Bombay High Court
Commissioner Of Income-Tax vs H.H. Rajendrasinghji, Maharaja Of ... on 24 November, 1993
Equivalent citations: [1995]213ITR225(BOM)
Author: Sujata Manohar
Bench: Sujata V. Manohar
JUDGMENT
Smt. Sujata Manohar J.
1. All these reference under the Income-tax Act and under the Estate Duty Act raise a common question relating to a certain property, viz., Rajpipla Palace, left by His Highness Rajendrasinghji, Maharaja of Rajpipla (deceased). Maharaja Rajendrasinghji of Rajpipla died on or about February 2, 1963, before the end of the accounting period relevant to the assessment year 1963-64. Income-tax return for the assessment year 1963-64 has been filed by his son, Raghubirsinghji, in his capacity as a legal heir of the late Maharaja Rajendrasinghji. Income-tax returns for the subsequent assessment years are filed by Raghubirsinghji. The years of assessment which are involved in Income-tax Reference No. 152 of 1978 are assessment years 1963-64 and 1964-65 to 1971-72 for which previous years ended on March 31, 1963, and 31st of March in each succeeding year up to March 31, 1971. Income-tax Reference No. 57 of 1983 raises the same question in respect of the succeeding assessment years 1973-74, 1974-75 and 1976-77. Estate Duty Reference No. 1 of 1977 relates to the same property as forming a part of the estate left by the deceased Maharaja Rajendrasinghji. It is necessary to refer in brief to the family history of Maharaja Rajendrasinghji of Rajpipla in so far as it is relevant for the purpose of these references.
2. The deceased Maharaja Rajendrasinghji of Rajpipla state was the elder son of his father, H. H. Maharaja Vijaysinghji. Maharaja Vijaysinghji had two Indian wives and one English wife. Apart from the deceased, Rajendrasinghji, Maharaja Vijayasinghji had two sons, Pramodsinghji and Indrajitsinghji from his Indian wives. He also had one son, Rajsinghji from his English wife Elladevi. Vijaysinghji had executed a will in England on September 4, 1946, under which he had bequeathed certain properties outside India to his English wife. Thereafter, he revoked the will and made another will in England dated November 10, 1948, bequeathing certain properties outside India to his English wife and his son by his English wife. Maharaja Vijaysinghji also executed a will in India at Bombay on January 9, 1949, in respect of his properties and assets in the then Dominion of India and at any other place except the United Kingdom, the United States of America, France and Switzerland.
3. On the death of Vijaysinghji, a petition was filed by one Indrajitsinghji, one of his sons, in the High Court of Judicature at Bombay being Petition No. 1A of 1952 seeking a direction that the Administrator-General of Bombay should apply for letters of administration-cum-testamento annexo in respect of the properties and credits of Vijaysinghji and to collect and take possession of the same. This became necessary in view of the fact that the official trustees under the Bombay will of January 9, 1949, renounced executorship. This petition was ultimately dismissed; whereupon Indrajitsinghji filed Petition No. 318 of 1953 in the Bombay High Court for letters of administration-cum-testamento annexo in respect of the Bombay will of January 9, 1949. Maharaja Rajendrasinghji filed a caveat in these proceedings. He also filed a suit in this High Court being Suit No. 939 of 1953 for a declaration that succession to all the properties and assets of his father, Vijaysinghji, was governed by the rule of primogeniture and he (Rajendrasinghji) was entitled to all the said properties, assets and credits. In the alternative, he prayed that if it was held that the properties, assets and credits were not governed by the rule of primogeniture, then these should be duly administered by the court, having due regard to the testamentary dispositions as were held to be valid or effective in law or in the alternative on the footing of intestacy.
4. During the pendency of the proceedings filed by Indrajitsinghji for letters of administration, the suit filed by the deceased, namely Suit No. 939 of 1953, came to be settled between all the heirs of Vijaysinghji by virtue of two sets of consent terms which were filed in court. The first set of consent terms was between the deceased Rajendrasinghji and Maharani Padmini Kooverba one of the widows left by Vijaysinghji. These consent terms are of August 23, 1955, under which certain properties were given to Maharani Padmini Kooverba.
