S. Periannan v. Commissioner of Income Tax — 1990 DIGILAW 1172 (MAD)

Judgment :- SOMASUNDARAM J. In these tax cases, at the instance of the assessee, the following question of law is referred to this court under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for its opinion. "Whether, on the facts and in the circumstances of the case, the property 'Grove Estate' belongs to the assessee-Hindu undivided family and, consequently, the income arising therefrom should be considered as the income of the Hindu undivided family for the assessment years 1975-76 and 1976-77 ?" * The assessee is a Hindu undivided family of which the karta is S. Periannan. The said Periannan is the son of one Sathappa Chettiar. On April 13, 1955, there was a partition in the Hindu undivided family of Sathappa Chettiar and his sons, Narayanan and Periannan. At that time, his sons Narayanan and Periannan were both minors, aged 12 and 1, respectively. An application was made on September 14, 1955, for the recognition of the partition under section 25A of the Indian Income-tax Act, 1922. The Income-tax Officer declined to recognise the partition by his order dated March 29, 1956. Sathappa Chettiar preferred 1. T. A. No. 214 of 1956-57 before the Appellate Assistant Commissioner, Tiruchi, who, by his order dated January 21, 1957, accepted the claim of partition and directed the Income-tax Officer to make an assessment on that basis. As a result of the partition dated April 13, 1955, the father, Sathappa Chettiar, became liable to pay to Periannan a certain sum of money. As Periannan was not married, he was being assessed in the status of an individual in respect of the income derived by him from the properties allotted to him on the partition. Periannan got married on June 9, 1974. Before his marriage, Periannan, along with his brother Narayanan, purchased a coffee estate known as "Grove Estate" under a sale deed dated June 20, 1973, for a sum of Rs. 5, 23, 000. Out of the said sum of Rs. 5, 23, 000, Rs. 1, 00, 000 was paid as advance on May 15, 1973, and the balance of Rs. 4, 23, 000 was paid by draft on the Bank of Madurai at the time of registration. The purchase was joint purchase by the two brothers, both making equal contributions. 5, 23, 000. Out of the said sum of Rs. 5, 23, 000, Rs. 1, 00, 000 was paid as advance on May 15, 1973, and the balance of Rs. 4, 23, 000 was paid by draft on the Bank of Madurai at the time of registration. The purchase was joint purchase by the two brothers, both making equal contributions. For the assessment year 1975-76, Periannan claimed that the income derived from the "Grove Estate" which amounted to Rs. 45, 148 should not be considered as the income of the assessee-Hindu undivided family on the ground that the said estate was the individual property of Periannan, having been purchased with his separate funds. Periannan claimed that the consideration for the purchase of the estate was met by borrowing moneys from his father and the Bank of Madurai. The Income-tax Officer held that the father, Sathappa Chettiar, was owing to Periannan a sum of Rs. 2, 77, 850 as on April 13, 1973, and that a sum of Rs. 50, 000 was withdrawn from him for the purpose of paying the advance for the purchase of the "Grove Estate". Consequently, the Income-tax Officer held that since the sum of Rs. 50, 000 paid as advance for the purchase of the coffee estate represented ancestral property in the hands of Periannan, the estate purchased under the sale deed dated June 20, 1973, should also be considered as belonging to the assessee-Hindu undivided family. Thus, by his order dated February 20, 1976, the Income-tax Officer determined the total income at Rs. 66, 630 and, in doing so, he included Rs. 45, 148 being the assessee's share of income from the "Grove Estate". Similarly, for the assessment year 1976-77, a sum of Rs. 70, 940, being the assessee's share of the income from the above said estate, was included in the assessment of the assessee Hindu undivided family and, by an order dated February 25, 1977, the total income was determined as Rs. 90, 030. Against the orders of the Income-tax Officer, the assessee preferred appeals to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the case of the assessee and held that the estate could not be said to have been purchased out of the funds received on partition and hence should be considered as belonging to Periannan and Narayanan in their individual capacity. The Appellate Assistant Commissioner accepted the case of the assessee and held that the estate could not be said to have been purchased out of the funds received on partition and hence should be considered as belonging to Periannan and Narayanan in their individual capacity. Consequently, the appeals filed by the assessee were allowed by the Appellate Assistant CommissionerAggrieved by the, order of the Appellate Assistant Commissioner, the Department filed appeals (I. T. A. Nos. 973 and 3009/MDS/77-78) before the Tribunal. The Tribunal, by its order dated December 19, 1978, held that the Grove Estate should be considered as belonging to the assessee-Hindu undivided family and consequently, the income arising therefrom is to be considered as the income of the assessee-Hindu undivided family and, accordingly, allowed the appeals preferred by the Department. Aggrieved by the order of the Tribunal, the assessee obtained a reference under section 256(1) of the Act to this court for the purpose of opinion on the question of law referred to above The question we have to decide in these tax cases is whether the Grove Estate purchased by Periannan along with his brother, Narayanan, on June 20, 1973, is joint family property belonging to the assessee-Hindu undivided family or whether it is the self-acquired property of Periannan. As observed in Mayne's Hindu Law, 12th Edition, at page 552, "the whole doctrine of self-acquisition is briefly stated by Yajnavalkya as follows: 'Whatever is acquired by the coparcener himself, without