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1997 DIGILAW 477 (MAD)

State of Tamil Nadu v. P. Ganesa Odayar

1997-04-07

K.A.THANIKKACHALAM, N.V.BALASUBRAMANIAN, S.M.ABDUL WAHAB

body1997
Judgment :- K. A. THANIKKACHALAM, ACTG. C. J. A Division Bench of this court referred the following question for the opinion of the Full Bench "Whether a father constituting a family with his wife and children, can by a settlement create a right in favour of his daughters so as to exclude the properties covered by such a settlement deed from the agricultural income-tax ?" The abovesaid question arose from the following facts. One Muthusamy Odayar of Pillarnatham village was the grandfather of the assessee. The assessee's father was one Palanisamy Odayar. Muthusamy Odayar had admittedly some ancestral property. Subsequently, from the income of that ancestral property as also from the personal earnings of the grandfather, father and the assessee, some further properties were acquired. The original ancestral properties as well as the subsequently acquired properties were the subject-matter of partition between Muthusamy Odayar, Palanisamy Odayar and the assessee in an oral partition on August 5, 1954, and each one of them was thereafter enjoying the properties allotted to them separately. To confirm the oral partition, a partition deed came to be executed on August 7, 1959. According to the said partition deed, Muthusamy Odayar got 27.26 acres, Palanisamy Odayar 25.15 acres and the assessee got 37.98 acres. Certain lands were given away to five sisters of the assessee. Out of the lands got by the partition, the assessee settled 13.96 acres in the name of his minor daughter, Parimalam, and 13.34 acres in the name of another minor daughter, Vimala, under a document dated November 25, 1959. The settlement deed stated that the settlements have been made by the assessee for the purpose of providing for the education, marriage, etc., of the minor daughters. The deed also stated that the title and possession have been given to the settlees with immediate effect. Muthusamy Odayar settled the properties obtained by him in the partition in a settlement deed dated May 15, 1960, under which an extent of 13.10 acres had been settled in favour of his brother, Appadurai Odayar, and an extent of 14.21 acres in favour of his wife, Subbammal. Subsequent to these documents, the grandfather Muthusamy Odayar, grandmother, Subbammal, and the father, Palanisamy Odayar, have all died. The assessee's father, Palanisamy Odayar, appears to have acquired 3.50 acres before his death. Subsequent to these documents, the grandfather Muthusamy Odayar, grandmother, Subbammal, and the father, Palanisamy Odayar, have all died. The assessee's father, Palanisamy Odayar, appears to have acquired 3.50 acres before his death. The assessee also acquired 9.38 acres and 9.29 acres and held them in the benami names of Anthonisamy and Natesa Odayar. Having regard to the lands in the actual possession and enjoyment of the assessee, the assessment came to be made by the assessing authority treating the assessee as an individualOn these facts, the assessee, in the assessment year 1977-78, before the Assessing Officer submitted that inasmuch as there was settlement of the properties in the individual names of the members of the joint family, the income derived from the lands settled on the members of the Hindu undivided family cannot be assessed in the hands of the assessee. The assessee filed a return in form No. II, furnishing an income of Rs. 7, 000 and declaring his status as Hindu undivided family. The Agricultural Income-tax Officer made an assessment treating the status as individual and determining the net income at Rs. 55, 875. In making the assessment, he included the income from lands which were settled by the appellant, who is the respondent herein, in favour of his minor daughters and lands standing in the name of the grandmother of the appellant, the assessee, herein. There was an appeal before the Appellate Assistant Commissioner of Agricultural Income-tax, which was dismissed ultimately. Thereafter, the matter was taken up before the Agricultural Income-tax Appellate Tribunal. The assessee contended that the income from the lands of the assessee's minor daughters and the lands in the name of the assessee's grandmother should not be included in the hands of the assessee. It was submitted that the authorities should have determined the status of the assessee as Hindu undivided family following the decision of the Tribunal in the case of the same assessee in the earlier assessment years. It was further submitted that the provisions of section 9(2) of the Act shall not be applicable to the facts of this case. It was submitted that the authorities should have determined the status of the assessee as Hindu undivided family following the decision of the Tribunal in the case of the same assessee in the earlier assessment years. It was further submitted that the provisions of section 9(2) of the Act shall not be applicable to the facts of this case. According to the assessee, the lands in the name of the grandmother was a separate unit of assessment and the assessee's share was only a fractional one and it should be considered in the individual status of the assesseeConsidering the facts of this case the Tribunal, following the earlier orders in the case of the same assessee in the earlier assessment years, held that (i) the status of the assessee is a Hindu undivided family and not individual ; (ii) that the income from the lands standing in the name of the minor daughters cannot be clubbed with that of the assessee, and (iii) that the appellant, the assessee herein, will be assessable as an individual on 1/21 share of the property of the grand mother and the remaining 20/21 share is not assessable in the hands of the assessee as individual or as a Hindu undivided family. Accordingly, the Tribunal set aside the assessment and remanded the matter back to the Agricultural Income-tax