Gujarat High Court
Arvind Chandulal vs Commissioner Of Income-Tax, Gujarat on 18 August, 1981
JUDGMENT Divan, C.J.
1. In this case at the instance of the assessee, the following question has been referred to us for our opinion by the Tribunal:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the correct statute of the assessee is 'individual' as determined by the Income-tax Officer, and not 'HUF' as claimed by the assessee ?"
2. In the present reference, we are concerned with assessment year 1968-69 and 1969-70, the relevant previous year being Samvat years 2023 and 2024. Samvat year 2023 was from November 30, 196, to November 2, 1967, and Samvat year 2024 was for November 3, 1967 to October 20, 1968.
3. The facts leading to this reference are that the was an HUF of Shri Manilal Chokshi and in that family, in the year 1932, there were two coparceners,namely, Manilal himself and his son Chandulal Manilal. Manilal's wife Bai Chanchal was also a members of that HUF. A partition took place between Manilal and his son Chandulal on October 22, 1932. Thereafter these two separated members carried on family business in partnership in the name and style of Manilal Shamaldas. On December 4, 1937, a son Arvind was born to Chandulal, and Arvind Chandulal is the assessee before us. Chandulal died on December 23, 1941. On March 26, 1942, a family arrangement document was executed and to this family arrangement the parties were Manial, bai chanchal, the wife of Manilal, and Bai Mani, the widow of Chandulal who was a party to the family arrangement for herself and as the natural guardian of minor Arvind. Manilal died on April 21, 1942, and Bai chanchal, Manilal widow, died on June 18, 1942. It is not in dispute that the assessee Arvind got married on February 8, 1960, and on September 12/13, 1961, one daughter was born to Arvind. Thereafter, two more daughters were born and on September 20, 1968, a son was born to Arvind. Thus, Arvind son was born during the previous year relevant to the assessment year 1969-70.
4. Under the family arrangement, all the properties belonging to or owned by the different family members who were parties to the family arrangement, were profits together and it is s contended on behalf of the Revenue that all these properties had come to Arvind as his absoulate property. For the assessment year 1940-41 to 1955-56, assessment was made on Manilal Shamaldas HUF an d, for the assessment year 1950-51 in connection with Manilal Shamal das HUF, the Tribunal delivered a judgment on December 3, 1955. From the assessment year 1956-57 to the assessment year 1967-68, Arvind Chandulal was assessed in the states of an "individual" so far as income-tax was concerned and no appeal was preferred against this decision to assessee in the status of an individual. For the assessment year 1968-69 and 1969-70, the assessee claimed the status as HUF in the assessment proceedings but this claim was rejected by the ITO following his order passed earlier in the assessment year 1967-68. The ITO assessed Arvind Chanduala in the start of an individual. The assessee went in appeal against the order of the ITO and the AAC who heard the appeal allowed the appeal and accepted the contention of the assessee and directed that the correct status of the assessee was that of an HUF and not that of an individual.
5. Against the decision of the AAC holding that the status of Arvind Chandulal for the two assessment year under consideration was that of an HUF and not that of an individual, the Revenue went in appeal for to the theses years to the Income-tax Appellate Tribunal. The Tribunal found that the whole question as toe the status in this case turned upon the interpretation of the family arrangement, because the property in regard to which the question arose was the property acquired by the assessee under the assessee and the Revenue and the decisions relied upon in this connection and the family arrangement document, the Tribunal came to the conclusion, firstly that there was by the family arrangement, in fact no reunion and that such reunion was not possible, and secondly that the earlier order of the Tribunal in the case of Manilal Shamaldas did not deal with the adjudication of the family arrangement and there was no pronouncement as to whether it amounted to a reunion remitting the members to their former status of an HUF as contended by the assessee. The Tribunal also held that the was nothing to show that the properties which the assessee acquired under the family arrangement were properties which had been acquired under the original partition. It also rejected the alternative contention that the property received by the assessee was ancestral property and, therefor, it became the property of the HUF in view of the finding that the property had been acquired under the family arrangement and there was nothing to show that the property had any ancestral nucleus. The Tribunal accepted the department contention that the assessee was not entitled to the status of an HUF and it, therefore, allowed the appeal and set aside the order of the AAC and restored the order of the ITO. Thereafter, at the instance of the assessee, the question hereinabove set out has been refereed to us for our opinion.
6. In order to understand the rival contentions of the parties, it is necessary to appreciate the proposes of arriving at the family arrangement and the legal effect of such a family arrangement. In Halsbury's Laws of England, 4th Edn., Vol. 18 at 135, para. 301 mentions:
"A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefits of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour."
7. It has been pointed out by Halsbury that though the agreement may be implied, it is more usual to embody or to effectuate the agreement by a deed to which the terms "family arrangement" is applied. In the same volume of Halsbury at p. 137 para. 304 states:
"Family arrangements are governed by principles which are not applicable to dealings between strangers. When deciding the rights of parties under a family arrangement or a claim to upset such an arrangement, the court considers what in the broadest view of the matter is most in the interest of the family, and has regard to considerations which, in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would be fatal to the binding effect of family arrangement. Conversely, an intention to create a legally enforceable contract may be negatived more readily where the parties to an arrangement are members of the same family than where they are not."
8. In para. 305 at p. 138, it has been pointed out by Halsbury:
"Considerations which will lead a court to support a family arrangement are that as a result of the family arrangement disputes are avoided in the family; the honour of the family is safeguarded or various obligations, morally binding on a family, are provided for, or family property is continued in the family."
9. In Mulla's Hindu Law, 14th Edn., at p. 238, it has been pointed out:
"The court leans strongly in favour of family arrangement to bring about harmony in a family and do justice to its various members and avoid in anticipation further disputes. In the case of a family arrangement it is not necessary that the should have been any previous dispute as to the right of the parties.
The expression 'family' in the context of family arrangement is not to of persons who are recognized in laws as having a right of succession or having a claim to a share in the property in disputs. It is sufficient if the arrangement in between near relations."
10. In para. 248B at p. 311 of Mulla's Hindu Law, is has been pointed out:
"Family arrangement or family settlement as it is sometimes termed, generally meets with approval of the court and the court alway leans in favour of a transaction relating to any such arrangement which ensures peace and goodwill amount the family members. "This does not rest on any special rule of Hindu law but flows from general principle and policy of law.... Though conflict of legal claims in present or in futuro is general regarded as a condition of the validity of a family arrangement it is not necessarily so. Even bona fide dispute, present or possible, which may not involve further claims will suffice..... Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement the transaction is not the creation of an interest. In such an arrangement, ordinarily, each party takes a share or interest in the property by virtue of the independent title which is admitted to that extent by the other parties. But very party who takes benefit under it need not necessarily be shown to have, under the law, a claim to a shares in the property. All that is necessary to show is that the parties are related to each others in some way and have a possible claim to even a semblance of a claim or some other ground as, say affection."
