Rajasthan High Court - Jaipur
Rao Narain Singh vs Commissioner Of Income-Tax on 3 July, 2001
Equivalent citations: [2001]252ITR88(RAJ)
JUDGMENT Rajesh Balia, J.
1. This is a reference made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the assessee, Rao Narain Singh of Masuda, relating to the assessment year 1960-61. It arises out of Income-tax Appeal No. 786/JP of 1972-73 and Cross Objection No. 33/JP of 1972-73 for the assessment year 1960-61. Along with the statement of case, the following two questions of law have been referred to this court for its opinion arising out of the order of the Tribunal in the aforesaid appeal and cross-objection.
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the aforesaid estate was different in nature from the estates created by the Crown Grants Act 15 of 1895, and that, as such, the decision of the Privy Council in Rajendra v. Raghubans Kanwar, AIR 1918 PC 25, would not apply to the facts of the present case ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the business of Vakil and Co. and the immovable properties situated in Masuda, Ramgarh, Vijaynagar and Ajmer which were admittedly part of the impartible estate of Masuda up to July 31, 1955, continued to remain the properties of the impartible estate of Masuda even after the abolition of the Istimrari estate of Masuda by the Ajmer Abolition of Intermediaries and Reforms Act, 1955, and, therefore, the income therefrom was assessable in the hands of the asses-see as individual ?"
2. The facts, as emanating from the statement of case : The applicant-asses-see was the holder of the Istimrari estate of Masuda, situated in the District of Ajmer. According to the recital recorded in the books of the asses-see dated August 18, 1955, spelling out partition of compensation to be received on resumption of the Istimrari estate of Masuda Thikana and has been the property of family of the assessee for the last 14 generations. On March 29, 1875, Shri Bahadur Singh, the grandfather of the assessee, was the holder of the Thikana Masuda and was paying revenue in respect of the estate to the British Government. On that date, the Governor-General in Council issued a Sanad in favour of the late Shri Bahadur Singh whereby the then British Government waived its right of enhancing the assessment of the estate of Shri Bahadur Singh in future and declared the assessment of the said estate to be fixed in perpetuity. The Sanad recited that the Istimrardar of Masuda for the time being and holders specified in Schedule "A" shall all time be faithful to Her Majesty the Queen Victoria and this Sanad was prefaced with the object that "whereas the Government and Council has been pleased to waive the right of the British Government to enhance the assessment of your estates and to declare the existing assessment of the said estates to be fixed in perpetuity, therefore, the Sanad was granted to set forth the conditions in consideration of the true and faithful observance and fulfilment of which by the Istimrardar, then holding the estate, to be observed truly and faithfully and his heirs representatives or assignees the concession was made." In other words, the Sanad contained the conditions on the fulfilment of which the concession of freedom from enhancement of revenue was granted in consideration of faithful allegiance to British Crown.
3. Under the conditions of the said Sanad, apart from fixing various rates of Nazranas on succession and for maintenance of canal or irrigation work, constructed or maintained at the expense of the Government it also prohibited the Istimrardar for the time being, from alienating his estate or any portion thereof by lease, mortgage or otherwise for the time extending beyond his own life time.
4. After the grant of the aforesaid Sanad, the Ajmer Land and Revenue Regulation, 1877 (hereafter called, "the Regulation of 1877"), was promulgaged. The Regulation, inter alia, provided so far as succession of Istimrari was concerned, under Section 23 thereof that "when a Istimrardar dies leaving sons or male issue descended from him through males only whether by birth or adoption, or when after the death of an Istimrardar his widow has power to adopt and adopts a son to him, the Istimrari estate shall devolve as nearly as may be according to the custom of the family of the deceased : Provided--First : That the descent shall in all cases be to a single heir, according to the rule of primogeniture."
5. The conditions about adoption were also laid, with which we are not concerned herein this reference.
6. On the death of Shri Bahadur Singh, his eldest son, Shri Vijay Singh, succeeded to the Thikana of Masuda. On his death in 1938, his eldest son, Thakur Narain Singh, the assessee in the present case, succeeded to the aforesaid estate.
7. The ancient impartible estate of Thikana of Masuda which was inherited by the present assessee, the eldest son, at the time of death of his father, consisted of (i) the Istimrari estate consisting of the villages mentioned in Schedule "A" to the Sanad of 1875, (ii) the immovable properties situated in Masuda, Ramgarh, Vijay Nagar and Ajmer, and (iii) the business in the name of Vakil and Co.
8. The income from all these sources was assessed in the hands of the present assessee up to the assessment year 1944-45 as his individual income. In respect of the assessment year 1945-46, the assessment of the income from property in his hands as individual was questioned by the assessee following the decision of the Privy Council in CIT v. Dewan Baha-
dur Dewan Krishna Kishore [1941] 9 ITR 695. The present assessee's contention was accepted and a separate assessment for the assessment year 1945-46 was made on him as karta of his Hindu undivided family and he was held be the owner of the immovable properties comprised in the impartible estate. An amendment was brought to Section 9 of the Indian Income-tax Act, 1922, by inserting Sub-section (4) thereto vide Income-tax and Business Profits Tax (Amendment) Act, 1948, with effect from March 30, 1948, whereby it was envisaged that for the purposes of that section the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. As a result of this legal fiction, the income from the immovable properties situated at Masuda, Ramgarh, Vijay Nagar and Ajmer as well as income from profits and gains of Vakil and Co. were again taxed in the hands of the present assessee as individual as it was a common ground at the relevant time that the properties in question formed part of the impartible estate of the Thikana of Masuda, and, therefore, the income therefrom, under whatever head, had to be assessed in the hands of Thakur as his individual income by virtue of Section 9(4)(a) of the Act of 1922. This was continued until May 30, 1955.
