Andhra HC (Pre-Telangana)
Commissioner Of Wealth-Tax vs M.A.R. Rajkumar on 4 October, 1996
Equivalent citations: [1997]226ITR804(AP)
Author: B. Sudershan Reddy
Bench: B. Sudershan Reddy, S.S. Mohammed Quadri
JUDGMENT B. Sudershan Reddy, J.
1. This reference, at the instance of the Revenue, under section 256(1) of the Income-tax Act, 1961, came up before a Division Bench of this court for its opinion. On consensus, a composite question was framed by the court required for its opinion and the said question reads as follows :
"Whether, on the facts and in the : circumstances of the case, the Appellate Tribunal is justified in subjecting the Hindu undivided family of M.A. Rajkumar to assessment as a non-specified Hindu undivided family at the rates specified in clause (i) Part 1 of Schedule 1 to the Wealth-tax Act, 1957, for the purpose of wealth-tax assessments for the years 1976-77 and 1977-78 on the basis of the declaration dated April 5, 1971, made by Smt. Naga Satyavathi relinquishing her status and rights in the property as a member of the Hindu undivided family ?"
However, the Division Bench felt that there is no direct decision of any High Court or the Supreme Court on the point. After referring to the judgment of this court in Prem Chand v. CIT , and the Division Bench decision of the Madhya-Pradesh High Court in CIT v. Dhannamal [1983] Tax LR 323, the Division Bench of this court came to the conclusion that the said two decisions are conflicting with each other and, therefore, felt the expediency of referring the matter to a Full Bench for an authoritative pronouncement on the question. The Division Bench observed :
"What follows the main question that emerges principally for consideration is :
'Whether the wife who was a member of a Hindu joint family comprising herself, her husband and sons can sever herself from the membership of the joint family by unilateral declaration to that effect, yet retaining the marital tie ?'"
Before we proceed to answer the question, it would be necessary to briefly refer to the relevant facts.
2. The brief facts : The dispute relates to the wealth-tax assessment for the assessment years 1976-77 and 1977-78. The assessee filed declarations to the effect that the members of the Hindu undivided family did not have any taxable wealth for the said assessment years and on such declarations, the Wealth-tax Officer treated the status of the assessee as a non-specified Hindu undivided family. However, it appears, that later, it was realised that the wife of the karta had substantial wealth and was assessed on a net wealth of Rs. 5 lakhs and odd and Rs. 3 lakhs and odd for the said assessment years, respectively. Consequently, the Commissioner of Wealth-tax directed the Wealth-tax Officer in exercise of the powers conferred under section 25(2) of the Wealth-tax Act, 1957 (for short "the Act"), to treat the status of the assessee as specified Hindu undivided family which resulted in higher rate of taxation. The order of the Commissioner was challenged by the assessee. The Income-tax Appellate Tribunal heard the case. There was a difference of opinion on the declaratory/release deed dated April 5, 1971, purported to have been executed by the wife of the karta of the assessee under which she made a declaration to the effect that she ceased to be a member of the Hindu undivided family and that she would not claim any right of maintenance in the properties of the Hindu undivided family as she relinquished all such rights that had accrued and vested in her. She is further said to have declared that she ceased to be a member of the Hindu undivided family. With regard to this declaration, there was a difference of opinion in the Tribunal and, therefore, the question has been referred to this court for opinion.
3. So, the real question that would fall for the consideration of this court is as to whether the wife of the karta ceased to be a member of the Hindu undivided family as a result of the execution of the document dated April 5, 1971, although she continued to be the wife of the karta ?
4. The concept of "joint and undivided family" is the normal condition of Hindu society. There is always a presumption that the members of the Hindu family are living in a state of union, unless the contrary is established. There can be no limit to the number of persons of whom a Hindu joint family consists. The Hindu joint family has no separate legal entity from its members. The law on the subject is succinctly stated in Mayne's Treatise on Hindu Law and Usage revised by Sri Justice Alladi Kuppuswami at page 557 as follows :
"There can be a joint family with a single male member and his wife or where there are widows of deceased coparceners. There can also be a joint family where there are widows only or a widow and an unmarried daughter. For, on the death of a sole surviving coparcener, a Hindu joint family is not finally terminated so long it is possible in nature or law to add a male member to it. A widow holding her deceased husband's ancestral properties as a widow's estate constituted a Hindu undivided family prior to the Hindu Succession Act. The Act had the effect of altering the status of a widow to an individual for the purpose of taxation. The family cannot be at an end while there is still a potential mother, if that mother in the way of nature or in the way of law brings in a new male member. The existence of a coparcenary is not essential for the existence of a joint family. A coparcener who has received his share on partition and has no wife or children, cannot constitute a joint family and he must be assessed to tax as an individual."