11. The learned Advocate-General on behalf of the assessee hads urged the following five submission before us. He made it clear that each one of these submission are in the alternative and without prejudicial to the other. His first contention was that by this family arrangement of March 26, 1942, there was in effect a reunion between Manilal and Bai Chanhal on the one hand and Arvind a nd Bai Mani on the other and after the reunion the properties have been partitioned out amongst members of the reunited family. He, therefore, contended under his first submission that what the assessee Arvind Chandulal got as a result of the family arrangement was ancestral and joint family property and, therefore, his status was that of an HUF. The second submission which is in alternative to the first contention and an alternative to the rest of the contentions, was that the family arrangement of March 26, 1942, amounted to cancellation of the partition which was arrived at between Manila and Chandulal on October 20, 1932, and the parties, namely, Manilal's branch consisting of Manilala and Bai Chanchal and Chandulal's branch consisting of Arvind Chandulal and his mother Bai Mani, were restored to the position which prevailed prior to October 20, 1932, namely, the position of jointness, and therefor, as a result of this family arrangement, whatever properties came to him in his capacity as a members of an HUF. In any even, according to the learned Advocate-General, there was a readjustment of the rights of the respective parties to the family arrangement by this arrangement of 1942 and in the light of the readjusted right, the parties were relegated to the position that prevailed prior to October 20, 1932, namely, the status of a Hindu joint family. The third submission of the learned Advocate-General was that as a result of the family arrangement of March 26, 1942, there was a throwing of the properties into a common hotchpot by the persons who were parties to the family arrangement and thereafter the properties thrown in the common hotchpot of the HUF were partitioned amongst the different persons as shown in the family arrangement and, thereafter the properties coming to Arvind Chandulal under the family arrangement were properties of an HUF. The fourth submission of the learned Advocate-General was that a property, otherwise an HUF property, does not cease to be as such because it has been allotted under a family arrangement if the character of the property prior to the family arrangement was that of an HUF property. The fifth and the last submission of the learned Advocate-General was that if a members of the HUF utilises the property of an HUF by pooling it with the property of to there and in the process of pooling causes a detriment to the HUF, and, in exchange, that member gets some property, it is not open to him to says that the property which he gets from the pool is not an HUF property.
12. In support of his general submissions regarding family arrangement and their effect, the learned Advocate-General had relied upon two decision of the Supreme Court. The first decision is in Maturi Pullaiah v. Maturi Narasimham, AIR 1966 SC 1836. In para. 9 of the judgment at p 1839 of the report, Subba Rao J., as he then was speaking for the Supreme courts, after citing the passage from Halbury's Laws of England which we have set out hereinabove, observed (p. 1839):
"This passage indicates that even in England, Courts are averse to disturb family arrangement but would try to sustain them on broadest consideration of the family peace and security. This concept of a 'family arrangement' had been accepted by Indian courts but has been adapted to suit the family set up of this country which is different in may respects from that obtained England As in England so in India, courts have made every attempt to sustain family arrangement rather than to avoid it, having regard to the broadest consideration of family peace and security."
13. Again, in Kale v. Deputy director of Consolidation, AIR 1976 Sc 807, the Supreme Court had dealt with the legal position regard it family arrangement. Fazal Ali J., speaking for himself and Krishan Iyer J. had at p. 812, cited the following passage from Kerr on Fraud:
"The principles which apply to the case of ordinary compromise between strangers, do not equally apply to the case of compromises in the nature of family arrangement. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend."
14. According to the Supreme Court the object of such arrangement is to protect there family from long drawn litigation or perpetual strifes which mate the unity and solidarity of the family and create hatred and bad blood between the various members of the family. Subba Rao J., observed (p. 812):
"Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and, therefore, of the entire country, is the prime need of the hour. A family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is undoubtedly a milestone in the administration of social justice."
15. One of the proposition which Fazl Ali J., laid down regarding family arrangement was that the members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if on of the parties to the settlement had not title but under the arrangement the other party relinquishes all its climes or title in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must but assumed and e family arrangement will be upheld and the courts will fire no difficulty in giving assessment to the same, and it was pointed out that even if bona fide disputes, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement. In para. 24 at p. 817 of the report it has been pointed out that the Supreme Court has also clearly laid down that a family arrangement being binding on the parties to the argument clearly operates as an estoppel so as to preclude any of the parties who have taken advantage under the agreement from revoking or challenging the same. And in para. 19 at p. 815, it has been summarised as follows:
"Thus it would appear from a review of the decision analysed above that the court has taken a very liberal and broad view of the validity of the family settlement and have always tried to uphold it and maintain it. The central idea in the approach made by court is that if by consent of parties a matter has been settled, it should not be allowed to be reopened by the parties to the agreement on frivolous or untenable grounds."
16. Taking up the contentions urged on behalf of the assessee by the learned Advocate-General, we will first consider his argument that the family arrangement of March 26, 1942, amounted to reunion between the branches of Manilal and Chandulal. The original partition of October 22, 1932, was arrived at between two coparceners of the family, namely, Manilal and Chandulal and After Chandulal's death, Chandulal's branch consisting of Bai Mani and Arvind was represented by Bai Mani at the time where Bai Mani was party to the family arrangement for herself and as natural guardians of minor Arvind. On this basis, it was contend that the parties to the family reunion were the same as the parties to the original agreement, namely, Manilal who was still living at the item of the family arrangement of March 26, 1942, and Chandulal branch. Now the law regarding reunion has been thus stated in Mulla's Hindu Law, 14th Edn., at p. 430:
"A reunion in estate properly so called can only take place between persons who were parties to the original partition. It would appear from this that a reunion can take place between any persons who were parties to the original partition. Only males can reunite. The commentators, however, are not unanimous this point. According to the Mitakshara, the Dayabhaga (Bengal school), and Smriti Chandrika (Madras school) a members of a joint family once separated can reunite only with his father, brother or paternal uncle, but not with any other relation, as for instance, paternal grandfather or paternal uncles son, though such relation was a party to the original partition. According to the Vivada Chintamani (Mithila school) and the Mayukha (which is the paramount authority in Gujarat, the island of Bombay and northern Konkan), a person may reunite with any relation who was a party to the original partition.
No writing is necessary for a reunion. Even persons who are parties to a registrar deed of partition may reunite by an oral agreement.
The leading text on the subject is that of Brihaspati, which runs as follows:
'He who being once separated dwells against through affection with his father, brother or paternal uncle, is termed reunited."
'The conflict of opinion among the commentators has arisen from the fact that some commentators regard the list given in the above text as exhaustive, while others regard it as merely illustrative."
17. In para. 343 it has been pointed out that the effect of a reunion so the remit the reunited members to their formers status as members of a joint Hind family. Similar in Raghavachariar's Book on Hindu Law, vol.I, at p. 435,it has been pointed out :
"If a joint family separates, the family or any members of tits may agree to reunite as a joint Hindu family but such a reuniting is of very rate occurrence, and when it happens, it must be strictly proved as any other disputed fact requires to be proved. just as there is a presumption of jointness until a partition is proved, so also, after a partition is established, there is a presumption against a reunion, and the burden is on those alleging a reunion to establish not only that the parties, already dividend, lived or trace to gather, but that they did so with the intention of thereby altering their divided status into a joint status with all the usual incident of jointness in estate and interests. Mere jointness in residence, food and worship does not necessarily connote reunion, in the same way as a separation in these respect is not conclusive proof of partition."
18. In para. 367 at p. 436, Raghavachariar points out:
"The text of Brihaspati on this question is as follows: 'He who being once separated dwells against through affection with his father, brother, or paternal uncle, is termed reunited. " Vachaspati and the Mayukha take the view that even persons other than those mentioned by Brihaspati may reunite, but Mayukha adds a qualification that a reunion can only be between persons who were parties to the period partition. On this question there is the i observations by the Privy Council in Balabux v. Rukhmabai [1903] LR 30 IA 130; [1903] ILR 30 Cal 725; A reunion in estate properly so called can only taken place between persons who were parties to the original partition." There is no qualification here that there can be a reunion only with persons mentioned in the text Brishapati. This text, however, has been treated as exhaustive and restrictive and not merely illustrative in Bangle and Southern Indian, but there Bombay High Court adopts the view of the Mayukha."
19. It is true that in Ram Narain Chaudhry v. Pan Kuer [1935] LR 62 IA 16, AIR 1935 PC 9, the Privy Council has approved the view of the Patan High Court regarding the text of Mitakshara and observed (p. 11 of AIR):
"In their Lordships' opinion the text of the Mitakshara is clear and unambiguous and excludes recourse to other authorities, and they would only add that, in their opinion, para 2 makes clear that the parties to the reunion must have eye parties to the original partition, and that, when para 3 states 'that cannot take place with any person indifferently', it is intended to place a further restriction within a still narrower limit than that prescribed by para 2. In this view if is difficult to see how the persons expressly named can be merely illustrative, or, indeed, what class they can illustrate."
