the matter, we do not see any

warrant for issuing a direction to the Tribunal to state a case on the question set out above. The petitions are, therefore, dismissed. No costs.