Commissioner of Income-Tax, Assam Vs.
Nandlal Aggarwal & ANR  INSC 251 (17 November 1965)
17/11/1965 RAMASWAMI, V.
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
CITATION: 1966 AIR 902 1966 SCR (2) 918
Indian Income-tax Act (11 of 1922), s.
40--Two guardians appointed for two minors--Hindu undivided family or
The two respondents were appointed guardians
of the two minor .sons after the death of their father and mother, by an order
of the Civil Court. Prior to his death the income of the father's business was
assessed as an individual. The guardians filed a return on behalf of the minors
in the status of a joint Hindu family. The Income-Tax Officer assessed the
guardians under s. 23(3) read with s. 41 of the Income-tax Act. Later the Court
allowed the guardians toll separate accounts thereafter for each of the minors.
The Appellate Assistant Commissioner, on appeal against the assessment,
directed their separate individual assessments, which was set aside by the
Tribunal. On reference, the High Court held against the Revenue. In this Court,
the Revenue contended that under s. 40 of the Act the guardians were liable to
pay tax as it would be leviable from minors if of full age, and if the minors
had been of full age they would be assessed as Hindu undivided family.
HELD : Section 40 of the Act applied to this
case, and consequently the guardians ought to be assessed, treating the minors
as constituting a Hindu undivided family. [616 H] On the death of the father,
the minor sons constituted a joint Hindu family and the business was joint
family property. Till some positive action was taken to a partition of the
property, it would remain joint family property. The order appointing the two
guardians could not be read as having effected partition of the property. Apart
from the fact that the Court under the Guardianship Act has no jurisdiction to
partition property belonging to a join" Hindu family, there are no words
in the order of the Court appointing the guardians to warrant such a finding.
[616 E] The court's order allowing the guardians to keep and submit separate
accounts came into existence after the assessment year and after the Income-tax
Officer had passed his order. Therefore it could not have any effect on the
position prevailing in the relevant accounting year in dispute. [616 D]
Srifudin Alimohammad v. Commissioner of Income-tax, 25 I.T.R. 237, referred to.
Commissioner of Income-tax v. Balvantrai
Jethalal Vaidya, 34 I.T.R. 187, approved.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 820 of 1964.
Appeal from the order dated July 4, 1961 of
the Assam High Court in Income-tax Reference No. 1 of 1961.
613 S.V. Gupte, Solicitor-General, N. D.
Karkhanis, B. R. G.
K. Achar and R. N. Sachthey, for the
A. V. Viswantha Sastri and D. N. Mukherjee,
for the respondents.
The Judgment of the Court was delivered by
Sikri, J. This appeal in pursuance of a certificate granted under s. 66A(2) of
the Indian Income Tax Act, 1922, hereinafter referred to as the Act, is
directed against the judgment of the High Court of Assam in a reference made to
it under s. 66(2) of the Act. The question referred to by the Appellate Tribunal
was "whether in the circumstances of the case the Tribunal was justified
in assessing the income of the minors in the hands of the guardians as the
income of a Hindu undivided family." The relevant facts out of which the
reference arose are as follows : Shri Kishanlal Agarwalla died intestate in
December 1950, leaving his widow and two minors, Basanta and Ashok. Prior to
his death he was being assessed as an individual on the income arising from the
business carried on in the name of Shri Krishan Rice Mills, Tezpur. He was
governed by Mitakshra School of Hindu Law. The widow also died in 1952. On the
death of the widow an application was made by Shri Nandlal Agarwalla to the
Court of the District Judge, Gauhati, for being appointed as a guardian of the
person and the properties of the two minors, Basanta and Ashok. The District
Judge, by his order dated June 1, 1953, appointed him temporarily the guardian
of the person and properties of Basanta and Ashok, till the disposal of the
application, and transferred the file to the Subordinate Judge, L.A.D.,
Nowgong. On December 15, 1953, the Sub-Judge appointed Shri Dwarka Prasad
Agarwalla and Shri Nandlal Agarwalla guardians of the person and properties (as
per the schedule in the application) of Basanta and Ashok. The guardians were
directed to render accounts half yearly in the months of March and September
each year, i.e. by the 31st March and 30th September, each year until the
minors attained majority.
It is not necessary to mention what happened
in the assessment years 1951-52, 1952-53 and 1953-54 because nothing turns on
that. For the assessment year 1954-55, which is the subjectmatter of this
reference, a return was filed in the status of a Joint Hindu Family by the two
It appears that on March 25, 1958, the
Sub-Judge, Nowgong, passed the, following order Sup.C.I/66--9 614 "Account
upto 30th September, 1957 filed. The guardians file petition seaking permission
for showing the accounts of the two minors separately.
Heard learned lawyer. The guardians are
hereby allowed to keep and submit separate accounts henceforward for each of
the minors together with accounts of profits and loss and separate expenses of
each minor." It seems to have been assumed that this order was also
operative during the accounting year 1953-54, but it is clear that this order
has no application to this accounting year.
The Income Tax Officer, by his order dated
October 19, 1957, assessed the guardians under s. 23 (3) read with s. 41 of the
Act. The guardians filed an appeal before the Appellate Assistant Commissioner
contending that the assessment was bad in law. The Appellate Assistant
Commissioner by his order dated May 16, 1956, set aside the assessment and
directed the Income Tax-Officer to reassess after obtaining two separate
returns from the appellants and to frame two separate individual assessments.