20. However, since we are concerned with the case arising from Gujarat where Mayukha is the final authority on propositions of Hindu law, we will abide by the decision and follow the view as explained by the Bombay High Court as far back as 1865 in the case of Vishvanath Gangadhar v. Krishnaji Ganesh [1866] 3 Bom HC AC 69. In that case, Couch C.J. Observed at p. 75 after consideration the texts of Mitakshara and Vyavahara Mayukha:
"It appears to use that the meaning of the passage from Brihaspati which it the foundation of law is, that the reunion must be made by the part's, or some of them, who made the separation. If any of their descendants think fit to unite, they may do so; but such a union is not a reunion in the sense of the Hindu law, and does not affect the inheritance.'
21. Thus, it is clear that if the descendants of Chandulal, namely, minor Arvind, acting through his natural guardian Bai Mani, and Manilal chose to reunite, it was open to the to do so but such a union was not a reunion in the senses of the Hindu law and would not affect the right of inheritance from the point of view of the Hindu law of undivided Hindu family. Therefore, in the light of this decision of the Bombay High Court, it is clear that there was no reunion as a realist of the family arrangement of March 26, 1942, in the sense that the status quo prior to the partition of October 22, 1932, was restored by this family arrangement.
22. On this aspect of the reunion, the learned Advocate-General has drawn out attention to the decision of there Privy Council in Balabux v. Rukhmabai [1903] LR 30 IA 130; ILR 30 Cal 725. There the Privy Council observed; reunion property so called can taken place between persons who were parties to the original partition, and quaere, whether an agreement can be made for that purposes by or on behalf of a minor. At p. 136 Lord Davey delivering the opinion of the Privy Council observed after citing the above test of Brihaspati (see pp. 734, 735 of ILR 30 Cal):
"It is difficult also to see how an agreement for that purpose could have been made by or on behalf of the appellant during his minority."
23. In V. N. M. Arunachala Nadar v. CEPT [1962] 44 ITR 352 (SC), the question of family reunion was considered by the Supreme Court at p. 357:
"Whether or not in law there could have been a reunion between the appellant and his minor sons it is unnecessary of us to decided the present case. In Balabux v. Rukhmabai, [1903] LR 30 IA 130, the Privy Council no doubt had observed that no agreement for a reunion of behalf of a separated minor coparcener could be made by his father or mother as his guardian; but as according to Mayne it would be open to the father or mother as his guardian to effect separation on behalf of the minor coparcener, it would be equally open to the father or mother as has guardian to agree to a reunion on behalf of the minor. However, we do not proper to pursue this matter any further because for the decision of the present appeals it is unnecessary to decide this question."
24. The passage from Mayne is to be found at p. 570 of the 11th Edn. of Mayne's Treaties on Hindu Law, and the passage at p. 570 is as follows;
25. It would seen from an observations of the Privy Council in Balabux v. Rukhmabai [1903] LR 30 IA 130, that no agreement for a reunion on behalf of a separated minor coparcener could be made by his father or mother as his guardian. But it must be remembered that as it I open to the father or mother as his guardian to effect a separation on behalf of the minor coparcener, it would be equally open to the father or mother as his guardian to agree to a reunion on behalf of the minor. At any rate so far as the power of the father is concerned, the text of Brihaspati and the passage in the Mitakshara, I, vi. 7 appear to be sufficient warrant."
26. It is clear, therefore, that according to the Supreme Court, on the view based on the passage from Mayne, a reunion can be valid even though the consent to the reunion on behalf of a minor who is a party to the reunion is given by the mother of the minor as his guardian But even if a valid reunion could have taken place between Manila and minor Arvind because of the constant toe the reunion being given by Bai Mani as natural gardenia of Arvind, yet, in view of the position in Mayukha as set out in Vishvanath Gangadhar case 3 Bombay High Court Reports 69, it is clear that there could not have been a valid reunion as known to Hindu law so as to revive the HUF consisting of Manila Shamaldas by this arrangement and since the descendant of chandulal, that is, Arvind, could not arrive at the reunion in the sense of the Hindu law and, therefore even if consent for reunion by Bai Mani on behalf of minor, Arvind, is a valid consent, in the eye of the law as know to Vyavahara Mayukha which is prevailing in Gujarat, there was no reunion in the sense of Hindu Law. Hence, the first contention urged on behalf of the assessee by the learned Advocate-General must fail and must be rejected.
27. Taking up the contention regarding the family arrangement being readjustment of the partition or a repartition, the learned Advocate General submitted that what he was submitting on this aspect was merely as aspect if the matter and that though this contention was not specifically urged before the I.T. authorities or before the Income-tax Appellate Tribunal, being an aspect of the matter he could urge it at this stage. Now, when a partition can be cancelled or reopened as contended by the learned Advocate-General, the position is to be found thus summarized at p. 428 of Mulla's Hindu Law: Under Hindu law partition is made only once, but there are some exceptions to the rule. The posthumous on can claim a repartition an so can be heir of a disqualified person and an absent comparcener. The case of the adopted son also must be included amongst the exceptions. A partition may also be reopened on grounds of fraud or mistake. It has been pointed out that a partition may be reopened by any after-born in the circumstances, namely, that a son begotten at the time of partition but born after partition, since he was in his mothers womb at the time of partition, is entitled to a share though born after partition, as he was in existence at the time of partition. If no shares is reserved for his at the time of partition, he is entitled to have the partition reopened and share allotted to him. A father separating from his sons may or may not reserve to himself a share on partition. The right of a sons born as well as begotten after partition are different according as the father has or has not reserved as share to himself. Where the father has reserved a shares to himself a sons who is begotten as well as born after partitions not entitled to have the partition reopened; but in lieu thereof he is entitled, after the fathers death to inherit not only the share allowed to the father on partition, but the whole of the separate property of the father, whether acquired by him before to after partition, to the entire exclusion of the separated sons. On the other hand, where the father has not reserved a share to himself on a partition with his sons, a son who is born as well as begotten after the partition is entitled to have the partition reopened and to of the original partition, but in the accumulations made with the help of treat property. In the light of these circumstances, a partition may be reopened by an after-born or a validity adopted son to a deceased coparcener (who if existence at the time of the partition would have been entitled to share) but his widow after the partition. It has been pointout by Mulla at p. 429, that a partition may be reopened, if any coparcener has obtained an unfair advantage in the division of the property by fraud upon the other coparcener, or where, after a partition has been made, it is discovered that the property allotted to one of the coparcener did not belong to the family, but to a stranger, or that it was subject to a mortgages, the coparcener to whom such property has been allotted is entitled to compensation out of the share of the other coparcener, and the partition may, if necessary, be reopened for readjustment of the shares. Therefore, it cannot be claimed in the instance case that there was, by the family arrangement of March 26, 1942, any readjustment of right as between the separated coparceners, namely, Chandulal's branch and Manilal's branch, Manilala and Chandulal being parties to the partition in 1932.
28. The third submission of the learned Advocate-General was that the properties were thrown into the common hotchpot by the family arrangement and then partition amongst the apart to the family arrangement and, therefore, whatever was obtained from the common hotchpot would belong to the joint Hindu family of Arvind and his branch. Now there is a fallacy in this argument namely, that by the family arrangement, had become a new joint family. As we have observed above, in view of the decision in Vishvanath Gangadhar's case [1866] 3 Bom HC AC 69, there could not have been a reunion under the Hindu law and if there was no reunion, there could no be any hotchpot of any HUF consisting of Manial, Chanchal, Mani and Arvind. If there was no HUF after the family arrangement, there could not be any question of any property coming from the common hotchpot to Arvind, as a joint family property. Hence the third submission of the learned Advocate -General also must be rejected.
