Patna High Court
Commissioner Of Income-Tax, Bihar And ... vs Kumar Tara Prasad Singh, And Others. on 3 April, 1963
Equivalent citations: [1964]51ITR98(PATNA)
JUDGMENT
Miscellaneous Judicial Case No. 343 of 1960.
Raja Shiva Prasad Singh was the proprietor of an impartible estate governed by the rule of primogeniture in the matter of succession. The Raja died on the 1st January, 1947, and at the time of his death he was the Karta of the Hindu undivided family consisting of himself, his wife, Rani Mandakini Devi, and five sons, namely, (1) Sri Kali Prasad Singh, (2) Thakur Shyam Prasad Singh, (3) Kumar Tara Prasad Singh, (4) Sri Uma Prasad Singh and (5) Sri Rama Prasad Singh. After the death of the Raja on the 1st January, 1947, his eldest son, Sri Kali Prasad Singh, became entitled to the income of the impartible estate. In the lifetime of the late Raja Shiva Prasad Singh rent and royalties amounting to Rs. 2,19,293 had fallen due which was realised after his death. This amount was taxed by the Income-tax Officer in the hands of the Hindu undivided family for the assessment year 1948-49. The Assistant Commissioner of Income-tax, however, held that the rents and royalties were not liable to be taxed in the hands of the Hindu undivided family as they were in the nature of capital receipts. The income-tax department took the matter in appeal before the Appellate Tribunal, but the appeal was dismissed. The Tribunal held that the arrears of rents and royalties were actionable claims and, therefore, movable properties which belonged absolutely to the last male holder of the impartible estate, namely, Raja Shiva Prasad Singh, and after his death the rents and royalties devolved on the personal heirs of Raja Shiva Prasad Singh and not on the Hindu undivided family. Upon a reference made by the Tribunal at the instance of the Commissioner of Income-tax, the Patna High Court affirmed the decision of the Tribunal (see Kali Prasad Singh, In re).
After the annulment of the assessment made in the matter of the Hindu undivided family, the Income-tax Officer took action under section 34 of the Income-tax Act and made assessment on the entire body of personal heirs of the late Raja Shiva Prasad Singh regarded collectively as an association of persons. The Income-tax Officer also made assessment as a protective measure upon the different heirs individually in respect of one-sixth share of each of them on the amount of Rs. 2,08,956 for the assessment year 1948-49 and Rs. 76,665 for the assessment year 1949-50. Rani Mandakini Devi was assessed in the status of an individual in respect of her one-sixth share of the total amount of accumulated rents and royalties which were realised after death of the Raja. It was argued on behalf of the assessee before the Appellate Assistant Commissioner that the receipts were of a capital nature in the hands of the assessee and should not have been assessed to income-tax. The Appellate Assistant Commissioner rejected the contention and dismissed the appeal. It was held by the Appellate Assistant Commissioner that the assessee was liable to be assessed as a member of an association of persons along with the other heirs of the late Raja Shiva Prasad Singh in respect of her one-sixth share of the amount of rents and Royalties collected after the death of latter. Against the decision of the Appellate Assistant Commissioner the assessee as well as the income-tax department preferred appeals before the Income-tax Appellate Tribunal. In the appeal preferred by the income-tax department the Tribunal held that the heirs of the late Raja Shiva Prasad Singh could not be taxed as an association of persons in respect of arrears of rent and royalties which had fallen due in the lifetime of the late Raja and realise after his death. In the appeal preferred by the assessee the Tribunal held that the assessee did not inherit either the impartible property or the right to enjoy the income thereof, but the accumulated arrears came to her in a lump sum dissociated from the property itself. The Tribunal took the view that the amount of rents and royalties which had develop upon the assessee after the death of Raja Shiva Prasad Singh was in the nature of capital receipts not liable to be assessed to income-tax in the hands of the assessee.
At the instance of the Commissioner of Income-tax, the Appellate Tribunal has stated a case on the following question of law under section 66 (1) of the Income-tax Act :
"Whether, on the facts of the case, the rents, royalties, etc., which had accrued due in the lifetime of the late Raja Shiva Prasad Singh but were realised after his death, are taxable in the hands of the assessee in respect of her share as his heir ?"
In Kali Prasad Singh, In re it was held by a Division Bench of this High Court that rents and royalties which accrue to the holder of an impartible estate during his lifetime but are realised after his death are not taxable in the hands of his eldest son as the income of a Hindu undivided family. It was further held in that case that in the case of an impartible estate, which is joint family property, the income of such impartible estate and the accumulation of such income are the absolute property of the holder, and after the death of the holder the income and accumulations go not to the joint family but to the personal male heirs of the holder. In the present case it was argued by learned counsel on behalf of the income-tax department that the rents and royalties would have been taxed in the hands of Raja Shiva Prasad Singh had he continued to live, and, therefore, the heirs are liable to income-tax upon such arrears of rents and royalties. We are unable to accept this argument as correct. It has been stated by the Income-tax Appellate Tribunal in the course of its appellate order that the Raja used to maintain his income on cash basis and he used to be assessed on that basis and that the rents and royalties were never collected by the Raja and could not, therefore, have been taxed in his hands. What passed on to the personal heirs of the late Raja after his death was an actionable claim with regard to the unrealised arrears of rents and royalties. It is also manifest that the assessee did not as a matter of law inherit either the impartible property or the income thereof but the accumulated arrears devolved upon her in a lump share dissociated from the property itself. It has been pointed out be the Judicial Committee in Commissioner of Income-tax v. Shaw Wallace and Company that the term "income" in the Indian Income-tax Act connotes a periodical monetary return "coming in" with some sort of regularity, or expected regularity, from definite sources. At page 212 of the report, Sir George Lowndes states :
"The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. This income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as capital. But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production."
In circumstances of the present case, we are therefor of opinion that the share of the assessee, Rani Mandakini Devi, in the rents and royalties is not stamped with the character of income and, therefore, not liable to be assessed to income-tax. We accordingly answer the question of law referred to the High Court in favour of the assessee and against the income-tax department. There will no order as to costs with regard to the reference.
Miscellaneous Judicial Cases Nos. 342, 344 and 489 of 1960.
In all these cases the questions of law referred to the High Court by the Income-tax Appellate Tribunal are identical in character to the question of law referred in miscellaneous Judicial Case No. 343 of 1960. For the reasons given by us in the judgment of Miscellaneous Judicial Case No. 343 of 1960, we consider that the questions of law in all these cases must be answered in favour of the assessee and against the income-tax department. There will be no order as to costs with regard to any of these cases.