N. V. Narendranath V.s Commissioner of
Wealth Tax, Andhra Pradesh, Hyderabad [1969] INSC 64 (7 March 1969)
07/03/1969 RAMASWAMI, V.
RAMASWAMI, V.
SHAH, J.C.
GROVER, A.N.
CITATION: 1970 AIR 14 1969 SCR (3) 882 1969
SCC (1) 748
CITATOR INFO :
R 1971 SC 33 (8) F 1976 SC 109 (14,15,33,36)
R 1978 SC 504 (7) R 1985 SC 716 (7)
ACT:
Wealth Tax Act, 1957, section 3-Family
consisting of sole surviving Hindu coparcener, his wife and daughters, whether
assessable as Hindu Undivided Family or as individual- Assessee receiving
property from coparcenary on partition- Character of.
HEADNOTE:
In respect of his assessment to wealth tax
for the assessment years 1957-58, 1958-59 and 1959-60, the appellant filed
returns in the status of a Hindu Undivided Family.
His family at the material time consisted of
himself, his wife and two minor daughters. The appellant claimed to be assessed
in the status of a Hindu Undivided Family inasmuch as the wealth returned
consisted of ancestral property received or deemed to have been received by him
on partition with his father and brothers. The Wealth Tax Officer did not
accept the contention of. the appellant and assessed him as an individual. The
Appellate Assistant Commissioner confirmed this view. However the Appellate
Tribunal held that the appellant should be assessed in the status of Hindu
Undivided Family but the High Court, upon a reference, disagreed with the view
of the Appellate Tribunal and held that as the appellant family did not have
any other male coparcener, all the assets forming the 'subject matter of the
returns filed by the appellant belonged to him as an individual and not to a
Hindu Undivided Family.
On appeal to this Court, HELD: Allowing the
appeal:
The status of the appellant was rightly
determined as that of a Hindu ,Undivided Family by the Appellate Tribunal. The
expression "Hindu Undivided Family" in the Wealth Tax Act is used in
the sense in which a Hindu joint family is understood in the personal law of
Hindus. 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. [886 C] Under s. 3 of the Wealth
Tax Act not a Hindu coparcenary but a Hindu Undivided Family is one of the
assessable legal entities. A Hindu joint family consists of all persons
lineally descended from a common ancestor, and includes their wives and
unmarried daughters. A Hindu coparcenary is a much narrower body than the Hindu
joint family; it in- cludes only those persons who acquire by birth an interest
in the joint or coparcenary property, these being the sons, grand-sons and
great grand-sons of the holder of the joint property for the time being. [885
F-H] Kalyanji Vithaldas v. Commissioner of Income Tax, 5 I.T.R.
90, Commissioner of Income Tax v. Gomedalli
Lakshminarayan [1935] 3 T.R. 367 considered.
88 3 Commissioner of Income Tax v. A. P.
Swamy Gomedalli, 5 I.T.R. 416, Attorney General of Ceylon v. A.R. Arunachallam
Chettiar [1957] A.C. 540, Gowali Buddanna's [1960] 6 I.T.R.
203 referred to.
T.S. Srinivasan v. Commissioner of Income Tax
60, I.T.R.
36 distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1477 to 1479 of 1968.
Appeals from the judgment and order dated
November 30, 1964 of the Andhra Pradesh High Court in Case Referred No. 49 of
1962.
S.T. Desai and K. Jayaram, for the appellant
(in all the appeals).
D.Narsaraju, G. C. Sharma, R. N. Sachthey and
B. D. Sharma, for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Ramaswami, J. These appeals are brought by certificate from the judgment of the
Andhra Pradesh High Court, dated 30th November, 1964 in Reference Case No. 49
of 1962.
