The
Additional Commissioner of Income Tax Lucknow Vs. Maharani Raj Laxmi Devi [1997] INSC 154 (11 February 1997)
S.C.
AGRAWAL, K.S. PARIPOORNAN
ACT:
HEAD NOTE:
These
appeals, by special leave, arise out of a reference made by the Income Tax
Appellate Tribunal Allahabad Bench, (hereinafter referred to as ' the
Tribunal') under Section 255(1) of the Income Tax Act, 1961 (hereinafter
referred to as 'the Act') whereby the following question was referred for the
opinion of the Allahabad High Court :
"Where
on the facts and in the circumstances of the case 1/6th income from the from
computation of income of assessee - Hindu Undivided Family - could be excluded
pertaining to the miner son as Maharaja?" By the impugned judgment the
High Court has answered the said question against the Revenue and in favour of
the assessee. The High Court has placed reliance on its earlier decision in M/s
Kalloomal Tapeswari Prasad v. The Commissioner of Income Tax, 1973 Tax Law
Reports 697.
Briefly
stated the facts are as follows.
Maharaja
P.P. Singh of Balrampur was being assessed as an individual up to and including
the assessment year 1964- 65, He had no issue of his own. On December 28, 1963, he adapted Maharaja Dharmendra Pratap
Singh, who was a minor, as his son. After the said adoption the status of
Maharaja P.P. Singh was taken as that of the Hindu Undivided Family (for short
'HUF'). Maharaja P.P. Singh died on June 20, 1964. Thereafter his wife, Maharani Raj Laxmi
Devi, became the karta of the HUF consisting of herself and the afresaid minor
son, Maharaja Dharmendra Pratap Singh. For the assessment year 1966-67 the assessee
filed. For the assessment year 1966-67 the assesses filed a return declaring
the total income of the Huf as Rs. 28935/- Subsequently she filed another return
showing the total income as Rs. 25,288/- The difference between the original
and revised returns was explained on the basis that the revised return had been
filed by the HUF after excluding 1/6th share belonging to the minor son.
Maharaja Dharmendra Pratap Singh, As an individual because according to Section
6 of the Hindu Succession Act, 1956, 1/3rd share of Late Maharaja P.P. Singh in
the HUF property devolved on his two heirs Maharaja Dharmendra Pratap Singh
(minor son) and Maharaja Raj Laxmi Devi (wife). The Income Tax Officer held
that the At is a separate, distinct and complete statute in itself and under
the Act a changed in HUF status can be effected only by claiming partition
either partial or complete and that such partition could become operative if a
claim of partition has been preferred and after examining the evidence
produced, and order under Section 171 accepting the claim of partition has been
accepted by the Income Tax Officer, and that in the case of the assessee both
the element where missing. He, therefore, held that the assessee HUF continued
to be as it was before. The said view was followed by the Income Tax Officer in
the Assessments for the Subsequent assessment years 1967-68 to 1970-71. The
said view of the Income Tax Officer was upheld in appeal the Tribunal reversed
the said view and held that the case of the assessee was not of a partition
contemplated in Section 171 and, therefore, no claim was necessary and absence
of an order under section 171 does not mean that the whole estate should be
deemed to belong to the assessee HUF. The Tribunal following the edecision of
the Allahabad High Court in the case of M/s Kalloomal Tapeswari Prasad (Supra),
further held that assuming the assessee's case came under Section 171 the
estate of the assessee HUF having been diminished in terms of Section 6 of the
Hindu Suceessinon Act, 1956 but which regard to Which an order accepting the
claim for partial partition has not been made, the income from such properly
could not be included in the computation of the income of the HUF. The Tribunal
referred the question abovementioned to the High Court for its opinion and the
said question was answered by the High Court in favour of the assessee and
against the Revenue. The High Court has followed its decision in the case of
M/s Kallomal Tapeswari Prasad (supra). Hence this appeal.
Shri
P.A. Choudhary, the learned senior counsel appearing for the revenue, has
argued that the High Court was in error in upholding the view of the Tribunal
that Section 171 of the Act was not applicable in the present case. Shri Choudhary
has pointed out that the decision of the High Court in M/s Kalloomal Tapeswari
Prasad (supra) on which reliance has been placed by the High Court in the
impugned judgment has been reversed by this Court in Kalloomal Tapeswari prasad
(HUF) v. Commissioner of Income Tax, Kanpur, (1982) 133 N.K. Sarade Thampatty,
(1991) 187 ITR 696, and R.B. Tunki Sah Baidyanath Pd. v. Commissioner of Income
Tax. Bihar -1 Patna, (1995) 212 ITR 632.