29. The fourth submission of the learned Advocate-General is, as pointed out above, that the properties which were otherwise HUF property did, not cease to be such because they were allotted to Arvind under the family arrangement. In this connection, it was pointed out that prior to the partition between Manila and Chandulal on October 22, 1932, both these male coparceners who were members of the HUF of Manilal Shamaldas, were carrying on the family business. After the partition, Manilal and Chandulal, the two separated members, carried on the family business in partnership in the firm name of Manilal Shamaldas. Therefore, according to the learned Advocate-General, whatever, came to the share of Chandulal on partition, and particularly Chandulal's one-half share in the partnership firm of ManilalShamaldas, was ancestral property in his hands, having been received by him on partition with his father Manilal and, therefore after Chandulal death, this property continued to be joint family property of the branch of Chandulal. The branch of Chandulal at the time of the family arrangement of March 26, 1942, consisted of Bai Mani and Minor Arvind and, therefore, at lease one-half share of the property of the firm of Manila Shamaldas would be joint family property in the shape of ancestral property in the hands of Arvind and Bai Mani. He contended that this character of joint family property did not lose its character as such by reason of intervention of the family arrangement. It is contended in this connection that, at least sofar as Chandulal's branch was concerned the HUF property belonging to that branch, was put into the common hotchpot but by being so put in common hotchpot or pool in the family arrangement, the property did not lose its character of HUF property and that position is being on all the coparcener so the family. In this connection, the learned Advocate-General had relied upon several decision. In Rani Mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 IA 157, the fact were there; The suit out of which the appeal went to Privy Council was brought by Rani Mewa Kuwar, the grand-daughter of Raja Ruttunsingh, against Rani Hulas Kuwar, the widow of Khyratee Lall, who was a grandson of the Rajah, to recover an 8 1/2 announce share of three houses and an Imambara situated in the city of Lucknow. Rani Mewa Kuwar claimed 4 1/2 annas in her down right, and 4 1/2 annas as the representative of her deceased sister, Chatur Kuwar. The property in dispute which was in Oudh, belonged, with other considerable property in Rohilcund, to Mahomcdan and that, according to Hindu law, his ancestral property thereupon vested in his son Dowlut Singh, the father of Mewa Kuwar and Chattur Kuwar. Dowlut Singh died before his father, and in consequence of his having so predeceased him, and having no male issue, the property of the Rajah Ruttun Sigh would have descended to the grandson, Khyratee Lall, whose widow, Hulas Kuwar, was the defendant and respondent before the Privy Council, unless the conversion of the Rajah and the consequent vesting of the estate in Dowlut Singh was established. Questions arising out of the alleged conversion to Mohamedanism of the Rajah, and respecting the confiscation, were contested between the widows of the deceased Ruttun Singh and of his son, Dowlut Singh and after their deaths the controversies where renewed between Khyratee Lall and Mewa Kuwar and her sister. After these controversies, and avowedly to put an end to the disputes, a compromise was effected between the parties, the terms of which were found in a deed of agreement dated July 21, 1860, and in the light of these fact, it is was observed by their Lordships of the Privy Councial at p. 164 of the report (1 LR IA) :
"Under these circumstances the case simply come to the question of the right of the appellant under the agreement of July, 1860. That agreement assumes that the purities were severally claiming, by virtue of some right of inheritance, the property of the Rajah Ruttun Singh; that there were question between them which might disturb the rights which each claimed, and it was better instead of a long litigation to settle the rights, and they do settle them by arriving at this agreement, which provides, that the property shall be held in certain share, and shall be divided according to those shares. A partition according to those shares has never taken place, and the respondent is in possession of the entirely of the houses of Oudh and the said Imambara."
30. At p. 166 it was further observed:
"The compromise is based on the assumption that there was an antecedent title of some kind in the parties, and the agreement acknowledges and defines what that title is. The claim does not rest on contract only, but upon a title to the land acknowledged and defined by the contract, which is part only of the evidence of the appellant to prove her title, and not all her case."
31. Thus, in the case of a family arrangement, if there is a title to the particular property which is acknowledged and defined by the family arrangement, then the antecedent title will continue and the agreement in the case so acknowledged and defined what that title was.
32. In Khunni Lal v. Gobind Krishan Narain [1911] LR 38 IA 87; ILR 33 All 356 (PC), when further litigation arose out of the same compromise of 1860 between Mewa Kuwar and her sister, Chattur Kuwar, on the one hand and Khyratee Lall on the other, it was held that the compromise based on the title of the parties existing antecedent thereto, and acknowledged and defined thereby. In this case of Khunni Lal v. Gobind Krishna Narain, the earlier decision in the case of Rani Mewa Kuwar's case [1874] LR 1 IA 157 was followed. At p. 102, their Lordships of the Privy Council observed (see pp. 366, 367 of ILR 33 (All):
"Such were the relative positions of the parties in 1860, when the compromise was entered into. The heirs of Daulat had no existing enforceable right to the shares of Ratan Singh, and the entire property was recorded in the name of his widow. Under these circumstances the parties, under the advice of the district officer instead of engaging in a long litigation, arrived at a mutual settlement of their claims. The real nature of the compromises is well expressed in a judgment of the High Court of the North West Provinces in 1868 in the suit of Mewa Kunwar against her sister Chhattar Kunwar's husband.... The learned judges say as follows:
'The true character of the transaction appears to sue to have been a settlement between the several members of the family of their disputes, each one relinguishing all claim in respect of all property in dispute other than that falling to his share, and recognising the right of the other as they had previously asserted it to the portion allotted to them respectively. It was in this light, rather than as inferring a new distinct title on each other, that the parties themselves seen to have regard the arrangement, and we think that it is the duty of the courts to uphold and give full effect to such an arrangement.' Their Lordships have no hesitation in adopting that view. The true test to apply to transaction which is challenged by the reversioners as an alienation not binding on them is, whether the alienee derives title from the holder of the limited interest of life-tenant. In the present case, Khairati Lal acquired no right from the daughters of Daulat, for the compromise, to use their Lordships language in Rani Mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 IA 157 at p. 166,'is based on the assumption that there was an antecedent title of some kind in the parties, and the agreement acknowledges and defines what that title is."
33. This decision in Khunni Lal v. Gobind Krishna Narain [1911] LR 38IA 87, was followed by the Privy Council in Mt. Herein Bibi v. Mt. Sohan Bibi, AIR 1914 PC 44, where it was pointed out that the compromise in that particular case was not an alienation by limited owner but a family settlement. A compromise was in no senses of the word an alienation by a limited owner of family property but a family settlement by which each party took a share in independent right which was, to that extent, and by way of compromise, admitted by the other parties.
34. In Sahu Madho Das v. Mukund Ram, AIR 1955 SC 481, the question of family arraignment by Hindu was dealt with by the Supreme Court In para 45 at p. 489, of the report, Bose J., speaking for the Supreme Court observed:
"But if there was a family arrangement assassinated to by the daughters and later accepted and acted on by the sons when they attained majority, their claim to separate and independent, absolute titles is understandable. It does not matter whether the claims were well founded in law because what we are considering at the moment is not the legal effect of the arrangement but whether there saw one in fact."
35. Again, in para. 54 at p. 490, Bose J., observed:
"It is well settled that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that falling to his share and recognising the right of the others as they had previously asserted, it, to the portion allotted to them respectively. That explains why no conveyance is required in these case to pass the title from the one in whom it resides to the persons receiving it under the family arrangement, it is assumed that the title claimed by the person receiving the property under the arrangement had always resided in him or her so far as the property falling to his or her share is concerned and, therefore, no conveyance is necessary.
But, in our opinion, the principle can be carried further and so strongly do the courts lean in favour of family arrangement that bring about harmony in a family and do justice to its various members and avoid, in anticipation, future disputes which might ruin them all, that we have no hesitation in taking the next step (fraud apart) and upholding an arrangement under which one set of members abandons all claim to all title and interest in all the properties in dispute and acknowledges that the sole and absolute title to all the properties resides in only one of their number (provided he or she had claimed the whole and made such an assertion of title) and ar content to take such properties as are assigned to their shares as gifts pure and simple from him or her, or as a conveyance for consideration when consideration is present."