N. V. Rangarao, the father of the appellant,
was the holder of an impartible estate called the "Munagala Estate"
in the Krishna District in the State of Andhra Pradesh. This estate was
abolished under the Madras Estates (Abolition and Conversion into Ryotwari)
Act, 1948, and compensation under' section 45 of the Act was paid severally to
the appellant, his father and his brothers. Other properties belonging to the
joint family of the appellant, his father and brothers were also partitioned between
them from time to time. The assets forming the subject of reference to the High
Court consisted of investments made from the compensation amount received by
the appellant in securities, shares etc. and also other assets such as deposits
in Banks. The appellant filed returns for the assessment years 1957-58, 1958-59
and 1959-60 in the status of a Hindu Undivided Family. The appellant's family
during the material time consisted of himself, his wife and his two minor
daughters and there was no other male member. The appellant claimed to be
assessed in the status of a Hindu Undivided Family inasmuch as the wealth
returned consisted of ancestral property received or deemed to have been
received by him on partition with his father and brothers. The Wealth Tax Officer
did not accept the contention of the appellant and assessed him as an
individual for the assessment years 1957-58, 1958-59 and 1959-60. On appeal to
the Appellate Assistant Commissioner of Wealth Tax the finding that he must be
assessed as an individual was confirmed.
L 11 Sup.CI/69-7 884 The Income Tax Appellate
Tribunal however on appeal by the appellant held that he should be assessed in
the status of a Hindu Undivided Family. Thereupon, the Commissioner of Wealth
Tax applied to the Tribunal to state a case to the High Court under section
27(1) of the Wealth Tax Act (Act No. 27 of 1957) (hereinafter called the Act).
The Tribunal accordingly referred the following question of law for the opinion
of the High Court :
"Whether the status of the assessee was
rightly determined as Hindu Undivided Family ?" The High Court disagreed
with the view of the Appellate Tribunal and hold that as the appellant's family
did not have any other male coparcener all the assets forming the subject
matter of the returns filed by the appellant belonged to him as an individual
and not to a Hindu Undivided Family. The High Court answered the question in
favour of the appellant and against the Commissioner of Wealth Tax.
It is necessary at this stage to set out the
relevant provisions of the Act as they stood at the material time :-
"Section 2 : In this Act, unless the context otherwise requires-
(e)"assets" includes property of every description, movable or
immovable, but does not include- (i) agricultural land and growing crops, grass
or standing trees on such land;
(ii) any building owned or occupied by a
cultivator or receiver of rent or revenue out of agricultural land
(iii)animals;
(ix)a right to any annuity in any case of
where the terms and conditions relating thereto preclude the commutation of any
portion thereof into a lump sum grant;
(v)any interest in property where the
interest is available to an assessee for a period not exceeding six years;
(m)"net wealth" means the amount by
which the aggregate value computed in accordance with the provisions of this
Act of all the assets, wherever located, 885 belonging to the assesses on the
valuation date, including assets required to be included in his net wealth as
on that date under this Act, is in excess of the aggregate value of all the
debts owed by the assesses on the valuation date other than,- (i)debts which
under section 6 are not to be taken into account; and (ii)debts which are
secured on, or which have been incurred in relation to, any asset in respect of
which wealth-tax is not payable under this Act.
Section 3 Charge of Wealth-tax Subject to the
other provisions contained in this Act, there shall be charged for every
financial year commencing on and from the first day of April, 1957, a tax
(hereinafter referred to as wealth-tax) in respect of every individual, Hindu
Undivided Family and company at the rate or rates specified in the Schedule.
Section 5 : Exemption in respect of certain
assets:
(i)Wealth-tax shall not be payable by an
assesses in respect of the following assets and such assets shall not be
included in the net wealth of the assessee- (ii)the interest of the assessee in
the coparcenary property of any Hindu Undivided Family of which he is a
member".
Under s. 3 of the Wealth Tax Act not a Hindu
coparcenary but a Hindu Undivided Family is one of the assessable legal en-
tities. A Hindu joint family consists of all persons lineally descended from a
common ancestor, and includes their wives and unmarried daughters. A Hindu
coparcenary is a much narrower body than the Hindu joint family; it includes
only those persons who acquire by birth an interest in the joint or coparcenary
property, these being the sons, grand-sons and great grand-sons of the holder
of the joint property for the time being. In Kalyanji Vithaldas v.
