The law so far as relevant for the purpose of these cases may be summarised thus. On a partition of a bigger Hindu undivided family the property coming into the hands of the assessee becomes his separate property vis-a-vis other coparceners although it continues to be joint visa-vis his wife and children and he continues to constitute a Hindu undivided family with them, i.e., his wife and children, and, in the absence of the children, with the wife alone. But where on partition separate shares are allotted not only to the children but also to the wife, the existence of the Hindu undivided family comes to an end. And the property in the hands of the assessee becomes separate property and the income therefrom is liable to be taxed in the status of individual until another son is born or adopted in future.
1. These references under Section 256(1) of the Income-tax Act, 1961, are at the instance of the Revenue. The reference in Tax Cases Nos. 61 and 62 of 1983 in which the assessees are full brothers and members of the bigger Hindu undivided family is in the same terms. Tax Case No. 9 of 1982, is a different case altogether. But although the reference is not in the same terms and the facts, naturally, also are not exactly the same, the controversy is one and the same in these cases. They have, as such, been heard together and are disposed of by this common judgment.
2. In Tax Case No. 9 of 1982, the material facts are as follows. The assessee's family consisted of himself, i.e., Radhe Shyam Prasad Agarwal, wife, two sons (including a minor son) and three daughters (including one minor and one married daughter). The assessee used to file returns in the status of a Hindu undivided family and was being assessed to income-tax as such. On the last date of the previous year relevant to the assessment year 1976-77, partial partition in the family took place. The capital standing in the name of the Hindu undivided family was partitioned amongst the members of the family, namely the assessee, his two sons, Suresh Prasad Agarwal and Ganesh Prasad Agarwal, and wife, Smt. Sita Devi Agarwal. The assessee claimed that he should be assessed in the status of the Hindu undivided family because even after partition he had a legal obligation to maintain his wife and he along with his wife constituted the Hindu undivided family. The Income-tax Officer took the view that since the capital of the Hindu undivided family had been partitioned and the wife had also got share and there was none to claim any share in the property which had come into the hands of the assessee, his status would be that of individual. The Appellate Assistant Commissioner on appeal by the assessee reversed the finding of the Income-tax Officer. He held, following the decision of the Supreme Court in N. V. Narendranath v. CWT [1969] 74 ITR 190, that the assessee along with his wife continued to form a Hindu undivided family. The Appellate Tribunal, on appeal by the Revenue, affirmed the view of the Appellate Assistant Commissioner. It relied, besides N. V. Narendranath's case [1969] 74 ITR 190 (SC), on CIT v. Pannalal Rastogi [1974] 96 ITR 110 (Patna), Addl. CIT v. V. K. Purwar [1979] 116 ITR 908 (All) and Banarsi Lal Tulsiyan v. CIT [1980] 124 ITR 310 (All). On an application by the Department, the Tribunal referred the following question of law to this court for opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the status of the assessee should be a Hindu undivided family ?"
3. The material facts of Tax Cases Nos. 61 and 62 of 1983 may be stated as follows. The assessees, namely, Jainath Prasad and Baijnath Prasad, were members of a bigger Hindu undivided family. They were "kartas" of their respective Hindu undivided families consisting of self, wife and children. The Hindu undivided family derived share income from firms. Partial partition was effected in the bigger Hindu undivided family as a result of which the capital in various firms was divided. The Income-tax Officer noticed that as a result of the partial partition, the capital had been partitioned not only amongst the assessees and their respective children but also their wives. In other words, their wives too had received their share in the capital. The Income-tax Officer on these facts held that the income received by the assessees from the assets after partition was their individual income. He rejected the claim of the assessees that they be assessed as Hindu undivided families. The Appellate Assistant Commissioner held that with respect to the assets received by the assessees on partial partition, they continued to be Hindu undivided families with their wives. He relied on N. V. Narendranath's case [1969] 74 ITR 190 (SC). The Appellate Tribunal, on appeal by the Revenue, concurred in the view of the Appellate Assistant Commissioner. It held that simply because the wife had also received a share on partial partition, it does not mean that he ceased to constitute a Hindu undivided family with the wife. What was received by the assessee on partial partition of the bigger Hindu undivided family was not his absolute property, it was subject to charge and claims of members who may be born or adopted in future. The income derived from the assets received on partial partition was, therefore, liable to be assessed in the hands of the assessees in the status of Hindu undivided family and not individual. The Tribunal, in coming to the conclusions, followed N. V. Narendranath's case [1969] 74 ITR 190 (SC). It also referred to the cases of L. Hirday Narain v. ITO [1970] 78 ITR 26 (SC) and Tolaram Bijoy Kumar v. CIT [1978] 112 ITR 750 (SC). The main order was passed in the case of Baijnath Prasad. In the case of Jainath Prasad, the Tribunal merely followed the said order. On an application by the Department, however, it referred the following questions for opinion by this court ;
"(1) Whether, on the facts and the circumstances of the case, the Appellate Tribunal was correct in law in holding that income from assets received on partial partition was liable to assessment in the hands of Sri Jainath Prasad/Sri Baijnath Prasad in the status of a Hindu undivided family consisting of himself and his wife and not in the capacity of an individual ?