5. Thereafter, as a result of another settlement arrived at between the deceased and the remaining heirs of Vijaysinghji, the entire suit came to be settled and this was under the consent terms of January 28, 1957. The detailed dispositions made under the consent terms of January 28, 1957, have been set out in the order of the Income-tax Appellate Tribunal dated August 9, 1974, in Estate Duty Application No. 123 (Bom) 69-70, which is annexed as exhibit 'C' in Income-tax Reference No. 152 of 1978. What is relevant to note is that certain properties specified in those consent terms were given to the heirs of Vijaysinghji as set out therein. For example Pramodsinghji, one of the sons of Vijaysinghji, was declared absolutely entitled to an immovable property known as "Rajendra Villa" at Rajpipla together with all furniture, fixtures and movable lying therein, and so on. The remaining or residuary property came to the share of the deceased Rajendrasinghji. The consent terms provided that none of the other heirs will have any right, title or interest in respect of the remaining property as also in respect of the privy purse that was being received by Rajendrasinghji and which may be received by his successors to the Rajpipla state and its "Gadi" as well as any other properties movable or immovable whatsoever.
6. As a result, the deceased Rajendrasinghji became the owner of the properties left by his father Vijaysinghji other than those given over to the defendants in the said suit. One of the properties which so came to him under the consent terms was the Rajpipla Palace. He also became entitled to the privy purse which he was already receiving.
7. In the estate duty proceedings arising on the death of Rajendrasinghji in February, 1963, the accountable person claimed that the properties both movable and immovable which were received by the deceased Rajendrasinghji on the death of his father, late Maharaja Vijaysinghji, under the consent decree of January 28, 1957, as well as any other property belonging to the deceased Rajendrasinghji at the time of his death, were the properties of the Hindu undivided family of the deceased, with the deceased as the karat. This contention of the accountable person has been upheld by the Income-tax Appellate Tribunal in estate duty proceedings by its order dated August 9, 1974. In respect of this order in the estate duty proceedings, the following question has been referred to us under section 64(1) of the Estate Duty Act, 1953 :
"Whether, on the facts and in the circumstances of the case, the properties in question, which came to the deceased from his father by virtue of the consent decree dated January 28, 1957, are governed by the law of succession and the said properties are the joint Hindu family properties and not the personal properties of the deceased ?"
8. Raghubirsinghji, the son of the deceased Rajendrasinghji, as the legal heir of the deceased Rajendrasinghji, filed his income-tax return for the assessment year 1963-64 as Rajendrasinghji died during the relevant accounting year for the assessment year 1963-64. The income-tax returns for the other assessment years which are under consideration before us in these references, have been filed by Raghubirsinghji. In all the income-tax return for the assessment year 1963-64 the income from the Rajpipla Palace as also certain other incomes were returned as the income of the Hindu undivided family of the deceased Maharaja Rajendrasinghji. In the subsequent assessment years, the income from Rajpipla Palace is shown as of the Hindu undivided family of Raghubirsinghji.
9. This was not acceptable to the Income-tax Officer who, in his assessment orders, held that the entire income was the individual income of the deceased Maharaja Rajendrasinghji for the assessment year 1963-64 and of Raghubirsinghji for the subsequent assessment years in question. Ultimately, the Income-tax Appellate Tribunal, however, has on the basis of the judgment and the order of the Income-tax Appellate Tribunal in estate duty proceedings, held that the income, inter alia, from Rajpipla Palace will have to be considered as income of the Hindu undivided family of the deceased Maharaja Rajendrasinghji for the assessment year 1963-64 and of the Hindu undivided family of Raghubirsinghji for the subsequent assessment years in question.