Commissioner of Income Tax,(1) Sir George
Rankin observed :
"The phrase "Hindu Undivided
Family" is used in the statute with reference, not to one school only of
(1) 5 I.T R. 90.
886 Hindu law, but to all schools; and their
Lordships think it a mistake in method to begin by pasting over the wider
phrase of the Act the words "Hindu co-parcenary", all the more that
it is not possible to say on the face of the Act that no female can be a
member".
The first question involved in this case is
whether the status of the appellant was that of a Hindu undivided family
consisting of himself, his wife and his daughters. In our opinion, there is no
warrant for the contention of the respondent that there must be at least two
male members to form a Hindu Undivided Family as a taxable unit. The expression
"Hindu Undivided Family" in the Wealth Tax Act is used in the sense
in which a Hindu joint family is understood in the personal law of Hindus.
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.
The next question is whether the assets which
came to the share of the appellant on partition ceased to bear the character of
joint family properties and became the individual property in his hands. In
this connection, a distinction must be drawn between two classes of cases where
an assesses, is sought to be assessed in respect of ancestral property held by
him : (1) where property not originally joint is received by the assessee and
the question has to be asked whether it has acquired the character of a joint
family property in the hands of the assessee and (2) where the property already
impressed with the character of joint family property comes into the hands of
the assessee as a single coparcener and the question required to be considered
is whether it has retained the character of joint family property in the hands
of the assessee or is converted into absolute property of the assessee. In
Kalyanjis(1) case there were six appeals presented before the Judicial
Committee by six partners of the firm of M/s. Moolji Sicka and Co., viz., Moolji,
Purshottam, Kalyanji, Chaturbhuj, Kanji and Sewdas. Moolji, Purshottam and
Kalyanji each had a son or sons from whom he was not divided. It was found by
the appellate tribunal that the capital supplied by them to the partnership
business belonged to them in their individual capacities and was their self
acquired property. Hence the income of the firm which had to be assessed to
super-tax was the separate income of each of these partners. Chaturbhuj had a
wife and daughter but no son. Kanji and Sewdas, sons, of Moolji, were married
men but neither had a son. It was found by the appellate tribunal that
Chaturbhuj Kanji and Sewdas had (1) 5 I.T.R. 90 887 received by gift from
Moolji their respective share capital in the firm, that the, share capital
belonged to them in their individual capacities and was self acquired. The
question at issue was whether the existence of a son and a wife or a wife and a
daughter made the income of the partners the income of the Hindu Undivided
Family rather than the income of the individual partner. The Judicial Committee
held that though the income was from an ancestral source, the fact that each
partner had a wife or daughter did not make that income from ancestral source
income of the Hindu Undivided Family of the partner, his wife and daughter.
Different considerations would be applicable,
where property already impressed with the character of joint family property
comes into the hands of a single coparcener. The question to be asked in such a
case is whether the property retains the character of joint family property or
whether it sheds the character of joint family property and becomes the
absolute property of the single coparcener. In Commissioner of Income Tax v.
Gomedalli Lakshminarayan,(1) the property was ancestral in the hands of the
father and the son had acquired an interest in it by birth. There was a
subsisting Hindu Undivided Family during 'the life-time of the father and that
family did not come to an end on his death. On these facts, the Bombay High
Court held that the income received from the property was liable to super-tax
as the income of the Hindu Undivided Family in the hands of the son who was the
sole surviving male member of the Hindu Undivided Family in the year of
assessment. The reasoning was that the property from which income accrued
originally belonged to a Hindu Undivided Family and on the death of the father
it did not cease to be property of that Hindu Undivided Family but continued to
belong to that Hindu Undivided Family and its income in the hands of the son
was, therefore, assessable as income of the Hindu Undivided Family. There was a
vital distinction between the facts of this case and the facts in Kalyanjis
case(1). This distinction was not noticed by the Judicial Committee in
Kalyanji's case(2) when it observed that the Bombay High Court "arrived
too readily at the conclusion that the income was the income of the
family". When Gomedalli's case(1) was carried on appeal the Judicial
Committee once again failed to notice the distinction and wrongly reversed the
decision of the Bombay High Court holding that the facts of the case were not
materially different from the facts in Kalyanji's case(2) [See the decision of
the Judicial Committee in Commissioner of Income Tax v. A. P. Swamy
Gomedalli(3)].