(2) Whether, on the facts and in the circumstances of the case, an individual can form a Hindu undivided family with his wife in respect of the shares received by him on such partition in which the wife was also allotted a separate share and that share is used by her exclusively ?"
4. Mr. L. N. Rastogi, learned counsel for the Revenue, submitted that where on partition shares are allotted to the members of the erstwhile Hindu undivided family, including wife, the existence of the Hindu undivided family comes to an end and the assessee can no longer be assessed in the status of a Hindu undivided family because the income accruing from the property allotted to his share belongs exclusively to him. He placed reliance on Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC). He also referred to CWT v. Chander Sen [1986] 161 ITR 370 (SC), CIT v. Dhannamal [1984] 148 ITR 141 (MP), CIT v. Shankar Lal Budhia [1987] 165 ITR 380 (Patna) [FB], CIT v. Rajeshwari Prasad [1987] 166 ITR 789 (Patna), CIT v. P. L. Karuppan Chettiar [1992] 197 ITR 646 (SC) and Deputy Commissioner of Agrl. L T. v. R. S. Chidambaram [1994] 209 ITR 531 (Ker).
5. Mr. S. K. Mishra, learned counsel for the assessee, in Tax Case No. 9 of 1982 (assessees in Tax Cases Nos. 61 and 62 of 1983 were unrepresented) submitted that the partition in the family of the assessee did not mean that the wife became separate from the assessee, even though a separate share was allotted to her, and so far as the property allotted to the share of the assessee is concerned, the wife and, in fact, the children also would continue to have interest in that property and, therefore, the income therefrom in the hands of the assessee must be taxed in the status of Hindu undivided family. He further submitted that the property which is impressed with the character of joint family property does not cease to be so on partition. He placed reliance on N. V. Narendranath's case [1969] 74 ITR 190 (SC) and CWT v. Pannalal Rastogi [1974] 96 ITR 110 (Patna).
6. The dispute as to whether on partition the share coming into the hands of the assessee is to be taxed in the status of individual or Hindu undivided family has a rather long history. In Pannalal Rastogi [1974] 96 ITR 110 {Patna), a person no less than Untwalia C.J. (as he then was) observed, "the point at issue is not free from difficulty". Starting from Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 (PC), a decision rendered by the Privy Council in 1936, the question has been debated in a large number of cases in various High Courts and the Supreme Court. But as is often said, each case is to be decided on its own facts.
7. Since the Appellate Tribunal has heavily relied on N. V. Narendra-nath's case [1969] 74 ITR 190 (SC) which, as a matter of fact, is the foundation of its decision, it would be only appropriate to know the ratio decidendi of that case. The Supreme Court in N. V. Narendranath's case [1969] 74 ITR 190 observed that the expression "Hindu undivided family" in the Wealth-tax Act is used in the same 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 term "Hindu undivided family" is not defined under the Income-tax Act and, therefore, must have the same incidents and meaning as the one given to it in the context of the Wealth-tax Act). Having said so the court observed (page 193) :
" 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 the two classes of cases where an assessee 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." (emphasis* added).
After quoting the observations of the Judicial Committee in Attorney-General of Ceylon v. A. R. Arunachalam Chettiar [1958] 34 ITR (E.D.) 42 ; [1957] AC 540, that (page 196 of 74 ITR) : "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," the Supreme Court observed at page 197 of the Report that "though in the absence of male issue the dividing coparcener may be properly described in a sense as the owner of the properties, upon the adoption of a son or birth of a son to him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it 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". On this a priori reasoning their Lordships concluded 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.
The decision in N. V, Narendranath's case [1969] 74 ITR 190 (SC) does, at the first instance, seem to support the case of the assessees. There is, however, one salient fact which turns the tables against them. It is that in N. V. Narendranath's case [1969] 74 ITR 190 (SC) no separate share had been allotted to the wife while in these cases, as noticed above, separate shares were allotted to the wives, besides the children. This is evident from the statement of fact at page 198 of the Report (in N. V. Narendranath's case [1969] 74 ITR 190 (SC)) to the effect that "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."