He came to the conclusion that "the very fact that separate guardians for
the two minors were appointed by the Court with directions to separately
account for their accounts and the expenses clearly establishes that they
cannot also form an H.U.F." By the time this order was passed, the
Sub-Judge, Now gong, had passed the order dated March 25, 1958, and it is clear
that the Appellate Assistant Commissioner relied on it. He further held that
"the two minors should be taxed through the Guardians in their individual
share of profits at the rate applicable to the individual incomes. For that
purpose the total income should be computed as it has now been done. Two
separate assessments should be made in the names of two minors at the hands of
the guardians in the status of individual. I may note here that even the
deceased father was assessed in the status of an individual and not in any way
as an H.U.F." The Income Tax Officer filed an appeal before the Income Tax
Appellate Tribunal and the Tribunal set aside the order of the Appellate
Assistant Commissioner and restored the order of the Income Tax Officer with
the modification that the status of the assessee must be described as H.U.F.
The Appellate Tribunal held that the status
of the two minors is only that of H.U.F., as it existed before the curatorship
proceedings, and must continue to be so till at least such time that the elder
minor attains majority.
615 The guardians put in an application dated
December 8, 1958, before the Appellate Tribunal under s. 35 complaining that
the contention of the guardians that under the Hindu Law, by which the minors
are governed, their shares are specific and determinate and they can only be assessed
under s. 41 in the manner and to the extent the assessment can be made on each
of the two minor children individually on whose behalf such income was
receivable by the guardians had not been adverted to. The Appellate Tribunal,
however, replied that the contention referred to in the application had been
omitted to be dealt with in the order of the Tribunal as it became academic in
the light of the Tribunal's decision that the assessee was a H.U.F. The
Tribunal refused to state a case under s. 66(1) of the Act, but on being
directed to do so by the Assam High Court, it drew up a statement of-the case
and referred the question set out above. The High Court answered the question
in the negative. The High Court held that the guardians "received the
shares of these minors in the profit of the business as their income. By the
order of the Court, separate accounts in the name of the two minors were opened
in which the receipts and expenses relating to each of the minors were
separately adjusted. The guardians were thus only liable to pay tax on the
amount which they received on behalf of these two minors separately. It cannot
be said that they were appointed guardians of any joint family as such, so that
their beneficiary was the joint family as such and thus they were liable to pay
tax on the total income received by them on behalf of the Hindu undivided
family, their ward. The beneficiaries were the two minors separately, The two
minors are the wards of the guardians. The guardians will, in our opinion, be liable
to pay tax on the separate income of each of the minors." The learned
Solicitor-General who appears on behalf of the Revenue contends that under s.
40 the guardians were liable to pay tax in like manner and to the same amount
as it would be leviable upon and recoverable from the minors if of full age. He
says that if the minors had been of full age, they would have been assessed as
a H.U.F. Mr. Sastri, the learned counsel for the respondents, contends that the
minors would not have been assessed as a H.U.F. but would have been assessed
individually on their separate incomes.
He says that under s. 7 of the Guardians and
Wards Act, no guardian could have been appointed in respect of the undivided
interest of a minor and, therefore, the Court must have proceeded on the basis
that the properties had been divided among the minors. He further points to the
order dated 616 March 25,1958, which shows that the interest of the minors was
It is not necessary to decide the question
whether under the Guardianship Act a guardian could have been appointed in
respect of the undivided interest of the minors. There is authority for the
proposition that when all the co-parceners are minors, a guardian can be
appointed for the whole number. (see Bindaj Lusuman Triputikar v. Mathurabai)
(1), and Mayne's Hindu Law (para 230, page 285). The point whether the
appointment of guardians was valid or not has not been raised before the Income
Tax authorities and we must proceed on the basis that the appointment was valid.
Both the Revenue and the respondents have
acted on this assumption. The only question which can be raised is the effect
of the orders dated June 1, 1953, December 15, 1953 and March 25, 1958, on
which Mr. Sastri strongly relies to establish that the minors had individual
incomes. As we have already stated, the order dated March 25, 1958, came into
existence after the assessment year and after the Income Tax Officer had passed
his order. It cannot, therefore, have any effect on the position prevailing in
the accounting year 1953-54.
We have already mentioned that Shri Kishanlal
was governed by the Mitakshra School of Hindu Law and it appears to us that on
his death his widow, and two minor sons, Basanta and Ashok, constituted a joint
Hindu family and the business was joint family property. Till some positive
action was taken to have a partition of the property, it would remain joint
family property. We cannot read the order dated December 15, 1953, of the
Sub-Judge, Nowgong, as having effected partition of the property. Apart from
the fact that the Court under the Guardianship Act has no jurisdiction to
partition property belonging to a joint Hindu family there are no words in the
order to warrant such a finding.
Reference was made to Saifudin Alimohammed v.
Commissioner of Income Tax(2) and Commissioner of Income Tax v. Balwantrai
Jethalal Vaidya(3). We agree with the view expressed by Chagla, C.J., in the
latter case in which he explained certain observations made in the former case.
If a guardian carries on business on behalf of minors and receives income on
their behalf, S. 40 of the Act must be applied.
In our opinion S. 40 plainly applies to the
facts of this case and consequently the guardians have to be assessed, treating
the (1) I. L. R. 30 Bombay 152.
(3) 34 I. T. R .1 87.
(2) 25 I. T. R. 237, 617 minors as
constituting a H.U.F. In the result the appeal is accepted and the question
referred to the High Court is answered in the affirmative. The appellant will
have his costs here and in the High Court.