(1)(1935) 3 I.T.R. 367.
(2) 5 I.T.R. 90.
(3) 5 I.T.R. 416.
888 The recent decision of the Judicial
Committee in Attorney General of Ceylon v. AR. Arunachalam Chettiar(1) is
important,. One Arunachalam--Nattukottai Chettiar and his son constituted a joint
family governed by the Mitakshara school of Hindu law. The father and son were
domiciled in India and had trading and other interests in India, Ceylon and Far
Eastern countries. The undivided son died in 1934 and Arunachalam became the
sole surviving coparcener in the Hindu Undivided Family to which a number of
female members belonged. Arunachalam died in 1938 shortly after the Estate
Ordinance No. 1 of 1938 came into operation in Ceylon. By section 73 of the
Ordinance it was provided that property passing on the death of a member of the
Hindu Undivided Family was exempt from payment of estate duty. On a claim to
estate duty in respect of Arunachalam's estate in Ceylon, the Judicial
Committee held that Arunachalam was at his death a member of the Hindu Undivided
Family, the same undivided family of which his son, when alive, was a member
and of which the continuity was preserved after Aruna- chalam's death by
adoptions made by the widows of the family and since the undivided Hindu family
continued to persist, the property in the hands of Arunachalam as a single
coparcener was the property of the Hindu Undivided Family.
The Judicial Committee observed at page 543
of the Report "...........though it may be correct to speak of him as the
owner', yet it is still correct to describe that which he owns as the joint
family property. For his ownership is such that upon the adoption of a son it
assumes a different quality; it is such, too, that female members of the family
(whose members may increase) have a right to maintenance out of it and in some
circumstances to a charge for maintenance upon it. And these are incidents
which arise, notwithstanding his so- called ownership, just because the
property has been and has not ceased to be joint family property. Once again
their Lordships quote from the judgment of Gratiaen, J. (2) "To my mind it
would make a mockery of the undivided family system if this temporary reduction
of the coparcenary unit to a single individual were to convert what was
previously joint property belonging to an undivided family into the separate
property of the surviving coparcener". To this it may be added that it
would not appear reasonable to impart to the legislature the intention to
discriminate, so long as the family itself subsists, between property in the
hands of a single copar- (1) [1957] A.C. 540. (2) (1953) 55 C.N.L.R.
496-501.
889 cener and that in the hands of two or
more coparceners".
The Judicial Committee rejected the
contention of the appellant that since a single coparcener had full power over
the property ,held by him, he must be held to be the absolute owner and
observed that fact that he possesses a large power of alienation
"..............appears to their Lordships to be an irrelevant
consideration. Let it be assumed that his power of alienation is unassailable :
that means no more than that he has in the circumstances the power to alienate
joint family property. That is what it is until he alienates it and, if he does
not alienate it, that is what it remains. It is only by analysing the nature of
the rights of the members of the undivided family, both those in being and
those yet to be born, that it can be determined whether the family property can
properly be described as joint property' of the undivided family."(1) The
basis of the decision was that the property which was the joint family property
of the Hindu Undivided Family did not cease to be so because of the
"temporary reduction of the coparcenary unit to a single individual".
The character of the property, viz., that it was the joint property of a Hindu
Undivided Family, remained the same.