8. It is clear that the Supreme Court was dealing with an entirely different qase. The Appellate Tribunal appears to have been swayed by certain observations made in the judgment in N. V. Narendranath's case [1969] 74 ITR 190 (SC) to the effect, for example, that to constitute a Hindu undivided family it is not necessary that there should be two male members. In N. V. Narendranath's case [1969] 74 ITR 190 (SC), on partition, a share had been allotted to Narendranath who held the same on his own behalf as well as on behalf of his wife and minor daughters. In the present case, the fact that the wife has also been allotted a share, besides the children, makes all the difference. Dealing with a similar case, the Madhya Pradesh High Court in CIT v. Dhannamal [1984] 148 ITR 141 held (page 143) :
"Had the wife not been allotted any share in the partial partition, the matter was simple and there would have been no difficulty in holding that the assessee and his wife constituted a Hindu undivided family."
9. The Madhya Pradesh High Court followed an earlier case in Jeetmal Nagri v. CWT [1984] 148 ITR 139, wherein, on facts similar to those of the present case, the High Court held that the decision of the Supreme Court in N. V. Narendranath's case [1969] 74 ITR 190 had no application.
10. As noticed above, the expression "Hindu undivided family" is to be understood in the same sense as it is understood in the ordinary Hindu law. In Mayne's Hindu Law and Usage (page 575, 13th edition) it has been stated :
"Property which a man takes at a partition will be his separate property as regards those from whom he has severed but will be ancestral property as regards his own male issue. So too, family property vested in the last surviving male member of a coparcenary will be his separate property subject to its becoming at any moment coparcenary property when he has male issue or when an adoption is made to him or to a predeceased coparcener in the family, and subject to the right of maintenance of the other female members of the family. . ."
11. Mulla's Hindu Law (paragraph 223(4), page 248, 16th edition) states:
" The share which a coparcener obtains on partition of an ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently. Such share, however, is ancestral property only as regards his male issue. As regards other relations, it is separate property, and if the coparcener dies without leaving male issue, it passes to his heirs by succession."
12. In N. R. Raghavachariar's Hindu Law, Principles and Precedents, the law has been stated in paragraph 260 at page 222 (8th edition) in these words--
" The share in the ancestral estate which a coparcener gets on partition with his co-sharers is his separate property as against the coparceners from whom he separates, though as against his own male issue who are born after partition or who were born before but who do not get themselves separated from him the property has still the character of ancestral property in which they take an interest by birth,"
13. It is evident from the above statements of law that on the date partition is effected between the assessee and his father and/or brothers or even the son, the property coming into his hands is deemed to be a separate property though liable to become a joint family property when a son is born subsequently or an adoption is made. It may also have the trappings of a joint family property on account of a right to maintenance available to female members of the family. Such is not the case here. In both Tax Case No. 9 of 1982 and Tax Cases Nos. 61 and 62 of 1982, not only the children but the wives also had got separate shares on partition. No son was subsequently born or adopted. The wives having already been allotted shares, they could not claim a right of maintenance and, therefore, had no charge on the property. In such a situation, the property coming into the hands of the assessees must be held to be their separate property and income derived therefrom by them must be assessed in the status of individual and not Hindu undivided family.
14. In Pannalal Rastogi's case [1974] 96 ITR 110 (Patna), relied upon by counsel for the assessee, the family of the assessee at the time of partition consisted of self and wife. It does not appear from the said judgment that there was only inter se partition between the husband and wife. In that view the Division Bench correctly, if I may say so, followed and applied the ratio of the decision in N. V. Narendranath's case [1969] 74 ITR 190 (SC) and held that the assessee should be assessed as Hindu undivided family and not as an individual. This case too, therefore, has no application in the present case.
15. No case has been cited by counsel for the assessee or referred to in the orders of the Appellate Tribunal taking the view that even where on partition a separate share is allotted to the wife, income from the property coming into the hands of the husband is to be taxed as Hindu undivided family. The Tribunal mainly relied on N. V. Narendranath's case [1969] 74 ITR 190 (SC), but the facts of N. V. Narendranath's case [1969] 74 ITR 190 (SC) being different and distinguishable, as indicated hereinabove, the ratio of the decision is of no avail to the assessee in these cases. As the Supreme Court itself observed in that case (passage quoted above), where the property already impressed with the character of joint family property comes into the hands of the assessee as a single coparcener, the question which is 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 his absolute property. I have no hesitation in holding that in these cases on account of allotment of the separate share of the wife and in the absence of any son--born or adopted subsequently--the property did not retain the character of joint family property. It rather "acquired" the character of separate property in the hands of the assessees and income therefrom was liable to be assessed to tax in the status of individual. I may usefully quote the following observations of the Supreme Court in C. Krishna Prasad v. CIT [1974] 97 ITR 493, wherein their Lordships while considering the case of a single individual claiming the status of a Hindu undivided family for the purposes of taxation observed (page 497) :
"In view of the above, it cannot be denied that the appellant at present is the absolute owner of the property which fell to his share as a result of partition and that he can deal with it as he wishes. There is admittedly no female member in existence who is entitled to maintenance from the above-mentioned property or who is capable of adopting a son to a deceased coparcener. Even if the assessee-appellant in future introduces a new member into the family by adoption or otherwise, his present full ownership of the property cannot be affected."
