V. Sundararaj vs Commissioner of Income Tax

N. V. Balasubramanian, J.—It is a reference at the instance of the asses-see for two assessment years 1977-78 and 1978-79 and the

following question of law has been referred for our consideration ;

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that income from each of the three items of properties,

namely, 9/48, Cross-Cut Road, and 4/220 and 221, K. K. Pudur, Coimbatore, is assessable in the hands of the assessee as an individual ?

The assessee one V. Sundararaj was assessed in the status of individual. The assessee had three brothers, viz., V, Gurusamy, V. Duraisamy and

V. Ramasamy. The assessee''s father, Venkataswaniy Naidu, by a will executed on June 6, 1964, bequeathed to the assessee three properties,

viz., 9/48, Cross-Cut Road, Coimbatore, 9/50, Cross-Cut Road, Coimbatore, 4/220 and 221, K. K. Pudur, Coimbatore. It would appear that

his father, Ve-nkata-swamy Naidu, settled certain properties on Guruswamy and Duraiswamy prior to the execution of the will. By the will, the

testator devised certain properties firstly in favour of his son, V. Ramasamy, and then in favour of the assessee herein and also in favour of other

sons. The said V. Ramasamy was given A-Schedule properties and the assessee was given B-Schedule properties. In the will, it was stated that

the assessee should take possession of the B-Schedule properties on the death of the testator and enjoy the properties absolutely with full powers

of alienation. It is also stated in the will that the properties not covered under the will should go to his (testator''s) sons on his death and they should

enjoy the properties after making a division among themselves. The will also provides that it would come into effect on the death of the testator

who reserved his right to modify or revoke the will. A reading of the will clearly shows that the properties belonged to Venkataswamy Naidu

absolutely and they were not his joint family properties. The recital in the will makes it clear that the properties were not obtained from any

ancestral source and there are no contrary evidence against the recital. It is also significant to notice that the testator imposed certain restrictions

regarding the mode of enjoyment of the properties devised in favour of Ramaswamy, but no such restriction was placed with reference to the

enjoyment of the assessee herein. The will provides that the assessee should enjoy the properties without any restriction, with full powers of

alienation.

The Income Tax Officer came to the conclusion that the properties which devolved on the death of the assessee''s father on the assessee were

his absolute individual properties and the income from the said properties was liable to be assessed in his individual hands. He rejected the

contention raised on behalf of the assessee that the properties belonged to the Hindu undivided family.

The Appellate Assistant Commissioner, on appeal preferred by the assessee, accepted the case of the assessee and held that the income from

the property No. 9/48, Cross-cut Road, Coimbatore, should be assessed in the hands of the assessee''s minor son, Arun, and in so far as the

income from other properties are concerned, they should be assessed in the hands of the Hindu undivided family. The Department challenged the

order of the Appellate Assistant Commissioner before the Appellate Tribunal and the Appellate Tribunal, after considering the will, came to the

conclusion that the three properties devolved on the assessee on the death of his father, Venkataswamy, under the will and the properties were

bequeathed to him as his individual properties and they cannot be regarded as the joint family properties. The Tribunal also considered the family

arrangement dated April 1, 1976, effected by the assessee with his minor son, Arun, represented by his mother and the Tribunal came to the

conclusion that there was no pre-existing right in favour of the assessee''s son and, therefore, there could not be any family arrangement and the

properties devolved on the assessee should be regarded as individual properties of the assessee. In this view of the matter, the Tribunal allowed

the appeal preferred by the Department. The assessee has challenged the order of the Appellate Tribunal and the question of law set out above has

been referred by the Appellate Tribunal.

Mr. Arvind, learned counsel for the assessee, submitted that the Tribunal overlooked the fact that there were settlements in favour of two of his

other brothers also by Venkataswamy and under the settlements, his father settled the properties in favour of the assessee and his brothers and as

a part of the family arrangement, the properties were allotted to the assessee and his brother, Ramaswamy. According to learned counsel for the

assessee, though the document is styled as a will, it was in effect a partition of the properties and under the partition, the assessee got the

properties and, therefore, the properties should be regarded as joint family properties. He also referred to the family arrangement dated April 1,

1976, and submitted that the family arrangement clearly shows that the pro- perties were joint family properties and, therefore, the Tribunal was

not correct in holding that the properties should be regarded as individual properties of the assessee. He strongly relied upon a decision of the

Supreme Court in the case of N.V. Narendranath Vs. Commissioner of Wealth-tax, Andhra Pradesh, and submitted that on the basis of the

decision of the Supreme Court, the properties should be regarded as joint family properties as the properties were allotted on partition and the

income should be assessed in the hands of the Hindu undivided family.