It is well settled that the Hindu coparcenary is, however, a narrower body than the joint family. A joint family may consist of female members. It may consist of a male member, his wife, his mother and his unmarried daughters. The property of a joint family does not cease to belong to the family merely because there is only a single male member in the family. In Sunil Kumar v. Ram Parkash, , the law is clearly explained by the apex court in the following terms (page 581) :
"Those who are of individualistic attitude and separate ownership may find it hard to understand the significance of a Hindu joint family and joint property. But it is there from ancient times perhaps, as a social necessity. A Hindu joint family consists of male members descended lineally from a common male ancestor, together with their mothers, wives or widows and unmarried daughters. They are bound together by the fundamental principle of sapindaship or family relationship which is the essential feature of the institution. The cord that knits the members of the family is not property but the relationship of one another."
It is absolutely clear from the said decision that the members of the Hindu joint family are bound together by the relationship of one another and form the basis for the joint family and not the property. It is not something in the nature of corporation or partnership out of which any shareholder or a partner can walk out. Membership in the Hindu undivided family cannot be terminated by a unilateral act leading to the divesting of any right in the estate in the joint family unless there is a partition between the members of the joint family or any family settlement as such. Dealing with section 12 of the Hindu Adoptions and Maintenance Act, 1956, the Supreme Court in Vasant v. Dattu, held (headnote) :
"The introduction of a member into a joint family, by birth or adoption, may have the effect of decreasing the share of the rest of the members of the joint family, but it certainly does not involve any question of divesting any person of any estate vested in him. The joint family continues to hold the estate, but with more members than before. There is no fresh vesting or divesting of the estate in anyone."
The joint family property does not cease to be joint family property when it passes to the hands of a sole surviving coparcener.
5. The instant question can be answered even without going into the truth or otherwise of the declaratory/release/relinquishment deed dated April 5, 1971, purported to have been executed by the wife of the karta of the Hindu undivided family in the instant case. It is not the case that the document is in the nature of any conveyance transferring any rights in any immovable property. If the document is to be so construed, it would be hit by the provisions of the Transfer of Property Act and also the provisions of the Indian Registration Act. The said document, therefore, cannot be relied upon for any purpose if it is to be treated as one of conveyance. It is also an admitted fact that the marriage between the wife and the assessee-husband is not dissolved by any decree of divorce. The relationship of husband and wife continues. How can it be said that she ceased to be a member of the Hindu undivided family ?
6. There is no severance in the status of the joint family as such. Even in cases where there is severance in the status of a joint family, it is held that the joint family cannot be deprived of its property and the income derived therefrom. The apex court in Bhagwant P. Sulakhe v. Digambar Gopal Sulakhe, , held (page 89) :
"The plaintiff by seeking to bring about a severance in the status of the joint family, cannot deprive the joint family of this property and the income derived on the basis of the managing agency agreement continues to remain the property of the joint family, so long as this joint family asset is not partitioned and otherwise continues to remain in existence. We have, therefore, no hesitation in holding that the remuneration received by the plaintiff Bhagwant from the company for acting as the managing agent on the basis of the managing agency agreement must necessarily be held to be the joint family property and the plaintiff Bhagwant cannot claim the same to be his personal property."
It is further held in the said case (page 90) :
"The character of any joint family property does not change with the severance of the status of the joint family and a joint family property continues to retain its joint family character so long as the joint family property is in existence and is not partitioned amongst the co-sharers. By a unilateral act it is not open to any member of the joint family to convert any joint family property into his personal property."
The Wealth-tax Act, 1957, refers to Hindu undivided family in section 3, but the same is not defined in the Act. Section 3 of the Act is a charging section. Section 4 of the Act stipulates as to how the net wealth is to be computed. Sub-section (1A) of section 4 of the Act refers to a Hindu undivided family for the purpose of computing the net wealth of an individual being a member of a Hindu undivided family. As discussed above, the concept of a Hindu undivided family is too well-known under the Hindu law even before the codification of Hindu law and also thereafter. The expression "Hindu undivided family", therefore, is to be interpreted and understood and construed in the sense as it is understood in Hindu law even for the purpose of the Wealth-tax Act. The reference to the Hindu undivided family in sections 3 and 4 of the Act is, therefore, to be understood and interpreted in this background. In Surjit Lal Chhabda v. CIT , the apex court on this aspect said (page 781) :
"Section 2(9) of the Indian Income-tax Act, 1922, defines a 'person' to include, inter alia, a 'Hindu undivided family'. Under sections 3 and 55 of that Act, a Hindu undivided family is a taxable unit for the purpose of income-tax and super-tax. The expression 'Hindu undivided family' finds reference in these and other provisions of the Act but that expression is not defined in the Act. The reason of the omission evidently is that the expression has a well-known connotation under the Hindu law and being aware of it, the Legislature did not want to define the expression separately in the Act. Therefore, the expression 'Hindu undivided family' must be construed in the sense in which it is understood under the Hindu law."