16. In view of what has been stated above, it is unnecessary to deal with the cases cited by Mr. Rastogi. More so, because the facts of those cases were different. In fairness to counsel, however, I would very briefly refer to them.
17. In Surjit Lal Chhabda [1975] 101 ITR 776 (SC) (heavy reliance was placed on this case), the assessee had a wife and one unmarried daughter and no son. His wife and unmarried daughter were entitled to be maintained by him from out of the income of a certain "Kathoke Lodge" which was the separate property of the assessee. On January 26, 1956, the assessee made a declaration that he had thrown the said property into family hotchpot and he would be holding the same as "karta" of the joint family property consisting of himself, his wife and unmarried daughter in order to impress the property with the character of joint family property. The question was whether income received by the assessee from the property was to be assessed in the status of a Hindu undivided family. The Supreme Court rejected the assessee's contention. The court observed in that connection that until a son is born to him the personal law of the assessee regarded him as the owner of the property and income therefrom as his income even after the property was thrown into the family hotchpot. It may appear that the observation "until a son is born" is at a tangent with the observation in N. V. Narendranath's case [1969] 74 ITR 190 (SC) that "there is no warrant for the contention that there must be at least two male members to form a Hindu undivided family as a taxable unit". These observations, however, have to be understood in the fact situation of the two cases. In JV. V. Narendranath's case [1969] 74 ITR 190 (SC) the property was a joint family property of a bigger Hindu undivided family in which the assessee along with wife and daughters got shares on partition. They together constituted a Hindu undivided family. The existence of another male member was not necessary. In Surjit Lal Chhabda's case [1975] 101 ITR 776 (SC) there was no partition. The property was self-acquired pro-perty of the assessee which was sought to be impressed with the character of joint family property on the basis of a "declaration" that it was being thrown in the family hotchpot. It was held that without a son there cannot be joint Hindu family and the character of the property does not become joint family property.
18. In the case of Rajeshwari Prasad [1987] 166 ITR 789 (Patna), the facts were similar to those of the case of Surjit Lal Chhabda [1975] 101 ITR 776 (SC). The property belonged exclusively to the assessee who later claimed the same as belonging to the Hindu undivided family on the basis of a declaration that he had thrown it in the family hotchpot. This court, following Chhabda's case [1975] 101 ITR 776 (SC), held that the property was the individual property of the assessee and could not be taxed in the status of Hindu undivided family.
19. Chander Sen [1986] 161 ITR 370 (SC) was the case of a father dying intestate after partition between himself and the son. The property devolving on the son on his death was held to be his individual property and not the property of the Hindu' undivided family. The case of P. L. Karuppan Chettiar [1992] 197 ITR 646 (SC) falls in the same class of cases.
20. In Shankar Lal Budhia [1987] 165 ITR 380 (Patna) [FB], the assessee had acquired some shares in a company on a partial partition of the Hindu undivided family. Later he acquired some immovable property and filed returns in the status of the individual for a number of years and was assessed as such. On marriage, he claimed the status of a Hindu undivided family. On these facts, the Full Bench of this court held that the status of an individual assessee governed by Hindu law would not automatically change to that of a Hindu undivided family under the Income-tax Act.
21. In R. S. Chidambaram [1994] 209 ITR 531 (Ker) the assessee along with son obtained property on partition of the bigger Hindu undivided family. Subsequently, there was a partition between the assessee and the son. It was held that the property belonged to the assessee as an individual.
22. It would thus appear that all these cases were decided on different set of facts, and, strictly speaking, do not have much relevance in these cases. The plea of the Revenue none the less has to be accepted as already indicated above.
23. The law so far as relevant for the purpose of these cases may be summarised thus. On a partition of a bigger Hindu undivided family the property coming into the hands of the assessee becomes his separate property vis-a-vis other coparceners although it continues to be joint visa-vis his wife and children and he continues to constitute a Hindu undivided family with them, i.e., his wife and children, and, in the absence of the children, with the wife alone. But where on partition separate shares are allotted not only to the children but also to the wife, the existence of the Hindu undivided family comes to an end. And the property in the hands of the assessee becomes separate property and the income therefrom is liable to be taxed in the status of individual until another son is born or adopted in future.
24. In the above premises, the Tribunal was not correct in holding that the assessees should be assessed in the status of a Hindu undivided family. The questions referred for the opinion of this court are accordingly answered in the negative, that is, in favour of the Revenue and against the assessees. I will make no order as to costs.