detriment to the father's estate, as a present from a friend, or a gift at nuptials, does not appertain to the co-heirs. Not shall he who recovers hereditary property which has been taken away give it up to the coparceners, nor what has been gained by science'." * As pointed out by a Division Bench of this court in CIT v. K. S. Subbiah Pillai (HUF) 1984 (147) ITR 87, 1984 (16) TAXMAN 440 it is one of the fundamental principles of Hindu law that property acquired by the karta or a coparcener with the aid or assistance of joint family assets is impressed with the character of joint family property. To constitute self-acquired property in the hands of the karta or a coparcener, it should not have been acquired with the assistance or aid of joint family property. To constitute self-acquired property in the hands of the karta or a coparcener, it should not have been acquired with the assistance or aid of joint family property. In the above decision, the Division Bench, after referring to the various decisions of the Supreme Court on this aspect, has observed as follows (p. 97) "From the above decisions, the principle that emerges is that if the remuneration or income that is received by a coparcener or the karta of a Hindu undivided family is being received with the aid and assistance of the joint family funds and to the detriment or at the expense of the joint family assets, then it would be the income of the Hindu undivided family. That will be so, notwithstanding the fact that the karta or the coparcener renders some service. On the other hand, if it is essentially for the services rendered by the coparcener or the karta and if it is not received because of the investment of the joint family funds in the business or to the detriment or at the expense of the joint family assets, then, it would be his individual income." * A Division Bench of the Allahabad High Court, in Mangal Singh v. Harkesh, 1958 AIR(All) 42 dealing with the same question, observed as follows (p. 47) "The general rule laid down by these cases which is common to Mitakshara and Dayabhaga both, therefore, appears to be that whatever may be the extent of the contribution of the acquiring member himself out of his self-acquired funds, if he takes the aid of any portion of joint or ancestral property in acquiring the property, however small that aid may be, the property so acquired assumes the character of joint family property and cannot be claimed by him as a self-acquisition. In this view of the matter, the extent of his contribution or that of the family fund becomes immaterial. If any help is taken from the family property, it is enough to make the self -acquired property the property of the family." * In the light of the settled position of law as seen above, let us examine whether the estate acquired by Periannan on June 20, 1973, is his separate property or the joint family property belonging to the assessee-Hindu undivided family. The estate was purchased on June 20, 1973. The estate was purchased on June 20, 1973. At the time of the purchase of the estate, Periannan was not married and he got married only on June 9, 1974. It is only after his marriage, the assessee-Hindu undivided family came into existence. In the instant case, on April 13, 1955, there was a partition in the Hindu undivided family of Sathappa Chettiar and his sons, Periannan and Narayanan. As a result of the abovementioned partition, Sathappa Chettiar became liable to pay to his son, Periannan, a sum of Rs. 2, 77, 850. Out of the said sum of Rs. 2, 77, 850, sum of Rs. 50, 000 was withdrawn by Periannan for the purpose of paying the advance for the purchase of the Grove Estate. Since the sum of Rs. 50, 000 paid as advance for the purchase of the estate represented the ancestral properties in the hands of Periannan and the estate was purchased with the aid of the said sum of Rs. 50, 000, the estate acquired should be considered as the joint family property of Periannan. When Periannan acquired a family on his marriage on June 9, 1974, the estate acquired by Periannan with the aid of the ancestral properties would automatically become the property of such family. The facts of the case clearly go to show that the sum of Rs. 50, 000 which was utilised by Periannan for paying the advance for the purchase of the estate formed part of the funds allotted to Periannan on the partition that took place between his father and brother, Narayanan, on April 13, 1955, and, therefore, the estate in question would certainly become the property of the assessee-Hindu undivided family on its coming into existenceLearned counsel for the assessee submitted that though the sum of Rs. 50, 000 had been made available by Sathappa Chettiar from out of the amounts due by him to Periannan under the partition, subsequently, after Periannan got married and the assessee-Hindu undivided family came into existence, the same along with further amounts made available for buying the estate was debited to the account of Sathappa Chettiar in the books of the assessee-Hindu undivided family and, therefore, it cannot be said that there was a detriment to the funds of the assessee-Hindu undivided family in the matter of acquiring the Grove Estate. We are unable to accept the above contention of learned counsel for the assessee. When once the estate had become the property of the assessee-Hindu undivided family on its coming into existence, there could be no change in its character by reason of the fact that, subsequently, in the books of the assessee-Hindu undivided family, the account of Sathappa Chettiar was debited with the amounts which have been drawn for the purchase of the estate. In these circumstances, the Tribunal rightly held that the Grove Estate should be considered as belonging to the assessee-Hindu undivided family We, therefore, answer the question referred to us in the affirmative and against the assessee. The Revenue will be entitled to the costs of these references. Counsel's fee is Rs. 500 (one set).