10. From these findings of the Tribunal, the following question has been referred to us or determination in Income-tax Reference No. 152 of 1978 :
"Whether, on the facts and in the circumstances of the case, the income arising from the property called 'Rajpipla Palace' was the income of the Hindu undivided family of which H. H. Rajendrasinghji was the karta and was not the income of H. H. Rajendrasinghji for the assessment year 1963-64 and whether for the assessment years 1964-65 to 1971-72, the income arising from this property was the income of the Hindu undivided family of which H. H. Raghubirsinghji was the karta and was not the income of H. H. Raghubirsinghji ?"
11. The following question has been referred to us for determination in Income-tax Reference No. 57 of 1983 :
"Whether, on the facts and in the circumstances of the case, the income arising from the property called 'Rajpipla Palace' is the income of the Hindu undivided family of which the assessee H. H. Raghubirsinghji is the karta and is not the income of the assessee ?"
12. In order to decide these questions it is necessary for us to examine the nature of the property in the hands of Maharaja Vijaysinghji, the father of the deceased Rajendrasinghji, and thereafter the nature of the property in the hands of the deceased Maharaja Rajendrasinghji - the property being Rajpipla Palace. We are not concerned with other properties in these references. It is contended on behalf of the Department by Mr. Khatri that Rajpipla Palace was an impartible estate which devolved on Maharaja Rajendrasinghji under the rule of primogeniture. In support of this contention, however, Mr. Khatri has not been able to show us any material from the record before us. In the order of the Income-tax Appellate Tribunal in the estate duty application, the Tribunal, after examining all the facts, has given a finding to the effect that there is no evidence whatsoever to prove that the succession, inter alia, to Rajpipla Palace was governed by the rule of primogeniture or that the property constituted an impartible estate as urged by the Revenue. Therefore, the contention of the Department has no factual basis.
13. No custom establishing succession by primogeniture for the said property can be spelt out from the material which is before us. Mr. Khatri relied upon the observations made in one of the wills of Maharaja Vijaysinghji to the effect that the rule of primogeniture would not apply to his properties. We do not see how these observation in any way establish that the rule of primogeniture was applicable to the devolution of Rajpipla Palace. From the facts which we have set out earlier, it is clear that Vijaysinghji treated all his properties including the Rajpipla Palace as his private property in respect of which he made various wills. His English will was probated. But it does not relate in any manner, to succession to the Rajpipla Palace. The Indian will of Vijaysinghji was not probated. It was a result of the consent decree passed in Suit No. 939 of 1953 and dated January 28, 1957, that Rajendrasinghji, as the heir of his father Vijaysinghji became entitled to the Rajpipla Palace. The said property, therefore, came into the hands of the deceased Rajendrasinghji in his capacity as an heir of his deceased father as a result of the settlement arrived at between him and other heirs of his deceased father.
14. In these circumstances, since the deceased Rajendrasinghji inherited this property as an heir of his father who died prior to the coming into force of the Hindu Succession Act of 1956, this property will have to be considered as a Hindu undivided family property in his hands, the property devolving on him on the death of his father in April, 1951, before the coming into force of the Hindu Succession Act, 1956. Hence the provisions of the Hindu law as applicable prior to the coming into force of the Hindu Succession Act of 1956 will have to be applied. Rajpipla Palace therefore will have to be considered as a Hindu undivided family property in the hands of Rajendrasinghji during his lifetime.