25. Let a copy of this judgment be sent to the Income-tax Appellate Tribunal, Patna Bench, Patna.
Aftab Alam, J.
26. I agree.
Print Page
Patna High Court
Commissioner Of Income-Tax vs Radhe Shyam Agrawal, Jainath ... on 8 May, 1997
Equivalent citations: 1998 230 ITR 21 Patna
Bench: S Jha, A Alam
1. These references under Section 256(1) of the Income-tax Act, 1961, are at the instance of the Revenue. The reference in Tax Cases Nos. 61 and 62 of 1983 in which the assessees are full brothers and members of the bigger Hindu undivided family is in the same terms. Tax Case No. 9 of 1982, is a different case altogether. But although the reference is not in the same terms and the facts, naturally, also are not exactly the same, the controversy is one and the same in these cases. They have, as such, been heard together and are disposed of by this common judgment.
2. In Tax Case No. 9 of 1982, the material facts are as follows. The assessee's family consisted of himself, i.e., Radhe Shyam Prasad Agarwal, wife, two sons (including a minor son) and three daughters (including one minor and one married daughter). The assessee used to file returns in the status of a Hindu undivided family and was being assessed to income-tax as such. On the last date of the previous year relevant to the assessment year 1976-77, partial partition in the family took place. The capital standing in the name of the Hindu undivided family was partitioned amongst the members of the family, namely the assessee, his two sons, Suresh Prasad Agarwal and Ganesh Prasad Agarwal, and wife, Smt. Sita Devi Agarwal. The assessee claimed that he should be assessed in the status of the Hindu undivided family because even after partition he had a legal obligation to maintain his wife and he along with his wife constituted the Hindu undivided family. The Income-tax Officer took the view that since the capital of the Hindu undivided family had been partitioned and the wife had also got share and there was none to claim any share in the property which had come into the hands of the assessee, his status would be that of individual. The Appellate Assistant Commissioner on appeal by the assessee reversed the finding of the Income-tax Officer. He held, following the decision of the Supreme Court in N. V. Narendranath v. CWT [1969] 74 ITR 190, that the assessee along with his wife continued to form a Hindu undivided family. The Appellate Tribunal, on appeal by the Revenue, affirmed the view of the Appellate Assistant Commissioner. It relied, besides N. V. Narendranath's case [1969] 74 ITR 190 (SC), on CIT v. Pannalal Rastogi [1974] 96 ITR 110 (Patna), Addl. CIT v. V. K. Purwar [1979] 116 ITR 908 (All) and Banarsi Lal Tulsiyan v. CIT [1980] 124 ITR 310 (All). On an application by the Department, the Tribunal referred the following question of law to this court for opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the status of the assessee should be a Hindu undivided family ?"
3. The material facts of Tax Cases Nos. 61 and 62 of 1983 may be stated as follows. The assessees, namely, Jainath Prasad and Baijnath Prasad, were members of a bigger Hindu undivided family. They were "kartas" of their respective Hindu undivided families consisting of self, wife and children. The Hindu undivided family derived share income from firms. Partial partition was effected in the bigger Hindu undivided family as a result of which the capital in various firms was divided. The Income-tax Officer noticed that as a result of the partial partition, the capital had been partitioned not only amongst the assessees and their respective children but also their wives. In other words, their wives too had received their share in the capital. The Income-tax Officer on these facts held that the income received by the assessees from the assets after partition was their individual income. He rejected the claim of the assessees that they be assessed as Hindu undivided families. The Appellate Assistant Commissioner held that with respect to the assets received by the assessees on partial partition, they continued to be Hindu undivided families with their wives. He relied on N. V. Narendranath's case [1969] 74 ITR 190 (SC). The Appellate Tribunal, on appeal by the Revenue, concurred in the view of the Appellate Assistant Commissioner. It held that simply because the wife had also received a share on partial partition, it does not mean that he ceased to constitute a Hindu undivided family with the wife. What was received by the assessee on partial partition of the bigger Hindu undivided family was not his absolute property, it was subject to charge and claims of members who may be born or adopted in future. The income derived from the assets received on partial partition was, therefore, liable to be assessed in the hands of the assessees in the status of Hindu undivided family and not individual. The Tribunal, in coming to the conclusions, followed N. V. Narendranath's case [1969] 74 ITR 190 (SC). It also referred to the cases of L. Hirday Narain v. ITO [1970] 78 ITR 26 (SC) and Tolaram Bijoy Kumar v. CIT [1978] 112 ITR 750 (SC). The main order was passed in the case of Baijnath Prasad. In the case of Jainath Prasad, the Tribunal merely followed the said order. On an application by the Department, however, it referred the following questions for opinion by this court ;
"(1) Whether, on the facts and the circumstances of the case, the Appellate Tribunal was correct in law in holding that income from assets received on partial partition was liable to assessment in the hands of Sri Jainath Prasad/Sri Baijnath Prasad in the status of a Hindu undivided family consisting of himself and his wife and not in the capacity of an individual ?