36. In para. 55 it was further observed :
"The legal position in such a case would be this. The arrangement or compromise would set out and define that the title claimed by A to all the properties in dispute was his absolute title as claimed and asserted by him and that it had always resided in him. Next, it would effect a transfer by A to B, C and D (the other members of the arrangement) of properties X, Y and Z ; and thereafter B, C and D would hold their respective title under the title derived from A. But in that event, the formalities of law about the passing of title by transfer would have to be observed, and now either registration or twelve year;' adverse possession would be necessary."
37. There is considerable force in this argument of the learned Advocate-General. It is clear from the decision of the Supreme Court in Gowli Buddanna v. CIT [1966] 60 ITR 293, that there need not be more than one male members to form an HUF as a taxable entitle y under the I.T. Act. The expression "Hindu undivided family" in the I.T. 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 singly male members and widows of decease male members, and the I.T. Act does not indicate that an HUF as an assessable entity must consist of at least two male members. Therefore, on partition in 1932 between Manilal and Chandulal, Chandulal got his share of the family property and particularly one-half share in the partnership which was a continuation of the old family business, as ancestral property and HUF property. it is true that he was still a surviving coparcener at that time and, therefore, he had an absolute right to depose of the property. At p. 301 of the report, the Supreme Court, quoting form the decision of the Privy Council in Attorney-General of General v. Ar, Arunachalam Chettiar (No. 2) [1958] 34 ITR (ED) 42; 3 EDC 825, it is stated (at 301-302):
".... though it may be correct to speak of him (the sole surviving coparcener) as the 'owner', yet it is still correct to described 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) has a right to maintenance out of its and in some circumstances to a change of 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... it would not appear reasonable to impart to the legislature the intention to decrement, so lose as the family itself subsets, between property in the hands of a single coparcener and that in the hands of two or more coparceners (at p. 302)... It is only by analyzing the nature of the right of the members of the undivided family, both those in being those yet to be born, that it can be determined whether the family property can property be described as 'joint property' of the undivided family"
38. Applying the test laid down by the Supreme Court in the above decision, it must be held that the property which Chandulal got on partition from his father Manila under the partition of October 22, 1932, was joint family property belonging to the joint family, though as still surviving coparcener between 1932 and 1937, Chandulal had full power of disposal over his property. With the birth of Arvind in 1937, the property became joint family property of the family consisting of Chandulal, Arvind and Bai Mani and on the death of Chandulal, the property passed by survivorship to the joint family consisting of Arvind and Bai Mani, Hence, when the partnership firm of Manilal and Chandulal which was carrying on business in the amends of Manilal "Shamaladas was dissolved because of the death of Chandulal, one-half share of Chandulal in the partnership firm at least, passed to the joint family consisting of Arvind and Bai Mani. That title of Arvind and Bai Mani could not be disputed in view of the position under Hindu law and therefore, it was that title of Arvind and Bai Mani as an HUF to this property of Chandulal, which was put into the family arrangement, as has been pointed out in the family arrangement itself. And, as pointed out, by the Privy Council in the three decision in Rani Mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 IA 157, Khunni Lal v. Gobind Krishna Narain [1911] LR 38 IA 87 and Hiran Bibi v. Sohan Bibi AIR 1914 PC 44, the title which each of Arvind and Bai Mani as members of the HUF were having to Chandulal's share would be the title which they would get to those properties which were allotted to them under the family arrangement. The character of the property, namely, the property of an HUF as a joint family property, would not change by virtue of being thrown into the family arraignment and then being related to them under the family arrangement. The consequences of the observations of the Privy Council are that owned there was a pervious title or claim or antecedent title before the family arrangement, that title which the branch of Chandulal constituting of Bai Mani and Arvind had, would attach, to the properties which they got under the family arrangement. That is the only meaning which can be given to the decision of the Privy council in Rani Mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 LA 157, and Khunni Lal v. Gobind Krishna Narain [911] LR 38 IA 87. As had been pointed out by Bose J., in Sahu Madho Das v. Mukund Ram, AIR 1955 SC 481, even if one set of members of the family abandons all claims in property in dispute, and acknowledges that the sole and absolute title to all the properties resides in only one of their number (provided he or she had claimed the whole and made such an assertion of title), and are content to take such properties as are assigned to their shares as gifts pure and simple from him or her, or as a conveyance of consideration, the consideration is present. These decisions of the Privy Council in Rani Mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 IA 157 and Khunni Lal v. Gobind Krishna Narain [1911] LR 38 La 87, have been approved by the Supreme Court in Sahu Madho Das's case in para, 54 at p. 491, and, therefore, that it the law so far as the whole of India is concerned. The antecedent title of the branch of the Chandulal consisting of minor Arvind Chandulal and Bai Mani was confined and acknowledged by the family arrangement.
39. Mr. Desai on behalf of the Revenue has relied upon the decision of the Supreme Court in CWT v. H. H. Vijayaba [1979] 117 ITR 784, regarding the family arrangement. In that case the facts ware that on the death of Bhojrajji of Gondal, disputes arose between his dons Vikramisinghji and his younger brother Shivaraj in respect of assets left by Bhojrajji, the Maharajah a of Gondal. The younger brother was contemplating legal proceedings against this elder brother. Their mother Vijayaba intervened. The idea of litigation was thereupon dropped because Vijayaba gave a letter dated May 14, 1953, to Shivaraj, stating therein (p. 786):
"Our father had expressed in the presence of many people that he will give you rupees fifty lakhs. To keep up his words and promises and also that I should get peace of mind I an writing to you that if your brother Vikramsinghji, Maharaja of Gondal, does not given you the full amounts, then you, must get the balance of amount from me. This is my since desires. I will also press Vikram that he should give you the amount of rupees fifty lakhs."
40. Vikramsinghji paid only rupees twenty lakhs to Shivaraj. The latter thereupon claimed the balanced of rupees thirty lakhs from Vijayaba on the basis of there latter dated May 14, 1953. On or about September 12, 1959, pursuance to her commitment made in the letter aforesaid Vijayaba transferred war stock valued at Rs. 11,00,000 to Shivaraj and also agreed to hand over certain ornament in full settlement of his claim. The ornaments were, however, not given. That led to disputes between the mother and the son but eventually they were also settled on February 22, 1962, which settlement was evidence by a document setting out all the relevant fact of the history of the dispute.By virtue of the settlement, a sum of Rs. 10,00,000 was paid by Vijayaba to Shivaraj Singhji. In the wealth-tax assessment of Vihjayaba as the assessee, the questions was as to whether while assessing the net wealth of the assessee, the sum of rupees nineteen lakhs during the period that the subsequent settlement was not arrived at could be deducted from the assets in order to arrive at the net wealth At. p. 787 of the report, Untwalia J., speaking for the Supreme Court, observed :
"...... the argument is not sound. Taking the totality of the fact as found but the Tribunal and mentioned in the impugned judgment of the High Court, it was a case of a family settlement r family arrangement which is binding on the parties concerned. The assessee agreed to purchases peace for the family and to pay to here son the amounts which feel short of Rs. 50,00,000 if her elder son did not pay any portion thereof. It is well established that such a consideration is a good consideration which brings about an enforceable agreement between the parties. Section 25 of the Contract Act does not hit this."
41. In our opinion, the decision in CWT v. H. H. Vijayaba [1979] 117 ITR 784 (SC), merely recognizes the general law regarding family arrangement but it does not say that family arrangement must be arrive at only for the purpose of preservation of peace in the family. In our opinion, this decision in [1979] 117 ITR 784 (SC), does not in any way go contrary to the conclusion which is arrived at by us in the light of the decision of the Privy Council in Rani mewa Kuwar v. Rani Hulas Kuwar [1874] LR 1 IA 157 and Khunni Lal v. Gobind Krishna Narain [1911] LR 38 IA 87, approved by the Supreme Court in Sahu Madho Das v. Mukund Ram, AIR 1955 SC 481. It was contended on behalf of the Revenue by Mr. Desai that there was an estoppel against Arvind pleading contrary to the family arrangement and the title of Arvind was only by the family arrangement and there was no passing of the property contrary to the family arrangement. Even against outsiders, that is, the income-tax authorities, he was estoppel from contending that he is not the absolute owner. There was election to become an absolute owner and the assessee having elected to do so, he cannot result from that position. He said that Arvind who was a minor at the time of the family arrangement after arranging majority continued to receive the benefit of the family arrangement and, therefore he must be deemed to have elected to revive the family arrangement.
