Patna High Court
Panna Lal Rastogi vs Commissioner Of Income-Tax on 6 December, 1965
Equivalent citations: AIR1967PAT16, [1967]65ITR592(PATNA)
JUDGMENT Narasimham, C.J.
1. The question referred to this Court by the Wealth Tax (Income-tax) Tribunal under Section 66 (1) of the Indian Income-tax Act, read with Section 27 of the Wealth Tax Act, is as follows:--
"Whether on the facts and in the circumstances of the case the status of the petitioner is that of Hindu joint family ?"
2. The facts stated by the learned Tribunal are as follows. The petitioner on partition obtained his share out of the ancestral property of an original joint Hindu Mitakshara family, After partition his family consisted of himself and his wife, there being no issue. Thus he is the sole co-parcener in respect of the property that fell to his share after partition. The question for consideration is whether for the purpose of income-tax and wealth tax he should be assessed as an "individual" or else, as a Hindu undivided family.
3. Following the well known decision of the Privy Council in Kalyanji's case, Kalyanji Vitbaldas v. Commissioner of Income-tax, Bengal, AIR 1937 PC 36, and the subsequent decisions following the same, the Tribunal held that the assessee should be assessed only as an "individual". But in Rukmini Bai v. Commissioner of Wealth Tax, B. and O., AIR 1984 Orissa 274, a Division Bench of the Orissa High Court, after discussion of the subsequent decisions of the Privy Council, especially Anant v. Shankar, AIR 1948 PC 196, Srinivas Krishnarao v. Narayan Devji, AIR 1954 SC 379, and the case which went from Ceylon, Attorney-General of Ceylon v. A.R. Arunachalam Chettiar, 1957 App Cas 513: 1958-34 ITR (Supp) 42, held that the ancestral property in the hands of a sole surviving co-parcener should also be held to be the property of a Hindu undivided family, because there is always a potentiality of another co-parcener coming into existence either by adoption or by birth. The subsequent decisions of the High Court, in which doubt was cast on the correctness of that portion of the judgment of the Privy Council in Kalyanji's case, AIR 1937 PC 36, which dealt with the point in controversy, were also noticed. It is, therefore, unnecessary to repeat the reasons given in that judgment. I may, however, specially refer to the Ceylon case (at pp. 45-46) where their Lordships pointed out that the true test to decide whether the property in the hands of a sole surviving co-parcener is the properly of a Hindu undivided family or that of an individual is not whether his right of alienation of the property is unrestricted, which, according to them, was an irrelevant consideration. Their Lordships observed that it is only on analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as "joint property" of the undivided family. That decision was given while construing the expression "Hindu undivided family" occurring in a taxing statute of Ceylon, namely, the Estate Duty Ordinance I of 1938, and there is no special reason why the principle laid down therein should not be applied in construing the same expression occurring in the taxing statutes of India. Kalyanji's case, AIR 1937 PC 36, was actually noticed by their Lordships of the Privy Council, as will be clear from p. 46.
4. Our attention was, however, drawn to a judgment of the Rajasthan High Court in Mukat Beharilal Bhargava v. Commissioner of Income-tax, Delhi, 1964-53 ITR 613 (Raj), and that of the Madras High Court in K.R. Ramachandra Rao v. Commissioner of Wealth Tax, Madras, 1963-48 ITR 959: (AIR 1963 Mad 280), where, following the principle in Kalyanji's case, AIR 1937 PC 36, it was held that the property in the hands of a sole surviving co-parcener of a Hindu undivided family should be assessed as the property of an "individual". With great respect, I am unable to follow these decisions, because they have not taken into consideration the subsequent decisions of the Privy Council, especially in the Ceylon case, 1958-34 ITR (Supp) 42, mentioned above. On the other hand, there is a judgment of the Mysore High Court in Commissioner of Wealth Tax, Mysore v. D. C. Basappa, 1964-51 ITR 790: (AIR 1964 Mys 204), taking a contrary view, where the decision of the Privy Council in the Ceylon case was relied on.
5. If it be held that the property in the hands of a sole surviving co-parcener is not the property of the Hindu undivided family, startling results may ensue. As soon as he gets a son or adopts a son, the property will become the property of a Hindu undivided family. If that son happens to die, the property will then become the property of an "individual" until another son is either born or adopted. We will thus have a bewildering complexity as regards the status of an assesses which would vary from time to time. The safer test seems to be, as pointed out by the Privy Council in the Ceylon case, 1958-34 ITR (Supp) 42, whether there is a potentiality of a co-parcener being, brought into existence either by law or by nature. So long as that potentiality is there, the property must be held to be that of a Hindu undivided family. Such a potentiality exists in the case of a sole surviving co-parcener, because either he may beget a son or adopt a son. It also existed while the property was in the possession of a Hindu widow prior to the Hindu Succession Act of 1955, because by making a valid adoption she could continue the original joint family. It is true that in the Orissa case, AIR 1964 Orissa 274, it was pointed out that when she becomes the full owner of the property by virtue of the Hindu Succession Act the aforesaid potentiality disappears and the property in her hands must be assessed as that of an "individual". Here, however, the assessee is a male, and whether he adopts a son or begets a son a co-parcenery is established between him and his son. The property cannot be treated for all purposes as equivalent to his self-acquired property, in which alone his status can be said to be that of an "individual".
6. For these reasons the question is answered in the affirmative. The status of the petitioner for the purpose of assessment is that of a Hindu Joint family, or a Hindu undivided family. The reference is answered accordingly. The Department should pay costs of Rs. 100 to the petitioner, S.N.P. Singh, J.
7. I agree.