(2) Whether, on the facts and in the circumstances of the case, an individual can form a Hindu undivided family with his wife in respect of the shares received by him on such partition in which the wife was also allotted a separate share and that share is used by her exclusively ?"
4. Mr. L. N. Rastogi, learned counsel for the Revenue, submitted that where on partition shares are allotted to the members of the erstwhile Hindu undivided family, including wife, the existence of the Hindu undivided family comes to an end and the assessee can no longer be assessed in the status of a Hindu undivided family because the income accruing from the property allotted to his share belongs exclusively to him. He placed reliance on Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC). He also referred to CWT v. Chander Sen [1986] 161 ITR 370 (SC), CIT v. Dhannamal [1984] 148 ITR 141 (MP), CIT v. Shankar Lal Budhia [1987] 165 ITR 380 (Patna) [FB], CIT v. Rajeshwari Prasad [1987] 166 ITR 789 (Patna), CIT v. P. L. Karuppan Chettiar [1992] 197 ITR 646 (SC) and Deputy Commissioner of Agrl. L T. v. R. S. Chidambaram [1994] 209 ITR 531 (Ker).
5. Mr. S. K. Mishra, learned counsel for the assessee, in Tax Case No. 9 of 1982 (assessees in Tax Cases Nos. 61 and 62 of 1983 were unrepresented) submitted that the partition in the family of the assessee did not mean that the wife became separate from the assessee, even though a separate share was allotted to her, and so far as the property allotted to the share of the assessee is concerned, the wife and, in fact, the children also would continue to have interest in that property and, therefore, the income therefrom in the hands of the assessee must be taxed in the status of Hindu undivided family. He further submitted that the property which is impressed with the character of joint family property does not cease to be so on partition. He placed reliance on N. V. Narendranath's case [1969] 74 ITR 190 (SC) and CWT v. Pannalal Rastogi [1974] 96 ITR 110 (Patna).
6. The dispute as to whether on partition the share coming into the hands of the assessee is to be taxed in the status of individual or Hindu undivided family has a rather long history. In Pannalal Rastogi [1974] 96 ITR 110 {Patna), a person no less than Untwalia C.J. (as he then was) observed, "the point at issue is not free from difficulty". Starting from Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 (PC), a decision rendered by the Privy Council in 1936, the question has been debated in a large number of cases in various High Courts and the Supreme Court. But as is often said, each case is to be decided on its own facts.
7. Since the Appellate Tribunal has heavily relied on N. V. Narendra-nath's case [1969] 74 ITR 190 (SC) which, as a matter of fact, is the foundation of its decision, it would be only appropriate to know the ratio decidendi of that case. The Supreme Court in N. V. Narendranath's case [1969] 74 ITR 190 observed that the expression "Hindu undivided family" in the Wealth-tax Act is used in the same 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 term "Hindu undivided family" is not defined under the Income-tax Act and, therefore, must have the same incidents and meaning as the one given to it in the context of the Wealth-tax Act). Having said so the court observed (page 193) :
" 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 the two classes of cases where an assessee 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." (emphasis* added).
After quoting the observations of the Judicial Committee in Attorney-General of Ceylon v. A. R. Arunachalam Chettiar [1958] 34 ITR (E.D.) 42 ; [1957] AC 540, that (page 196 of 74 ITR) : "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," the Supreme Court observed at page 197 of the Report that "though in the absence of male issue the dividing coparcener may be properly described in a sense as the owner of the properties, upon the adoption of a son or birth of a son to him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it 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". On this a priori reasoning their Lordships concluded 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.
The decision in N. V, Narendranath's case [1969] 74 ITR 190 (SC) does, at the first instance, seem to support the case of the assessees. There is, however, one salient fact which turns the tables against them. It is that in N. V. Narendranath's case [1969] 74 ITR 190 (SC) no separate share had been allotted to the wife while in these cases, as noticed above, separate shares were allotted to the wives, besides the children. This is evident from the statement of fact at page 198 of the Report (in N. V. Narendranath's case [1969] 74 ITR 190 (SC)) to the effect that "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."