42. It was contended by Mrs. Desai that there were four individual in the present case and not two HUF at the time where the family arrangement was arrived at. He contended that as a result of 1932 partition between Manilal and his wife Chanchal and Chandulal, Chanchal got the movable property and she was the absolute owners of the movable property in the law of Mayukha which prevails in Gujarat. She had no share at all in the property of the HUF of amnilala Shamaldas and she could have given her property to any one she liked but she decided to put here money into the common hotchpot for the purpose of the family arrangement. On the other hand, in Chandulal branch, Arvind and his mother Bai mani were the members but Bai Mani was entitled to one-half of the property. Bai Mani did not want to continue with the family and, therefore, there was an intention of partition of the HUF and Arvind and Bai Mani had become tenants-in-common from the date of the family arrangement. In the connection, Mr. Desai had relied on the following recitals in the deed of family arrangement.
"WHEREAS the said Chandulal Manilal died on December 23, 1941, leaving behind him his widow Bai Mani party of the third part herein and a minor so Arvind aged about 4 years AND WHEREAS it is claimed that the said Bai mani becomes entitled to 1/2 share in the properties of the said Chanduala AND WHEREAS the quality of her shares on such shares in arising between the parties all parties herein as members of one family are desirous of making proper arrangement...."
43. and that the arrangement was arrived at to save and preserve the family honor and property and "to save the properties from ruinous limitation". Now, it is difficult to accepted the contention that there was a partition between Bai Mani and Arvind by the assertion on the part of Bai Mani that she was entitled to one-half share in the properties of Chanduala and there was some doubt regarding the claim of here interest in such the provision of the Hindu Women's Right to Property Act, 1937, were in force. Under s. 3 sub-s. (2) of that Act:
"When a Hindu governed by any school of Hindu law other than the Dayabyhaga School or by customary law dies having at the time of his death an interest in a Hindu joint family property, his widow shall, subject to the provisions of sub-section (3), have in the property the same interest as he himself had."
44. Under sub-s. (3) of s. 3.
"Any interest devolving on a Hindu widow under the provisions of his section shall be the limited interest known as a Hindu woman's estate, provided however that she shall have the same right of claiming partition as a male owner."
45. So far as separate property of Chanduala was concerned, by virtue of 3, sub-s. (1) Bai Mani became entitled to the same share as hare son but she would get even in that share limited interest known as Hindu woman's estate by virtue of s. 3 sub-s. (3). Therefore, the legal position is that this recital in the deed was merely a statement of the law as it prevailed under the Hindu Women's Right to Property Act, 1937, as it stood at the relevant time. It conferred a right on Mani to claim partition but it does not appear from this recital that Bai Mani had in fact claimed partition as between herself and Arvind. A claim was put forward that she was entitled to one-half share in the property of Chanduala and there was a doubt regarding the quality of her interest in this share which she was claiming. This recital in the family arrangement document would not, in our opinion, mean that there was a partition between Arvind and Bai Mani because Bai Mani was merely claiming to be entitled to that which was given to here by the Hindu Women's Right to Property Act. Under the circumstances, it cannot be said that Bai Mani and Arvind had become tenants-in-common as regards the property left by Chandulal, either by way of self-acquired property or by way of joint family property which he left at the time of his death.
46. At this stage it is necessary to refer briefly to the family arrangement dated March 26, 1942. The document is headed "Deed of family Arrangement" and it seems that the document was registered with the Sub-Registrar of Assurances at Ahmedabad. The document recites that the parties to the family arrangement are Manilal Chokshi, his wife Chanchal being the party of the second part and Bai Mani for herself and as the natural guardian of Arvind the minor son of Chandulal, as party of the third part. It had been pointed out in the recitals in the document that on the partition between Manila and Chanduala in 1932, Chanchal was allotted a share which, at the time of the family arrangement, consisted of a sum of about Rs. 47,151 lying in deposit of her credit in the firm of Manilal Shamaldas and after setting out the claim of Bai Mani that she had become entitled to one-half share of the property of Chanduala and a there was about the quality of her interest in such share, it has been recited that with a view to end the possibility of disputes arising between the parties, all the parties as members of one family were desirous of making proper arrangement regarding the estate belonging to and/or standing in the name of or being otherwise in the possession of any of the parties to the arrangement or of the deceased Chandulal, the parties to save and preserve family honor and property and to save the property from ruinous litigation have agreed for the aforesaid purposes to bring into hotchpot the entire movable and immovable properties either belonging to or standing in the name of or being anywise in the possession of either the said deceased Chanduala or of any of the parties to the arrangement to the extent of their interest therein and whereas the parties to the arrangement were anxious to safeguard the estate after making adequate provisions for certain other family members and for the parties' own decent living according to the family status and condition and whereas Bai Chanduala and Bai Amani were willing to forgo their strict rights to such part of the properties as might have come to them or to which they might be entitled. The relevant part of the recital follows. Causes (1) lays down:
"That all the parties to this deed shall forthwith bring into hotchpot all the movable and immovable properties either belonging to or standing in the name or being in anywise in their possession." The properties are mentioned in Sch, A to the arrangement. Schedule A show different kinds of properties for example, share belonging to the partnership of Manilal Shamaldas but standing in different names, than Manilala's separate shares, Chandualal separate shares, insurance policy of Chandualal Manilal, insurance policy of Manilal Shamaldas, property belonging to Chanchalben, immovable property of the firm of Chokshi Manilal Shamaldas, separate properties of Manilal, separate property of Chadualal. All these properties are mentioned in Such A to the family arrangement and were put into the common hotchpot and these properties thus put into the common hotchpot are to be dealt with in the manner set out in the rest of the clauses of the family arrangement. Clauses 1A, 2,3,4,5,6, and 7 deal with properties proposed to be given away to different persons. Under clause 1A, a sum of Rs. 15,001 was to be given to the Khadayata Community for the furtherance of educational or social betterment of the said community. another sum of Rs. 5,001 was to be handed over to Khadayata community for educational purposes. Another sum of Rs. 5,001 was to be handed over to the Native Share Brokers Association for being utilised for the benefit thereof to be added in another trust for the benefit of the members of the Association. Under clause 3A, a sum of Rs. 10,001 was to be set apart for being utilised by the manager or welfare of the society in general, and in subsequent clauses up to clause 7, specify displace of property are dealt with for being paid over to Ganganen, the sister of Manilal, so Bai Shanta, the daughter of Manilal religious ceremonies and other communal expenses on Manilal's death. The peculiar part is that under clause 7 Chandualal's separate property was to be given under this document to Shanta, the daughter of Manilal Shamaldas Chokshi who was given life interest to reside in the house or t get the income thereof and after the death of Shanta the property was to go over absolutely to her sons, failing sons to the issue of such sons, and failing both to the daughters of Shanta, failing daughter their (daughters) children and failing them, to Arvind or his descendants in the male or female line. If it was not possible to transfer the said house to Shanta, and amount of Rs. 15,000 was to be set apart for the purposes of a house for her on the same terms and conditions as stated above. Clause 9 also deals with specific disposal in favour of Devi, daughters, of Shanta. Under clause 10, a sum of Rs. 5,0001 was to be set apart of Madusudan Maniala Shah, sons of the sister of the party of first part. Under name of Bai Chanchal, the wife of the Manilal, and she was to be entitled to the income thereof during t] her lifetime. On the death of Bai Chanchal the said amount of Rs. 75,000 with the accumulated income thereof was to belong absolutely to Arvind subject to the provision of clause 21A of the family arrangement. A sum of Rs. 25,000 was to be paid and was as to the belong to Chanchala absolutely over and above amount of Rs. 75,000 in which life interest was given to her. It was provided that Chanchal had absolute right and full ownership and right of disposition over this amount of Rs. 25,000. In the same manner, Mani was to be given Rs. 75,000 set apart for here an she was to have the right to enjoy the income thereof during her lifetime and after the death this