Shri Janender
Lal, the learned counsel for the assesses, has sought to distinguish the
aforementioned decisions of this Court on the ground that in those cases
partial partition was claimed to have been effected and they fell within the
ambit of Section 171 of Act. The submission is that in the present case there
was inheritance of the share of late Maharaja P. P. Singh by his widow and
minor son under Section 6 of the Hindu Succession Act, 1956 and that in such a
case where on account of inheritance by virtue of statue there is a diminution
of the assets of the HUF Section 171 of the Act has no application.
In Kalloomal
Tapeswari Prasad (HUF) v. CIT (supra) there was a partial partition in respect
of 18 immovable properties which were divided amongst 10 members of the family.
There was no actual division of the properties because it was felt that
physical division of each of the 18 properties into 10 portion was not
possible. The Income Tax Officer did not, however, accept that division of
Properties was not possible and, while considering the claim of the assessee
under Section 171 of The Act, he did not accept the case of the assessee that
there was a partial partition for the purpose of Section 171 of the Act, he did
not accept the case of the assessee that there was a partial partition for the
purpose of Section 171 of the Act. The said view was affirmed by the Appellate
Assistant Commissioner and the Tribunal. The Tribunal referred two question for
the opinion of the Allahabad High Court. The first question was whether the
Tribunal was right in holding that the properties in dispute were capable of
division in define portion amongst 10 coparceners as contemplated in
Explanation n(a) (i) to Section 171 of the Act. The second question was whether
the Tribunal was justified in holding that the income from the properties in
dispute which were accepted to have been partitioned under the Hindu Law but
with regard to which an order accepting the claim of partial partition was not
made was liable to be included in the computation in the income of the assessee,
a HUF. The High Court answered the first question in the affirmative and upheld
the view of the Tribunal that it was possible to divide the properties in
question physically into different lots so that each member could take his
rightful share in them. The High Court, however, answered the second question
in favour of the assessee and held that the income accuring from 18 immovable
properties after the partial partition was not liable to be imcluded in the
computation of the included of the HUF. This Court, while agreeing with the
answer given by the High Court on the first question, did not agree with the
view of the Allahabad High Court on the second question. On interpretation of
the provisions of Section 171 of The Act this Court has held:
"Where
there is no claim made that a partition- total or partial - had taken place or
where it is made an disallowed a Hindu Undivided Family which in higher to
being assessed as such will have to be assessed as such notwithstanding the fact
that a partition had in fact taken place as per Hindu Law, A finding to the
effect that partition had taken place has to be recorded under Section 171 by
the Income Tax Officer.
[p.
704] "We have already held that Section 171 of the Act applied to all partitions
- total or partial - and that unless a finding is recorded under Section 171
that a partial partition has taken place that a partial partition has taken
place the income from the properties should be included in the total income of
the family by virtue of sub-section (1) of Section 171 of the Act."
[p.901] This Court has taken note of the decision of the Madras High Court in A
Kannan Chetty v. Commissioner of Income Tax (1963) 50 ITR 601, wherein was
observed :- "For instance, if the Karta of the family effects an
alienation or even makes a gift, insofar as the taxing department is concerned,
it is the income of the members of the Hindu Undivided Family that can be
assessed and, if by reason of any alienation, whether it is binding on the
members of the joint family or not, an item of property ceases to be in the
hands of the joint family, it would not be open to the department to say that
they would ignore such an alienation, notwithstanding that the possession of
the properties and its income may pass to the hands of the stranger." This
Court did not agree with these observations and said:- "As long as a
finding is not recorded under Section 171 holding that a partial partition had
taken place, the Hindu Undivided Family should be deemed for the purpose of the
owner of the property which is the subject matter of partition and also the
recipient of the income from such property. The assessment should be made as
such and the tax assessed can be recovered as provided in the Act." The
same view was reiterated in ITO v. Smt. N.K. Sarada Thampatty (supra). It was a
case where a preliminary decree for partition had been made out but the final
decree had not been passed and not division of the properties by metes and
bounds had taken place.
In
R.B. Tunki Sah Baidyanath Pd. v. CIT, Bihar-I, Patna (supra) the Hindu
Undivided Family consisted of Rai Bahadur Tunki Sah, the Karta, his wife Budhi Devi,
son Baidyanath Prasad and daughter-in-law Godawari Devi. Rai Bahadur Tunki Sah
died in 1955 and on his death Baidyanath Prasad became the Karta of the Hindu
Undivided Family. Budhi Devi, widow of Rai Bahadur Tunki Sah, was entitled to a
limited interest in the property under the provisions of the Hindu Womens'
Right property Act, 1937. After the coming into force of the Hindu Succession
Act, 1956, her limited interest turned into an absolute one and she acquired
absolute ownership rights under section 14(1) of the said Act. Budhi Devi died
in 1960 or thereabout and her share was inherited by her only son Baidyanath Prasad.