The same principle was applied by this Court
in Gowali Bud- danna's (2 ) case. In that case, one Buddappa, his wife, his two
unmarried daughters and his unmarried son, Budanna, were members of a Hindu
Undivided Family. Buddappa died and after his death the question arose whether
the income of the properties held by Buddanna as the sole surviving coparcener
was assessable as the individual income of Buddanna or as the income of the
Hindu Undivided Family. It was held by this Court that since the property which
came into the hands of Buddanna as the. sole surviving coparcener was
originally joint family property, it did not cease to belong to the joint
family and income from it was assessable in the hands of Buddanna as income of
the Hindu Undivided Family. In the course of the judgment Shah, J. speaking for
the Court examined the decision of the Judicial Committee in Kalyanji's
case(") and Gomedalli's (4 ) and pointed out that there was a clear
distinction between the two classes of cases :
"It may however be recalled that in
Kalyanji Vithaldas's case(3) the income assessed to tax belonged separately to
four out of six partners; of the remaining two (1) (1966) 60 I.T.R. 293.
(2) 60 I.T.R. 293.
(3) 5 I.T.R. 90.
(4) (1935) 3 I.T.R. 367.
890 it was from an ancestral source, but the
fact that each such partner had a wife or daughter did not make that income
from an ancestral source income of the undivided family of the partner, his wife
and daughter. In Gomedalli Lakshminarayan's case(1), the property from which
income accrued belonged to a Hindu Undivided Family and the effect of the death
of the father, who was a manager, was merely to invest the rights of a manager
upon the son. The income from the property was and continued to remain the
income of the undivided family. This distinction, which had a vital bearing on
the issue falling to be determined, was not given effect to by the Judicial
Committee in A. P. Swami Gomedalli's case(1).
At page 302 Shah, J. referred to the decision
of the Judicial Committee in Arunachalam's (2) case and concluded as follows:-
"Property of a joint family, therefore, does not cease to belong to the
family merely because the family is represented by a single coparcener who
possesses rights which an owner of property may posesss. In the case in hand
the property which yielded the income originally belonged to a Hindu Undivided
Family. On the death of Budappa, the family which included. a widow and females,
born in the family was represented by Buddanna alone, but the property still
continued to belong to that undivided family and income received therefrom was
taxable as income of the Hindu undivided family".
In the present case the property which is
sought to be taxed in the hands of the appellant originally belonged to the
Hindu Undivided Family belonging to the appellant, his father and his brothers.
There were joint family properties of that Hindu Undivided Family when the
partition took place between the appellant, his father and his brothers and
these properties came to the share of the appellant and the question presented
for determination is whether they ceased to bear the character of joint family
properties and became the absolute properties of the appellant. As pointed out
by the Judicial Committee in Arunachalam's case(2) "it is only by
analysing the nature of the rights of the members of the undivided family, both
those in being and those yet to be born, that it can be determined whether the
family property can properly be described as "joint property of the
undivided family". Applying this test it is clear that, though in the
absence of male issue the dividing coparcener may be properly described in a
sense as the owner of the properties, that upon the adoption of a son or birth
of a son to him, it would assume a different quality. It con- (1) (1935) 3
I.T.R. 367.
(2) [1957] A.C. 540.
891 tinues to be ancestral property in his
hands as regards his male issue for their rights hid already attached upon it I
and the partition only cuts off the claims of the dividing coparceners. The
father and his male issue still remain joint. The same rule would apply even
when a partition had been made before the birth of the male issue or before a
son is adopted, for the share which is taken at a partition by one of the
coparceners is taken by him as representing his branch. Again the ownership of
the dividing coparcener is such "that female members of the family may
have a right to maintenance out of it and in some circumstances to a charge for
maintenance upon it". (See Arunachalam's(1) case). It is evident that
these are the incidents which arise because the properties have been and have
not been ceased to be joint family properties. It is no doubt true that there
was a partition between the assessee, his wife and minor daughters on the one
hand and his father and brothers on the other hand. But the effect of partition
did not affect the character of these properties which did not cease to be
joint family properties in the hands of the appellant, Our conclusion is that
when a coparcener having a wife and two minor daughters and no son receives his
share of the joint family properties on partition, such property in the hands
of the coparcener belongs to the Hindu Undivided Family of himself, his wife
and minor daughters and cannot be assessed as his individual property. It is
clear that the present case falls within the ratio of the decision of this
Court in Gowali Buddanna's case (2) and the Appellate Tribunal was right in
holding that the status of the respondent was that of a Hindu Undivided Family
and not that of an individual.