Learned counsel for the Revenue supported the order ,of the Appellate Tribunal.

We have carefully considered the submissions of learned counsel for the assessee and learned counsel for the Revenue. We have already seen

that under the will Venkataswamy Naidu devised the properties in favour of the assessee and his brother, Ramasamy, and in so far as the

properties given to Ramasamy are concerned, there were certain restrictions imposed on him to enjoy the properties. Under the will, he should

enjoy the properties without alienation and he should enjoy only the income from the properties and after the lifetime of Ramasamy, the properties

should go to his wife, Vijayalakshmi and after the lifetime of his wife, the properties would go to the male issues born to Ramasamy through his

wife, Vijayalakshmi. The will also provides that in so far as the assessee is concerned the-assessee should enjoy the properties absolutely without

any restriction and with the full powers of alienation. The will also indicates that the properties belonged to Venkataswamy Naidu absolutely.

Though the father imposed certain restrictions in so far as the enjoyment of the properties by Ramasamy is concerned, he had given full powers of

alienation and absolute right of enjoyment in favour of the assessee. The recital in the will makes it clear that the properties were the absolute

properties of the testator and the way in which he devised the properties and the freedom with which he imposed restriction on the enjoyment of

the properties clearly show that the properties were his absolute properties. The restrictions imposed are consistent with his holding the properties

as absolute properties. The will, if read as a whole, indicates that the properties covered under the will were the absolute properties of

Venkaswamy Naidu, and they were not his joint family properties. It is not the case of the assessee that the properties originally belonged to the

Hindu undivided family of which Venkataswamy Naidu was the karta. Though a case was sought to be made that Venkataswamy Naidu

bequeathed his properties to his other two sons also under another settlement, described as partition, the assessee has not chosen to produce the

relevant documents even before the Appellate Tribunal. In the absence of any document or any proof with reference to the ancestral source of the

properties, we are of the opinion that the case set up by the assessee has to be rejected.

The Tribunal, in our view, has rightly rejected the case of the assessee that there was a partition of the properties and the properties were

allotted to the assessee. Further, as we have already seen, the terms of the will clearly show that the assessee was given full power of alienaton and

absolute power of enjoyment which indicate that the properties were given to the assessee as his individual properties. The will also does not in any

way indicate that the properties devolved on the assessee in the character of joint family properties. The assessee has also not produced any

evidence to show that subsequent to the death of his father, Venkataswamy Naidu, he had treated the properties as joint family properties by

throwing the same to the family hotchpot. Therefore, considering the case from any angle, we are of the opinion that the Tribunal has come to the

correct conclusion and was correct in holding that the three properties devolved on the assessee under the will of Venkataswamy Naidu should be

treated as individual properties of the assessee and not as joint family properties.

A reference was made to the family arrangement dated April 1, 1976, between the assessee and his son and we have already held that the

properties were not joint family properties and when the properties were not ancestral properties, the alleged family arrangement cannot improve

the case of the assessee to show that the properties were joint family properties. We are of the opinion that the Tribunal has come to the correct

conclusion in holding that the properties were the individual properties of the assessee and there was no pre-existing right in favour of the assessee

to create a family arrangement dated April 1, 1976. We are, therefore, of the opinion that the Tribunal has committed no error in holding that the

income of the properties was liable to be assessed in the hands of the assessee as his individual income and not in the character of the Hindu

undivided family.

In the question that has been referred to us, there is a reference to two properties. But the orders of the authorities as well as the order of the

Appellate Tribunal deal with three properties. The omission to describe the third item of properties seems to be a mistake. Accordingly, we

reframe the question of law to include the third property as under :

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that income from each of the three items of properties,

namely, 9/48, Cross-cut Road, 9/50 Cross-cut Road, and 4/220 and 221, K. K. Pudur, Coimbatore is assessable in the hands of the assessee as

his individual ?

Accordingly, we answer the question of law reframed by us in the affirmative and against the assessee. However, in the circumstances of the

case, there will be no order as to costs.