Income Tax Appellate Tribunal - Bangalore
Income-Tax Officer vs R.N. Dalichand Jain on 29 September, 2000
Equivalent citations: [2002]80ITR474(BANG)
ORDER
I.C. Sudhir, Judicial Member
1. The Income-tax Department has filed this appeal aggrieved by the order of the Deputy Commissioner of Income-tax (Appeals) (DCIT(A) for short) dated 8th March, 1994. This grievance of the Department is so raised on the issue of status of the assessee with reference to the provisions of Income-tax Act, 1961 (hereinafter referred to as the Act).
2. The Department in its ground of appeal have claimed that the proper status of the assessee should have been individual because, he was adopted by the widow of the deceased karta of Hindu Undivided Family (HUF for short) only after his death. This claim is also based on the plea that consequent to the death of the karta leaving only his wife behind the HUF has been disrupted and the properties vested by law on the widow by rule of survivorship.
3. The issue that is raised in the present appeal is a unique one and rarely this issue had come up under the Direct Taxes related proceeding. Considering the rarity of the issue and the interest it had created at the time of hearing, we have deliberated upon the issues as raised before us by both the parties. Before we proceed to deal with the legal issues as raised in this appeal, we shall state briefly the facts of the case.
4. Mr. Ganeshmal, karta of his HUF, had himself and his wife as the members of the HUF. Karta dies in 1957 with no male issues. His widow Mrs. Kusum Bai adopted the assessee, the respondent in the instant appeal in 1959 at which time he was a minor. Mrs. Kusum Bai died in 1972 and on her death the assessee received all the properties that included both immovable and movable properties, which hitherto was the property of the HUF of Mr. Ganeshmal. The assessee filed his return of income in the status of HUF at Rs. 12,870 showing incomes under the head income from business of potato as commission agent and from interest.
Assessing Officer refused to accept the claim of the assessee as regards the status of HUF but concluded the assessment in the status of individual. The standpoint of Assessing Officer for refusing the claim of HUF was that according to the provisions of Hindu Succession Act, 1956, when a Hindu dies leaving behind only his wife and with no other male member or son, the widow receives the properties of the HUF by rule of survivorship and becomes its absolute owner.
His other standpoint of Assessing Officer was that because the adoption took place after the introduction of Hindu Adoption and Maintenance Act, 1956, the adoption could not relate back to the period prior to the death of the karta of HUF and further could not divest the widow of the rights on the properties that she had acquired from the time of death of karta. For framing this conclusion he placed heavy reliance on the decision of Madras High Court in Smt. R. Rajathy Ammal v. CWT [1987] 164 ITR 605 : [1986] 28 Taxman 194.
5. In appeal before DCIT(A) the assessee raised the issue of status with reference to the book 'Mayne's Hindu Law and Usage, 13th Edition' and that according to the Explanation to Section 14(1) of the Hindu Succession Act, 1956 the widow had received possession of the properties of the HUF but was not vested on her by 'will' or 'operation of law'. The decision of the Madras High Court (supra) on which Assessing Officer had relied heavily was distinguished on facts and that in the said case the High Court had presumed that the widow of late 'R' was his sole heir, which could happen or is possible by a 'will' or by 'operation of law'. DCIT(A) accordingly upheld the claim of the assessee on the status. Department is aggrieved and has come up in appeal before us.
6. The issue that is raised before us is with reference to the status in which the assessment under the Act is to be framed on the assessee. The Department contends that the status of the assessee is individual for the reasons noted by Assessing Officer. The assessee contends that the status is HUF because the adopted son succeeds to the interest of his father as a coparcener by the rule of survivorship.
7. The assessee had placed reliance on the decision of Patna High Court in Savitri Devi v. CIT[1976] 104 ITR 385 in support of its claim. In this case, the facts were somewhat similar inasmuch as that the widow had adopted a male child very much after the demise of her husband and claimed that the properties belonged to HUF in which her adopted son was the karta. In this case 'A' died on 8-1-1953 leaving his widow, a son and a daughter. The son too died in February 1955. On 14-10-1955 there was a partition of the family and the assessee received her one-fourth share. On 3-10-1957 the assessee adopted a son and for the two assessment years 1965-66 and 1966-67 she filed her wealth-tax returns in the status of HUF with her son as the karta of HUF and she a member. The claim of the assessee did not find favour with the authorities and the Tribunal. The High Court contemplated on the claim and concluded that there existed the HUF even without adoption of a child and with adoption it became fortified suggesting that the adoption of the child was adoption by her to herself and her husband therefore, the HUF continued.
8. In coming to the above conclusion they had made reference to the two decisions of the Apex Court in Sawan Ram v. Mst. Kalawanti AIR 1967 SC 1761 and Smt. Sitabai v. Ramchandra AIR 1970 SC 343. Referring to the decision in Sawan Ram's case (supra) it was observed that adoption to a Hindu was intended to cover cases where one person adopts and the adopted child is also treated as adopted by the spouse when only the adoption is complete. It was further observed that the adoption by a female Hindu widow when the husband is dead or has completely or finally renounced the world or declared by a court of competent jurisdiction to be of unsound mind, though, the adoption is by the female, the adoption does not stop with her alone but, trickles down to her husband too. In a case where the female is unmarried and adopts a child then the adoption stops with her alone. But a married female after she had become a widow does not cease to be the wife of the deceased person and therefore, the adopted child is treated as the adopted by the deceased father too.
9. In the decision the Patna High Court has further observed on the scheme of adoption thus - "the scheme of Sections 11 and 12, therefore, is that in the case of adoption by a widow the adopted child becomes absorbed in the adoptive family to which the widow belonged. In other words the child adopted is tied with the relationship of sonship with the deceased husband of the widow. The other collateral relations of the husband would be connected with the child through that deceased husband of the widow".
10. The Mayne's Hindu Law and Usage at page 470 contains similar observations on the status of the adopted child when the adoption is by a widow whose husband had properties of his family as HUF. It was observed that the adopted child by a widow becomes the son of her husband and is entitled to get a share in the joint family property as its coparcener and also on adoption by the widow of the sole surviving coparcener the adopted child gets interest in the joint family property from the date she had her interests in the joint family property.
11. The facts in the present case is brought out earlier go to show that the karta had died leaving his widow and she had adopted the assessee and by virtue of the adoption by a Hindu, the adopted son is treated as adopted by the deceased father too and thereby he acquires the coparcenary rights in the HUF property as if it existed all the time. The fact that at the time of adoption the spouse of the widow was not alive in accordance with the above decisions does not alter his rights as a coparcener. In the circumstances of the case, we are therefore, of the opinion that the claim of status of HUF has been justifiably upheld by the DCIT(A) and we uphold his order.
12. The appeal by the Department for the said reasons is dismissed.