Officer for appropriate computation of the income in respect of the lands held by the assessee As against this order, the State preferred T. C. No. 1226 of 1979. When this tax case came up for consideration, the Division Bench expressed the view that in the decision in State of Tamil Nadu v. P. Ganesa Udayar 1988 (172) ITR 199, 1987 (63) CTR 217, this court has not taken into account that the presumption that a certain person is the karta of a undivided family is a concept with respect to the family in which more than one person had a share in an undivided property and that there is no scope of a certain person being a karta with respect to the properties which exclusively belong to him or in a family in which the others who live with him do not have any interest in the property of their own, except spes successionis. This was a doubt expressed by the Division Bench, which led to the reference to the Full Bench An answer to the question referred before the Full Bench finds a place in the judgment of the Supreme Court in Gowli Buddanna v. CIT 1966 AIR(SC) 1523, 1966 (60) ITR 293, 1966 (3) SCR 224 , wherein the Supreme Court has held as under: "That property of the joint family, did not cease to belong to the family merely because the family was represented after A's death by a single coparcener B, who possessed rights which an owner of property might possess, and the income received therefrom was taxable as income of the Hindu undivided family There need not be more than one male member to form a Hindu undivided family as a taxable entity under the Income-tax Act. The expression 'Hindu undivided family' in the Income-tax Act is used in the sense in which a Hindu joint family is understood under the personal law of the Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members Under section 3 of the Income-tax Act not a Hindu coparcenary but a Hindu undivided family is one of the assessable entities. A Hindu joint family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters. 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 joint family ; it includes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grandsons, and great grandsons of the holder of the joint property for the time being Similarly, while considering the provisions of sections 4(1), 8, 19, Sch., class I of the Hindu Succession Act, 1956, the Supreme Court in the case of CWT v. Chander Sen 1986 AIR(SC) 1753, 1986 (161) ITR 370, 1986 (2) Scale 75 , 1986 (3) SCC 567 , 1986 (3) SCR 254 , 1986 (58) CTR 119, 1986 (27) TAXMAN 330, 1986 (2) TLR 1328, 1986 TaxLR 1328, 1986 SCC(Tax) 641, 1986 (58) CTR(SC) 119, held as under: Held, affirming the decision of the High Court, that since C had inherited the amount standing to the credit of his father, R, from whom he had separated by partition in relation to that asset, under section 8 of the Hindu Succession Act, 1956, that amount belonged to C in his individual capacity and did not constitute an asset of the Hindu undivided family of C and his sons. That amount could not be assessed to wealth-tax in the hands of that family and the interest credited to that amount was allowable as a deduction in computing the business income of that family. "It was further held " It would be difficult to hold today that property which devolved on a Hindu under section 8 of the Hindu Succession Act would be Hindu undivided family property in his hands vis-a-vis his own son; that would amount to creating two classes among the heirs mentioned in Class I, the male heirs in whose hands it will be joint Hindu family property vis-a-vis their sons and female heirs with respect to whom no such concept could be applied or contemplated. The express words of section 8 of the Act cannot be ignored and must prevail. The preamble to the Act reiterates that the Act is, inter alia, to 'amend' the law. With that background, the express language which excluded son's son but included son of a predeceased son cannot be ignored. The express words of section 8 of the Act cannot be ignored and must prevail. The preamble to the Act reiterates that the Act is, inter alia, to 'amend' the law. With that background, the express language which excluded son's son but included son of a predeceased son cannot be ignored. " So also in the case of CIT v. P. L. Karuppan Chettiar 1993 (S1) SCC 580, 1992 (197) ITR 646, 1993 (109) CTR 317, the Supreme Court while considering section 8 of the Hindu Succession Act, 1956 In view of the foregoing decisions, we have got to hold that the lands in the name of the father of the assessee, were inherited by the assessee, as the son of his father, and the income derived from such land cannot be assessed in the status of a Hindu undivided family because under section 8 of the Hindu Succession Act, 1956, the property inherited from the father will be the individual separate property of the assessee Accordingly, we hold that the assessment had to be made on the Hindu undivided family consisting of the assessee, his wife and children in respect of the income derived by him from (a) properties received on partition among his father, his grandfather and himself, (b) properties acquired from income from properties obtained on partition, and (c) properties acquired by the assessee on the death of his father are to be assessed as his individual properties. The properties settled by the assessee on his minor children should be deemed to have been made by him in his capacity as the karta of the Hindu undivided family consisting of himself, his wife and children. The income from such properties could not be included in that of the Hindu undivided family under the provisions of section 9(2). The income from properties received by the assessee from his grandmother was assessable in his hands as his individual incomeAccordingly, the Assessing Officer is directed to assess the income of the assessee in the light of the directions given by us in this order. This tax case is allowed to the abovesaid extent. However, there will be no order as to costs.