Thus, it is clear that the joint family or the Hindu undivided family is a body consisting of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption :
"The fundamental principle of the Hindu joint family is the sapindaship. Without that it is impossible to form a joint Hindu family. With it as long as a family is living together, it is almost impossible not to form a joint Hindu family. It is the family relation, the sapinda relation, which distinguishes the joint family, and is of its very essence." (see Karsondas v. Gangabai (10 BLR 184)).
There is no dispute in the instant case that the husband-assessee and his wife are living together as such even after the alleged declaratory/release/relinquishment deed dated April 5, 1971. By applying the principles aforementioned, there is no difficulty in holding that the wife continues to be a part and a member of the Hindu undivided family.
7. Having said so, it may be necessary to advert to the contention about the effect and validity of the declaratory/release deed dated April 5, 1971, purported to have been executed by the wife of the karta. It is a settled principle that there cannot be any divesting of title without the title vesting in others. Can it be said that by a unilateral act the wife had divested herself of all her interest in a Hindu undivided family ? It is urged before us that by such declaration she got herself divested of her right, title and interest in the estate of the Hindu undivided family. But the question would be as to in whom shall it vest ? The one and the only answer is that the same shall vest in the Hindu undivided family. We have already held that by a unilateral act she cannot separate herself from the Hindu undivided family. The result is that the property relinquished by the wife comes back to the Hindu undivided family of which she is a member. We do not find any difficulty whatsoever in arriving at such conclusion.
8. Declaratory/release/relinquishment deed :
The said document is admittedly not a document of any family settlement or partition. By the said document, the wife is purported to have relinquished her rights in the property. The release or relinquishment always involves transfer of property. The word "release" is defined in Stroud's Judicial Dictionary (5th edition) at page 2214 as follows :
"'Release' is the giving or discharging of the right or action which any hath or claimeth against another or his land."
In Black's Law Dictionary (5th edition) at page 1159, the word 'release' is defined as follows :
"The relinquishment, concession, or giving up of a right, claim or privilege, by the person in whom it exists or to whom it accrues, to the person against whom it might have been demanded or enforced. Abandonment of claim to party against whom it exists, and is a surrender of a cause of action and may be gratuitous or for consideration - Giving up or abandoning of claim or right to person against whom claim exists or against whom right is to be exercised.
An express release is one directly made in terms by deed or other suitable means. An implied release is one which arises from acts of the creditor or owner, without any express agreement. A release by operation of law is one which, though not expressly made, the law presumes in consequence of some act of the releasor, for instance, when one of several joint obligors is expressly released, the others are also released by operation of law.
Release by way of enlarging an estate. - A conveyance of the ulterior interest in lands to the particular tenant; as if there be tenant for life or years, remainder to another in fee, and he in remainder releases all his right to the particular tenant and his heirs, this gives him the estate in fee."
In P. Ramanatha Aiyar's Law Lexicon (Reprint edition 1987), the word "release" is defined as follows :
"The gift or discharge of a right of action, which any one hath or claimeth against another or his land.
A release is a discharge of an existing obligation or right of action by the person in whom the obligation or right is vested to the person against whom it exists.
A 'release' has been defined to be the act or writing by which some claim or interest is surrendered to another, the giving up or abandoning of a claim or right to the person against whom the claim exists or the right is to be exercised or enforced. No set form of words is necessary to constitute a release, but such words should be used as would express the intention, and such intention would be recognised in law and equity."
Thus, it is absolutely clear that release or relinquishment involves the transfer of property. If it is so construed the so-called declaratory deed dated April 5, 1971, purported to have been executed by the wife of the karta, viz., Smt. Naga Satyavathi cannot be taken into consideration as the same is hit by section 54 of the Transfer of Property Act and also section 17(1) of the Indian Registration Act.
9. Coming to the question as to whether there is any conflict as such between the decision of the Division Bench of this court in Prem Chand v. CIT and CIT v. Dhannamal [1983] Tax LR 323 (MP), we are of the opinion that the same is not really material for the purpose of disposing of this reference. The reference order of the Division Bench itself would show that even according to the learned judges, both the decisions do not deal with the situation on hand. The Division Bench in fact in its reference order stated that there is no direct decision or authoritative pronouncement with regard to the question on hand. The Division Bench, in its reference order, observed thus :
"There is no direct decision of any High Court or the Supreme Court on the point."
"There is no specific statutory law or otherwise precluding the wife from causing such severance. True these are some of the salient features that are to be adverted to and in the light of these two conflicting decisions, at any rate, this court felt the expediency of referring the matter to a larger Bench for an authoritative pronouncement on the question."
For the aforementioned reasons, we declare that the wife who was a member of the Hindu undivided family comprising herself, her husband and her sons, can never sever herself from the membership of the Hindu undivided family by a unilateral declaration to that effect, yet retaining the marital tie. For all these reasons, we answer the reference in favour of the Revenue and against the assessee.