8. It is clear that the Supreme Court was dealing with an entirely different qase. The Appellate Tribunal appears to have been swayed by certain observations made in the judgment in N. V. Narendranath's case [1969] 74 ITR 190 (SC) to the effect, for example, that to constitute a Hindu undivided family it is not necessary that there should be two male members. In N. V. Narendranath's case [1969] 74 ITR 190 (SC), on partition, a share had been allotted to Narendranath who held the same on his own behalf as well as on behalf of his wife and minor daughters. In the present case, the fact that the wife has also been allotted a share, besides the children, makes all the difference. Dealing with a similar case, the Madhya Pradesh High Court in CIT v. Dhannamal [1984] 148 ITR 141 held (page 143) :
"Had the wife not been allotted any share in the partial partition, the matter was simple and there would have been no difficulty in holding that the assessee and his wife constituted a Hindu undivided family."
9. The Madhya Pradesh High Court followed an earlier case in Jeetmal Nagri v. CWT [1984] 148 ITR 139, wherein, on facts similar to those of the present case, the High Court held that the decision of the Supreme Court in N. V. Narendranath's case [1969] 74 ITR 190 had no application.
10. As noticed above, the expression "Hindu undivided family" is to be understood in the same sense as it is understood in the ordinary Hindu law. In Mayne's Hindu Law and Usage (page 575, 13th edition) it has been stated :
"Property which a man takes at a partition will be his separate property as regards those from whom he has severed but will be ancestral property as regards his own male issue. So too, family property vested in the last surviving male member of a coparcenary will be his separate property subject to its becoming at any moment coparcenary property when he has male issue or when an adoption is made to him or to a predeceased coparcener in the family, and subject to the right of maintenance of the other female members of the family. . ."
11. Mulla's Hindu Law (paragraph 223(4), page 248, 16th edition) states:
" The share which a coparcener obtains on partition of an ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently. Such share, however, is ancestral property only as regards his male issue. As regards other relations, it is separate property, and if the coparcener dies without leaving male issue, it passes to his heirs by succession."
12. In N. R. Raghavachariar's Hindu Law, Principles and Precedents, the law has been stated in paragraph 260 at page 222 (8th edition) in these words--
" The share in the ancestral estate which a coparcener gets on partition with his co-sharers is his separate property as against the coparceners from whom he separates, though as against his own male issue who are born after partition or who were born before but who do not get themselves separated from him the property has still the character of ancestral property in which they take an interest by birth,"
13. It is evident from the above statements of law that on the date partition is effected between the assessee and his father and/or brothers or even the son, the property coming into his hands is deemed to be a separate property though liable to become a joint family property when a son is born subsequently or an adoption is made. It may also have the trappings of a joint family property on account of a right to maintenance available to female members of the family. Such is not the case here. In both Tax Case No. 9 of 1982 and Tax Cases Nos. 61 and 62 of 1982, not only the children but the wives also had got separate shares on partition. No son was subsequently born or adopted. The wives having already been allotted shares, they could not claim a right of maintenance and, therefore, had no charge on the property. In such a situation, the property coming into the hands of the assessees must be held to be their separate property and income derived therefrom by them must be assessed in the status of individual and not Hindu undivided family.
14. In Pannalal Rastogi's case [1974] 96 ITR 110 (Patna), relied upon by counsel for the assessee, the family of the assessee at the time of partition consisted of self and wife. It does not appear from the said judgment that there was only inter se partition between the husband and wife. In that view the Division Bench correctly, if I may say so, followed and applied the ratio of the decision in N. V. Narendranath's case [1969] 74 ITR 190 (SC) and held that the assessee should be assessed as Hindu undivided family and not as an individual. This case too, therefore, has no application in the present case.
15. No case has been cited by counsel for the assessee or referred to in the orders of the Appellate Tribunal taking the view that even where on partition a separate share is allotted to the wife, income from the property coming into the hands of the husband is to be taxed as Hindu undivided family. The Tribunal mainly relied on N. V. Narendranath's case [1969] 74 ITR 190 (SC), but the facts of N. V. Narendranath's case [1969] 74 ITR 190 (SC) being different and distinguishable, as indicated hereinabove, the ratio of the decision is of no avail to the assessee in these cases. As the Supreme Court itself observed in that case (passage quoted above), where the property already impressed with the character of joint family property comes into the hands of the assessee as a single coparcener, the question which is 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 his absolute property. I have no hesitation in holding that in these cases on account of allotment of the separate share of the wife and in the absence of any son--born or adopted subsequently--the property did not retain the character of joint family property. It rather "acquired" the character of separate property in the hands of the assessees and income therefrom was liable to be assessed to tax in the status of individual. I may usefully quote the following observations of the Supreme Court in C. Krishna Prasad v. CIT [1974] 97 ITR 493, wherein their Lordships while considering the case of a single individual claiming the status of a Hindu undivided family for the purposes of taxation observed (page 497) :
"In view of the above, it cannot be denied that the appellant at present is the absolute owner of the property which fell to his share as a result of partition and that he can deal with it as he wishes. There is admittedly no female member in existence who is entitled to maintenance from the above-mentioned property or who is capable of adopting a son to a deceased coparcener. Even if the assessee-appellant in future introduces a new member into the family by adoption or otherwise, his present full ownership of the property cannot be affected."