15. The deceased Rajendrasinghji died on February 2, 1963. Since this is after the coming into force of the Hindu Succession Act of 1956, devolution of Rajpipla Palace is governed by section 6 of the Hindu Succession Act, 1956. From the facts on record, it is clear that Rajendrasinghji, on his death, left behind, apart from his son Raghubirsinghji, also his widow and two daughters. Under section 6 of the Hindu Succession Act ordinarily, when a male Hindu dies after the commencement of the Hindu Succession Act, 1956, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property would devolve by survivorship upon the surviving members of the coparcenary. But this is not so when he leaves behind female relatives specified in Class I of the Schedule to the Hindu Succession Act. Widow and daughters are such female relatives. In that case, the interest of the deceased in Mitakshara coparcenary property shall devolve by testamentary or intestate succession as the case may be under the Hindu Succession Act and not by survivorship. Therefore, in the present case, on the death of the deceased Rajendrasinghji, his interest, inter alia, in the deceased Rajendrasinghji, his interest, item alia, in the Rajpipla Palace would devolve by intestate succession under the Hindu Succession Act, 1956, as the deceased Rajendrasinghji did not leave behind any will.
16. In this connection a reference maybe made to a decision of the Supreme Court in the case of CWT v. Chander Sen [1986] 161 ITR 370. The court in that case was concerned with the nature of the property for the purposes of wealth-tax. The Supreme Court observed that it would be difficult to hold today that property which devolved on a Hindu male under section 8 of the Hindu Succession Act would be a 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 the female heirs with respect to whom no such concept could be applied or contemplated. The Supreme Court, therefore, held that the property which devolved on the son under section 8 of the Hindu Succession Act would be his absolute property and would not be joint Hindu family property vis-a-vis his own son.
17. This judgment of the Supreme Court has been followed in the subsequent case of CIT v. P. L. Karuppan Chettiar . In this case, the Supreme Court considered the case of the deceased who, with his wife, sons and daughter constituted a Hindu undivided family at the time of his death. His heirs including his son succeeded to the properties left by the deceased under section 8 of the Hindu Succession Act, 1956. The question was whether the income from the property coming to the son on the death of the deceased should be assessed as the income of the joint family of the son. The Supreme Court held that the income from the property which was inherited by the son on his father's death was not assessable as income of the joint family.
18. The ratio of these cases would apply to the present case also and the share in the Rajpipla Palace inherited by Raghubirsinghji under section 8 of the Hindu Succession Act, 196, on the death of Maharaja Rajendrasinghji cannot be considered as a Hindu undivided family property in his hands. Therefore, income from such share in Rajpipla Palace will have to be considered as his individual income.
19. We have to consider the nature of the interest of Raghubirsinghji in the Rajpipla Palace. As Rajpipla Palace was a property belonging to the Hindu undivided family of Rajendrasinghji, Raghubirsinghji had an interest in the said property by virtue of his being a coparcener in the said Hindu undivided family. But in respect of the interest of Rajendrasinghji in the said Hindu undivided family property, a portion of which devolved by intestate succession on Raghubirsinghji under the Hindu Succession Act of 1956, Raghubirsinghji would be entitled to it as an individual inheriting the property under section 6 of the Hindu Succession Act. The income, therefore, which accrues to Raghubirsinghji in respect of the said property will have to be proportionately divided and a portion considered as income of the Hindu undivided family and the remaining income as income of Raghubirsinghji as an individual. The division of income will have to be in the same proportion as the Hindu undivided family interest of Raghubirsinghji in the said property and his individual interest in the said property which he inherited from his father under the Hindu Succession Act.
20. For the above purpose, the share of Raghubirsinghji in the said property as a coparcener in the Hindu undivided family of Rajendrasinghji as also his share in the said property as the heir of Rajendrasinghji under the Hindu Succession Act shall be worked out byte Tribunal when the matter goes back to the Tribunal for giving effect to our order and the share of Raghubirsinghji in the income of the said property shall be worked out accordingly.