Baidyanath Prasad and his wife Godawari Devi adopted Nand Kumar as their son
sometime in 1961. On may 3, 1969, Baidyanath Prasad executed a registered gift
deed in respect of his share in the property which he had inherited from his
mother to his adopted son Nand Kumar which gift was accepted by the Gift Tax
Officer. During the assessment year 1970-71 and 1971-72 the Income Tax Officer,
while assessing the Hindu Undivided Family and Nand Kumar, accepted the
contention of the assessee that only 50 per Cent of the income from the
property and business was assessable in the hand of the Hindu Individed family
and the balance in the hands of the adopted son Nand Kumar. In the subsequent
years 1972-73 to 1975-76 the Income Tax Officer rejected the assessee's
contention that the income as liable to be divided 50: 50 between the Hindu
Undivided Family and adopted son Nand Kumar and assessed the entier income of
the Hindu Undivided Family, The said view of the Income Tax Officer was upheld
by the Appellate Assistant Commissioner but the Tribunal held that only 50 per
cent of the income should be assessed as income of the Hindu undivided Family
leaving the balance 50 per cent to assessed as income of the adopted son Nand
Kumar. The High Court, on reference, reversed the view taken by the Tribunal
and upheld the view taken by the Appellate Assistant Commissioner. Before this
Court the questions of Section 171 of the Act was necessary.
This
Court has laid down:- "Sub-Section (1) of Section 171 in terms provided
that a Hindu family Higher to assessed as undivided shall be deemed for the
purposes of this Act to continue to be a Hindu Undivided Family, except where
and insofar as a finding of partition has been given under this section in
respect of the Hindu Undivided Family. On a plan reading of this sub-section it
becomes clear that a Hindu family which is assessed as undivided has for the
purposes of the Act to be deemed t continue as such unless there is a evidence
of partition and finding is recorded to that effect under the Act in respect of
such family. The section creates a deeming fiction of continuing the HUF except
where a finding of partition has been given in respect of the HUF concerned.
Before
this finding is recorded an inquiry has to be undertaken on the question
whether there has been a total or partial partition the Joint family property
and if there has been any such partition, the date on which it took
place." [p. 635] "In the instant case, admittedly , no inquiry was
undertaken on the question whether there had been a total or partial partition
of the joint family property and if yes the date on which it had taken place.
That being so, in view of the language of Section 171 (1), the HUF would be
liable to be taxed as undivided notwithstanding the effect of Section 14(1) of
the Hindu succession Act." Reliance has been placed by the Court on the
decision in Kalloomal Tapeswari Prasad (HUF) v. CIT (supra) and ITO v. Smt N.K.
Sarada Thampatty (supra). On behalf of the assessee it was urged that in view
of the language of Section 14(1) of the Hindu Succession Act, 1956 the widow
acquired and absolute right by statute and, therefore, if the view urged by the
revenue was accepted as correct, it would be setting the clock back to the
position as existed prior to Hindu Succession Act, 1956, which could not be the
intention of the Legislature. The said contention was rejected by the Court by
referring to the decision of the Madras High Court in A. Kannan Chetty v. CIT
(supra) holding that an alienation by the Karta of the family in favour of the
a Stranger could not be ignored by the department and the observations of this
Court in Kalloomal Tapeswari Prasad (HUF) v. CIT (supra) disagreeing with the
said view of the Madras High Court.
It is
not doubt true that in Kalloomal Tapeswari Prasad (HUF) v. CIT (supra) and ITO
v. Smt N.K. Sarada Thampatty (supra) this Court was dealing with cases of
partial partition by way of voluntary act of the parties which is directly
covered by Section 171 of the Act. But R.B. Tunki Sah Baidyanath Pd. v. CIT
(supra) was a case where a claim was made on the basis of statute, viz., the
provisions of Section 14(1) of the Hindu Succession Act, 1956, and it was held
that Section 171 of the act would govern the matter insofar as income tax law
is concerned. For the same reason, it must be held that though for the purpose
of Hindu undivided Family, Section 6 of the Hindu succession Act, 1956 would
govern the rights of the parties but insofar as income tax law is concerned the
matter has to be governed by Section 171(1) of the Act.
For
the reason aforementioned, the question question referred to the High Court
must, therefore, be answered in favour of the Revenue and against the assessee
and it is so answered. The appeal is/are allowed accordingly. No order as to
costs.
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