On behalf of the respondent reference was
made to the decision of this Court in T. S. Srinivasan v. Commissioner of
'Income Tax(3), and it was contended that the decision proceeded on the basis
that property received by the coparcener on partition cannot be regarded as
property of a Hindu Undivided Family if he has merely a wife or daughter and no
son. It is therefore necessary to examine the material facts and find out what
is the ratio decided of that case. The appellant was a member of the Hindu
Undivided Family with his father and brothers. As a result of partial partition
of properties belonging to the Hindu Undivided Family the appellant received
certain shares and with tsese shares as nucleus he acquired house properties,
shares and deposits. His first son was born on 11th December, 1952 and it was
common ground that the conception of the child must have taken place sometime
in March, 1952.
For the assessment year 1953-54 the relevant
accounting year being the financial year 1st April 1952 to 31st March, 1953,
the (1) [1957] A.C. 540.
(2) 60 I.T.R. 293.
(3) 60 I.T.R. 36.
8 92 appellant claimed that the income from
the assets should be assessed in the hands of the Hindu Undivided Family
consisting of himself and his son which, according to him, had come into
existence in or about March, 1952 when the son was conceived. The Income Tax
Officer recognised the Hindu Undivided Family only from the date of the birth
of the son, viz. 11th December, 1952 and assessed the income till 11th
December, 1952 in the hands of the appellant as an individual. The Appellate
Assistant Commissioner and the Tribunal upheld this view on appeal. Before the
High Court the question debated was whether the Hindu Undivided Family came
into existence in or about March 1952 when the son was conceived and whether
the assesses could be assessed in the status of an individual for any part of
the relevant accounting year., The question was answered against the assessee
by the High Court. The assessee appealed to this Court and the contention of
the appellant was that according to the doctrine of Hindu law a son conceived
is in the same position as a son actually in existence. The argument was
rejected by this Court which held that the Hindu Undivided Family did not come
into existence on the conception of the son as claimed by the appellant, but
came into being when the son was actually born. It was suggested on behalf of
the respondent that the decision of this case must be taken to be implicitly,
if not explicitly that there was no Hindu Undivided Family prior to the date of
the birth of the son.
But we do not think that any such implication
can be raised.
The case of the appellant throughout the
course of the proceedings was that the Hindu Undivided Family came into
existence for the first time in or about March, 1952 when the son was conceived
and it was not his case at any time that a Hindu Undivided Family was in
existence prior to the conception of the son. Indeed, it was common ground
between the parties that there was no Hindu Undivided Family in existence prior
to the conception of the son. The only dispute was whether the Hindu Undivided
Family came into existence for the first time when the son was conceived as
claimed by the assessee or whether it came into existence when the son was born
as claimed by the Income Tax Department. The appellant relied on the doctrine
of Hindu law that the son conceived is in the same position as the son born and
the respondent contended that this doctrine was inapplicable. That was the only
question raised before this Court which it was called upon to decide and which
in fact it decided.- The question whether there was in any event even without a
son conceived or born, a Hindu Undivided Family consisting of the appellant and
his wife and whether the properties received on partition belonged to that
Hindu Undivided Family was neither raised nor argued before this Court which had
no occasion to consider it. The decision of T. S. Srinivasan's case(1) has
therefore no bearing on the question now presented for determination in the
present case.
For the reasons already expressed we hold
that the status of the appellant was rightly determined as that of a Hindu Un-
divided Family by the Income Tax Appellate Tribunal and the question of law
referred to the High Court must be answered ill the affirmative and against the
Commissioner of Wealth Tax. These appeals are accordingly allowed with costs.
One hearing fee.
R.K.P.S. Appeals allowed, (1) 60 I.T.R. 36.
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