21. Since it is strenuously urged before us by Mr. Khatri that Rajpipla Palace must be considered as having devolved by primogeniture on Raghubirsinghji we will also consider the situation which arose in this case on the death of Rajendrasinghji. In the first place as the Rajpipla Palace had not devolved on Maharaja Rajendrasinghji by primogeniture, it cannot devolve on Raghubirsinghji by primogeniture after the death of Rajendrasinghji. We will assume for the sake of argument, however, that the property in the hands of Rajendrasinghji was an impartible estate which had previously devolved on him by primogeniture. However, on the coming into forces of the Hindu Succession Act the position altered materially. Under section 5 of the Hindu Succession Act, save as otherwise expressly provided in the Act, any custom or usage, inter alia, as part of the Hindu law then in force immediately before the commencement of this Act shall cease to have effect with respect to any matter for which provision is made in this Act. Section 5, however, has carved out certain exceptions. Section 5(ii) says that the Hindu Succession Act shall not apply, inter alia, to "any estate which descends to a single heir by the terms of any covenant or agreement entered into by the Ruler of any Indian State with the Government of India or by the terms of any enactment passed before the commencement of this Act." Therefore, under section 4 any custom or usage under which a property devolved by the rule of primogeniture would stand abolished. This, however, will not be the case if under any convenient or agreement between the Ruler of any Indian State and the Government of India, estate descends to a single heir; or unless there is an enactment passed before the commencement of Hindu Succession Act which provides for descent of any property to a single heir. In the present case, therefore, even if we assume that the property was held by Maharaja Rajendrasinghji in his lifetime as an impartible estate and is liable to devolve by the rule of primogeniture, on the coming into force of the Hindu Succession Act, such custom or usage would stand abolished. Devolution to the property would now be governed by section 6 read with section 8 of the Hind Succession Act. The Department, therefore, in order to succeed, would have to show that under a covenant or agreement between the Ruler of the Rajpipla state with the Government of India there was a provision for devolution of Rajpipla Palace as an impartible estate to a single heir. We have not been shown any such covenant. Nor is there any enactment passed before the commencement of the Hindu Succession Act, 1956, which provides for such devolution of the Rajpipla Palace. We may refer in this connection to a decision of the Division Bench of this court in the case of CIT v. Her Highness Maharani Vijaya Raje Scindia in Income-tax Reference No. 158 of 1979, reported in [1994] 208 ITR 38. The Division Bench has considered in extenso the terms of the covenant dated April 22, 1948, between the Ruler in that case and the Government of India and has come to the conclusion that the covenant does not indicate that the estate stands guaranteed to a single heir by its terms. The relevant terms of the covenant in our case are substantially similar. The Division Bench in that case also considered the effect of sections 4(1) and 5(ii) of the Hindu Succession Act and held that in the absence of any covenant as set out in section 5(ii) or any enactment as set out therein, the property would devolved under the provisions of the Hindu Succession Act. The Division Bench, however, did not consider in that case the effect of the proviso to section 6 dealing with devolution of the estate when there is a female heir in Class I as the question does not appear to have been raised (or it may not have arisen) in that case.
22. The Tribunal, therefore, has rightly held that unless the Department can establish that in law the said property devolved by primogeniture on the death of Rajendrasinghji, the law requires that the property should be considered as passing by succession under the Hindu Succession Act. In the premises we answer the questions as follows.
(1) The question in Income-tax Reference No. 152 of 1978 and in Income-tax Reference No. 57 of 1983 is answered as follows :
(i) The income arising from the property called Rajpipla Palace was the income of the Hindu undivided family of which. H. H. Rajendrasinghji was the karta and was not the income of H. H. Rajendrasinghji as an individual for the assessment year 1963-64. For the assessment years 1964-65 to 1971-72 and the assessment years 1973-74, 1974-75 and 1976-77 the income arising from this property was the income of a Hindu undivided family of which H. H. Raghubirsinghji was the karta to the extent that this income arose from his interest in the said property derived by virtue of his membership of the Hindu undivided family of H. H. Rajendrasinghji as a coparcener. The income arising from this property to the extent that the income arose from his interest in the property as an heir of H. H. Rajendrasinghji under the Hindu Succession Act, 1956, was the income of H. H. Raghubirsinghji as an individual.
(2) We answer the question in the estate duty reference in the affirmative and in favour of the accountable person.
23. In the circumstances of the case, there will be no order as to costs.