amount to Rs. 75,000 was to go over absolutely to her son Arvind subject to the provisions of cls. 21 and 21A. An amount of Rs. 25,000 was to be paid and to belongs absolutely to Bai Mani with full power of disposition over this amount and Mani was to be the sole and absolute owner thereof. Under clause 16, an amount of rupees one lake was to be set apart and to belong absolutely to Manilal Shamaldas and he was to have full powers of disposition over this amount as full and absolute owner thereof. Under clause 17, Manilal Shamaldas was given the right to reside or to enjoy the income of the immovable properties consisting of one house in Khadayata's khadki and a bungalow at Ellis Bridge near Krishna Society so long as the parties to the family arrangement resided jointly and on separation as right to reside or to enjoy the income of one of the above properties at his option was given to Manilal and his wife Chanchal and a similar right of residence and enjoyment in other property was given jointly to Mani and her minor son Arvind. After the death of Manilal, Chanchal and Mani had the right to stay free of rent in the house situated in Khadayata's Khadki, or in the bungalow situated opposite Krishna Society, according to their choice and to let out if they so chosen the property occupied by them. They were to be entitled to enjoy the income in equal shares. If they desired to stay separately, they were to occupy portions of the houses in Khadayata's Khadki separately or one of then was to occupy the houses and the other the bungalow, as might be agreed between them. In the case of non-agreement, as may be decide by the managers. After the death of Chanchal and Mani, the houses and the bungalow were to belong absolutely to Arvind, the minor son of Mani, on the terms and conditions contained in clause 21, subject to the proviso contained in clause 21A. After, making the above provisions for the common hotchpot, the income of the remaining properties were, during his lifetime, to be of the joint ownership Manilal and minor Arvind, to be utilised for their enjoyment and benefit in equal shares. The corpus of the said property on the death of Manilal was to form part of the residue and was to be disposed of under cls. 20, 21 and 21A. Clauses 20 provides that the residue of the estate after making provision for the aforesaid payment and deposits was to be kept apart and deposited in the name of or held for an on behalf of the minor Arvind and income therefor was to be utilised for his maintenance, education, marriage and other personal benefit.
47. Clause 21 provides as under:
"The said Arvind is the absolute owner of the whole of the reminder of the estate after defraying the aforesaid payment and disbursement subject to the proviso contained in clause 21A hereof, but that possession thereof shall not be handed over to him until he attains the age of 21."
48. Clause 21A was as under:
"PROVIDED THAT in the event of the said Arvind dying without leaving any children or descendants male or female however remote, if alive, and failing widows, or after her death, life estate shall be given to Bai Mani mother of minor Arvind in all the estate given to Arvind absolutely and after the death of Bai Mani and/or the widow or in the event of the said Arvind dying without leaving any children or descendants male or female however, remote or a widow or him mother, one fourth of the estate given to Arvind absolutely by this arrangement and in particular under clauses 7, 12, 14, 18, 21 and 21B here of shall go over to Bai Shanta and failing here to her issue in the male or female line, howsoever (male issues in the male line to be given preference to issues in female line) and him to his heirs and the Rumanian half shall go to charity and she utilised by the manager or managers for any proposes conducive to the educational, religious and social welfare of the community in general."
49. The other provision ar not material for the purpose of this judgment. It has been contended on the basis of clause 21A, which is in the form of a proviso, that Arvind power of testamentary disposition and inter vivos disposition were restricted by clause 21A because of the provision in the clauses in which it is stated that Arvind is the absolute owner of the property coming to his shares under the family arrangement, which is in terms made subject to clause 21A. It has, therefore, been contended that under the family arrangement, since the powers of disposition whether by testament or document inter vivos, are restricted by the specified order of succession to these properties given to Arvind which has been laid down in cl, 21A, namely, to Bai Shanta to the extent of one-fourth, to Madusudan to the extent of one-forth and to Kahadayata community to the extent of the remaining one-half and, therefore, there was no joint family property in the hands of Arvind. Mr. Desai on behalf of the Revenue, therefore, contended that whatever, the other provisos might have been, by virtue of clause 21A of the family arrangement, all that Arvind got was a right to enjoy the properties during his lifetime, and he could not dispose of the properties which came to him under cls. 12, 14,18,19,20 and 21. In each of these clauses themselves it has been specifically mentioned that the property dealt with in the particular clauses was to belong absolutely to Arvind subject to the provision of clause 21A or subject to the provisions contained in cl, 21A. Mr. Desai contended that whatever rights of the joint family might have been prior to the entering into the family arrangement, at leases in the light of clause 21A, Arvind got no right as the head of the HUF or as male coparcener of the HUF consisting of himself and Bai Mani and, therefore, in view of the clear position f the family arrangement, no property coming to Arvind under the family arrangement came to him as joint family property. In our opinion, the proper way of constructing clause 21A is to look upon it as vesting the properties in'Arvind subject to the defeasance clauses that in the event of Arvind dying without leaving any children, male or female, the property given to him under the family arrangement under the different clauses was to go according to the provisions of clause 21A. In view of these provision of clause 21A, a further restriction must be read on Arvind's power of disposition of the property, of Arvind were to be recognized in these properties, then clause 21A cannot operate at all and therefore by necessary implication, the family arrangement must be read as given to Arvind a right of enjoyment of these properties of watch was said to be absolute owner under the different clauses of the family arrangement and it is only in the hands of this descendants that it would become absolute property without any restriction put by the family arrangement, it cannot be said that the title to such property that he got under the family arrangement was to the title of the HUF. It is clear that what was put into the family arrangement, namely, Chandulala's share and Chandualal's property, was the HUF property belonging to the HUF consisting of Arvind and Bai Mani and against, in the light of the decision of the Privy Council in Rani Mewa Kuwar narain [1911] LR 38 IA 87 and Sahu Madho Deas v. Mukund Ram, the imprint of an HUF family property.
50. After all, the idea of clause 21A and the necessary restriction on the weight of disposition ar very similar to the restriction on the power of the manager or "karta" of an HUF regarding the power of alienation of an HUF, namely, that there is no right of disposal under certain special circumstances. Here there is no right of disposal in Arvind either by testament or by document inter vivos, but, the nature of the property by coming to him is not altered by reason of the restrictions placed on his power by the family arrangement. There was an antecedent title and whatever Arvind gets under that arrangement would be impressed with the character of that title. Under these circumstances, in our view, the contention of the learned Advocate-General that even after the family arrangement the properties, which would go to Arvind, bore the character of an HUF property, is correct and none of the clauses of the family arrangement would detract from that position.
51. The fifth and the final contention of the learned Advocate-General is that when a members of an HUF utilises property of the HUF by pooling that property with others and throws toast property with property of others and in the process of pooling causes, a determinate to the HUF and in exchange that members gets some property, it is not open to him to says support of his contention in this regard he relief upon the observations of the Privy Council in Lachhman Das v. CIT [1948] 16 ITR 35. In that case the Privy Council observed at p. 40 of the report:
"Whatever the view of a Hindu joint family and its poverty might have been at the early stages of its development, their Lordships think that it is now firmly established that an individual coparcener, while remaining joint, can possess, enjoy and utilise, in any way he likes, property which was his individual property, not acquired with the aid of or with any detriment to the joint family property. It follows from this that to be able to utilised this property at his will, he must be accorded the freedom to enter into contractual relations with others, including his family, so long as it is represented in such transaction by a definite personality like its manager. In such a case he retains his share and interests in the property of the family, while simultaneously enjoys the benefits of his separate property and the fruits of its investment. To be able to do this, it is not necessary, for him to separate himself his family."