16. In view of what has been stated above, it is unnecessary to deal with the cases cited by Mr. Rastogi. More so, because the facts of those cases were different. In fairness to counsel, however, I would very briefly refer to them.
17. In Surjit Lal Chhabda [1975] 101 ITR 776 (SC) (heavy reliance was placed on this case), the assessee had a wife and one unmarried daughter and no son. His wife and unmarried daughter were entitled to be maintained by him from out of the income of a certain "Kathoke Lodge" which was the separate property of the assessee. On January 26, 1956, the assessee made a declaration that he had thrown the said property into family hotchpot and he would be holding the same as "karta" of the joint family property consisting of himself, his wife and unmarried daughter in order to impress the property with the character of joint family property. The question was whether income received by the assessee from the property was to be assessed in the status of a Hindu undivided family. The Supreme Court rejected the assessee's contention. The court observed in that connection that until a son is born to him the personal law of the assessee regarded him as the owner of the property and income therefrom as his income even after the property was thrown into the family hotchpot. It may appear that the observation "until a son is born" is at a tangent with the observation in N. V. Narendranath's case [1969] 74 ITR 190 (SC) that "there is no warrant for the contention that there must be at least two male members to form a Hindu undivided family as a taxable unit". These observations, however, have to be understood in the fact situation of the two cases. In JV. V. Narendranath's case [1969] 74 ITR 190 (SC) the property was a joint family property of a bigger Hindu undivided family in which the assessee along with wife and daughters got shares on partition. They together constituted a Hindu undivided family. The existence of another male member was not necessary. In Surjit Lal Chhabda's case [1975] 101 ITR 776 (SC) there was no partition. The property was self-acquired pro-perty of the assessee which was sought to be impressed with the character of joint family property on the basis of a "declaration" that it was being thrown in the family hotchpot. It was held that without a son there cannot be joint Hindu family and the character of the property does not become joint family property.
18. In the case of Rajeshwari Prasad [1987] 166 ITR 789 (Patna), the facts were similar to those of the case of Surjit Lal Chhabda [1975] 101 ITR 776 (SC). The property belonged exclusively to the assessee who later claimed the same as belonging to the Hindu undivided family on the basis of a declaration that he had thrown it in the family hotchpot. This court, following Chhabda's case [1975] 101 ITR 776 (SC), held that the property was the individual property of the assessee and could not be taxed in the status of Hindu undivided family.
19. Chander Sen [1986] 161 ITR 370 (SC) was the case of a father dying intestate after partition between himself and the son. The property devolving on the son on his death was held to be his individual property and not the property of the Hindu' undivided family. The case of P. L. Karuppan Chettiar [1992] 197 ITR 646 (SC) falls in the same class of cases.
20. In Shankar Lal Budhia [1987] 165 ITR 380 (Patna) [FB], the assessee had acquired some shares in a company on a partial partition of the Hindu undivided family. Later he acquired some immovable property and filed returns in the status of the individual for a number of years and was assessed as such. On marriage, he claimed the status of a Hindu undivided family. On these facts, the Full Bench of this court held that the status of an individual assessee governed by Hindu law would not automatically change to that of a Hindu undivided family under the Income-tax Act.
21. In R. S. Chidambaram [1994] 209 ITR 531 (Ker) the assessee along with son obtained property on partition of the bigger Hindu undivided family. Subsequently, there was a partition between the assessee and the son. It was held that the property belonged to the assessee as an individual.
22. It would thus appear that all these cases were decided on different set of facts, and, strictly speaking, do not have much relevance in these cases. The plea of the Revenue none the less has to be accepted as already indicated above.
23. The law so far as relevant for the purpose of these cases may be summarised thus. On a partition of a bigger Hindu undivided family the property coming into the hands of the assessee becomes his separate property vis-a-vis other coparceners although it continues to be joint visa-vis his wife and children and he continues to constitute a Hindu undivided family with them, i.e., his wife and children, and, in the absence of the children, with the wife alone. But where on partition separate shares are allotted not only to the children but also to the wife, the existence of the Hindu undivided family comes to an end. And the property in the hands of the assessee becomes separate property and the income therefrom is liable to be taxed in the status of individual until another son is born or adopted in future.
24. In the above premises, the Tribunal was not correct in holding that the assessees should be assessed in the status of a Hindu undivided family. The questions referred for the opinion of this court are accordingly answered in the negative, that is, in favour of the Revenue and against the assessees. I will make no order as to costs.
25. Let a copy of this judgment be sent to the Income-tax Appellate Tribunal, Patna Bench, Patna.
Aftab Alam, J.
26. I agree.
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