52. Again, at p. 41 it was observed:
".... it is now established by several ruling, including one of this Boards (see Sounder Singh Majithia v. CIT [1942] 10 ITR 457 (PC)) that a joint Hindu family can alienate an assets belonging to it to a member of the family without causing a disruption of the family."
53. This principle regarding determinate to the joint family property was reiterated by the Supreme Court in Rajkumar Singh Hukam Chandji v. CIT [1970] 78 ITR 33. Hegde J. speaking for the Supreme Court at p. 43, summarized the effect of the decision s delved till dated of the judgment and observed:
"At first sight there appears to be conflict between the two lines of decisions, namely, Kalu Babu's case [1959] 37 ITR 123 (SC), Mathura Prasad's case [1966]60 ITR 428 (SC), the two Dhanwatey's cases (V. D. Dhanwatey)[1968] 68 ITR 365 (SC) and M. D. Dhanwatey [1968] 68 ITR 385 (SC) and Krishan Lyer's case [1969] 73 ITR 539 (SC) and Palaniappa Chettiar's case [1968] 68 ITR 221 (SC), Dhakappa's case [1969] 72 ITR 192 (SC) and D. C. Shah's case [1969] 73 ITR 692 (SC), on the other. The line that demarcates these two lines of decisions is not very distinct but on a closer examination that line can be located. In order to find out whether a given income is that of the persons to whom it was purported to have been given or that of his family, several tests have been enumerated in the aforementioned decision but none of them excepting Kalu Babu's case [1959] 37 ITR 123 (SC), makes a reference to the observation of Lord Summer in Gokal Chand's case, AIR 1921 PC 35, that'in considering whether gains are particle, there is n o valid distinction between the direct use of the joint family funds an d a use which qualifies the member of make the gains by his own efforts'. We think that the principle is not more valid. The other tests enumerated are.....
(3) whether the family had suffered any detriment in the process of realization of the income.....
In our opinion, from these subsidiary principles, the broader principle that emerges is whether the remuneration received by the coparcener in substance though not in form was but one of the modes of return made to the family because of the investment of the family funds in the business or whether it was a compensation made for the services rendered by the individuals coparcener. If it is the former, it is income of the Hindu undivided family, but if it is the letter then it is the income of the individual coparcener."
54. Mr. Desai for the revenue urged before us that no plea regarding determinate to the HUF property was taken up at any earlier stag and he relied upon the interpretation of clause 22 of the family arrangement and contended that the right s to the old estate were indistinct and there was no the fifth contention urged by the learned Advocate-General is another aspect of the same plea their property in the hands of Arvind was joint family property and not his individual property and it is only by way of presenting another aspect of the case that the fifth contention has been urged by the learned Advocate-General and, therefore, it was possible to urge that all the property which Arvind Chandualal got under the family arrangement was joint family property. In Raghavachariar on Hind Law, 7th Edn., VOl. I at 276, it has been stated:
"If a member of a family takes aid of any portion of the joint or ancestral property, in acquiring fresh properties, however small that aid may be, the property so acquired assumes the character of joint family property, and cannot be claimed by the acquires as his self-acquisition. The extent of his contribution or that of the family fund is immaterial, and if any help had been taken from the family property, it is enough to make the acquired property, the property of the joint family."
55. In that connection the decision of the Allahabd High Court in Mangal Singh v. Harkesh, AIR 1958 All 42, has been relied upon by the learned author.
56. In Reghavachariar's Book on Hindu Law, Vol. I, at p. 253, it has bene pointed out that:
"Property under Hindu law can be classified under two heads:
(1) coparcenary property; (2) separate property. Coparcenary property is again divisible into (i) ancestral property and (ii) joint family property which is not ancestral. This latter kind of property consists of property acquitted with the aid of ancestral property and property acquired by the individual coparcener without such aid but treated by them as property of the whole family."
57. In para. 241 at p. 253 it has been pointed out that:
"The three notions: (1) joint property, (2) joint family property, and (3) joint ancestral family property are not the same. In all the three things there is not doubt a common subject, property, but this is qualified in three different ways. The joint property of the English law is property held by two or more person jointly, it characteristic survivor-ship. Analogies drawn from it to joint family property ar false or likely to he false for various reasons. The essential qualification of the second class mentioned above is not joints merely, but a good deal more. Two complete strangers may be joint tenants according to English law; but in no conceivable circumstances except by adoption could they constitute a joint Hindu family, or in that capacity, hold property. In the third case, property is qualified in a two-fold manner, that it must be a joint family property and it must also be ancestral. It is obvious that there must have been a nucleus of joint family property before an ancestral joint family property can come into existence, because the word ancestral connotes descent and hence pre-existence. But because it is true that there can be no joint ancestral family property without pre-existing nucleus of joint family property, it is not correct to say that theses cannot be joint family property without a pre-existing nucleus, for, that would be identifying joint family property with ancestral joint family property. Where there is ancestral joint family property, every members of the family acquires in it a right by birth which cannot be defeated by individual alienation or disposition of any kind except under certain peculiar circumstances. This is equally true of joint family property. Where a sufficient nucleus in the possession of the members joint family has come to them from a paternal ancestor, the presumption is that the whole property is ancestral and any members alleging that it is not, will have to prove his self-acquisition. Where property is admitted or proved to have been joint family property, it is subject to exactly the same legal incidents as the ancestral joint family property, but differed radically in original and essential characteristics from the joint family is the tie of sapindaship without which it is impossible to have a joint Hindu family, while such a relationship is unnecessary in the case of a joint tenancy in English laws."
58. Raghavachariar pointed out in para. 243 at p. 255 :
"Coparcenary property means and includes: (1) ancestral property, (2) acquisitions made by the coparceners with the help of ancestral property, (3) joint acquisition of the coparceners even without such help provided there was no proof of intention on their part that the property should not be treated as joint family property, and (4) separate property of the coparceners thrown into the common stock."
59. In this particulars case, as indicated in the facts stated in the earlier portion of this judgment, Arvind was born to Chandulal on December 14, 1937, and there was a joint HUF of Manilala Chowksi in which there were two coparcener, namely, Manilal himself and his son, Chandulal Manilal. Manilal's wife, Bai Chanchal, was also a members of the HUF prior to the partition between Maniala and Chandulal on October 22, 1932. This was the position which prevailed prior to the partition between Manila and his son, Chandulal, on October 22, 1932. Therefore, whatever came to Chandulal on that partition was ancestral property in the hands of Chandulal and in that property Arvind got an interest by birth. Chandulal died on December 23, 1941. Therefore, when the family arrangement was arrived at on March 26, 1942, the property which came to Arvind as ancestral property was pooled along with properties which were personal properties of Manilal himself and as a result of that pooling and in exchange for his own ancestral property, Arvind got the benefits of properties which came to him HUF property which was pooled with the rest of the properties that Arvind got the benefit of this pooling arrangement and got whatsoever came to him under the family arrangement. Thus, Arvind Chandulal got the property under the family arrangement impressed with the character of joint family property because qua his descendants, it is not open to him to contend that having thrown the HUF property into the common pool for the purposes off family arrangement, what he got under the family arrangement was no HUF property. We have already on an interpretation of the different clauses of the family arrangement, and particularly clause 21A, held that the nature of the property coming to him was not altered by reason of restriction placed on the power of alienation by virtue of the clauses of the family arrangement.
60. Under these circumstances, the question referred to us by the Tribunal must be answered in the negative, as it must be held that in the light of our acceptance of the fourth and the fifth contentions of the learned Advocate-General, each of them being in the alternative, that the correct status of the assessee was that of a Hindu undivided family as claimed by the assessee and not that of an individual as determined by the ITO and as held by the Tribunal.
61. The question referred to us is, therefore, answered in the negative that is, in favour of the assessee and against the Revenue. The Commissioner will pay the costs of this reference to the assessee.