9. On May 30, 1955, on account of the enactment of the Ajmer Abolition of Intermediaries and Land Reforms Act, 1955 (hereafter referred to as "Ajmer Act of 1955"), which came into effect with effect from June 23, 1955, the institution of Istimrari was abolished and the Istimrari estate vested in the State in accordance with the terms of the said Act. Before the compensation payable in lieu of resumption of the estate was determined, the assessee, by a deed of partition dated August 18, 1955, the compensation which was payable in lieu of such resumption, divided amongst the members of his family numbering five consisting of himself, his wife and three sons by making a narration of that fact in his books of account. After the Ajmer Act of 1955 came in existence, and the assessee had executed a deed of partition of the compensation payable under the Act, the State of Ajmer, which then was Part "C" State, merged with the State of Rajasthan in accordance with the States Reorganisation Act, 1956, and became part of the State of Rajasthan and with a view to secure uniformity in the revenue laws in the new State of Rajasthan as formed by Section 10 of the States Reorganisation Act of 1956, the Rajasthan Tenancy Act, 1955, and the Rajasthan Land Revenue Act, 1956, as in force in the pre-reorganisation State of Rajasthan, with suitable modifications therein for making it applicable to the territories of erstwhile Abu, Ajmer and Sunil areas, were extended by enacting the Rajasthan Revenue Laws (Extension) Act, 1957 being Act No. 2 of 1958. By this Act, the Revenue Regulation of 1877 as well as the Ajmer Tenancy and Land Records Act, 1950, were repealed.
10. At this juncture, it may be recalled that before the abolition of Istimrari under the Act of 1955, the Ajmer Tenancy and Land Records Act, 1950, was promulgated. Under that Act, certain primary rights were vested in the tenants from the holder of the estate and were provided protection against ejectment by the estate holders. Under Section 17 of the Ajmer Act of 1950, the tenants were classified as (i) occupancy tenants, (ii) exproprietary tenants, (iii) hereditary tenants, (iv) non-occupancy tenants, and (v) the estate holder. The land which was not occupied by tenants but was in the self-cultivation of the Istimrardar was held to be Niji Jot or Khudkasht as per Section 10 of the said Act and such land was to be demarcated Khudkasht or Niji Jot. Under Section 15 it provided that succession to the aforesaid Niji Jot land which was recognised as Niji Jot, the rights shall devolve in accordance with law which regulates the succession of proprietary rights in such lands. Thus, the succession to the property as per the Regulation of 1877 which governed the Istimrari estate, continued to apply to the Istimrari land allowed to be retained by the estate holders as their Niji Jot and the rights of tenants holding from them were protected and to that extent the right of Istimrardars qua the tenanted land became restrictive and came to be governed by the Act of 1950.
11. On abrogation of the Istimrari estate under the Act of 1955, the Istimrari estate vested in the State. Under Section 2(i)(v) the "estate" was given the same meaning as was assigned in the Act of 1955 and were to include the Istimrari estate. The "estate" has been defined under Section 5(10) of the Rajasthan Tenancy Act, 1955, to mean all Jagir land or interest in Jagir land held by a Jagirdar and shall include land or interest in land held by a Biswedar, or a Zamindar or a land owner. Thus, the lands forming part of the Istimrari grant, were resumed on the commencement of the Ajmer Act of 1955 and the institution of Istimrari came to an end. The said estate vested in the State free from all encumbrances as per Section 4 read with Section 4 of the said Act. Under Section 7 private lands, buildings, wells, houses, sites and other open enclosures which included such Khudkasht land in the personal cultivation as on the date of vesting, continued to belong to such intermediary or other persons. Coupled with this, in respect of Khudkasht lands allowed to be retained possession thereof under Section 27 of the said Act, every intermediary whose estate has been acquired under the Act could within six months of the vesting, apply to the SDO in whose jurisdiction the major area comprising the estate was situated, for allotment to him of the land for personal cultivation which required the estate holder to furnish a description of the estate, the date of the vesting of the estate, the total area of the estate under cultivation on the date of vesting, the names of the co-sharers, Gujaredars and mortgagees, if any in the estate and their interest, area of the Khudkasht intermediary on the date of vesting and other relevant particulars relating to the availability of the land to be allowed as Khudkasht in terms of that Chapter. Under Section 30 the lands allotted to an intermediary under Section 29 were to be held by the intermediary as a Khatedar tenant thereof. Under Section 29 every intermediary was to be allotted all Khudkasht lands which he was cultivating personally in the previous agricultural years provided that the area of the land does not exceed the permissible limit prescribed under Section 36. Under Section 29(2) it was envisaged that if at the time of vesting, the intermediary was holding the area under his cultivation as Khudkasht exceeding the permissible limit he was entitled to select out of the total area in his personal cultivation any contiguous area of land not exceeding the permissible limit and he could be allotted alternate land not in excess of the permissible limit and any land in excess of the permissible land was to be surrendered to the State Government. If the contiguous area was not available then the intermediary was entitled to select such maximum compact area, the aggregate of which was not exceeding permissible limit. Likewise under Sub-section (3) where the intermediary on the date did not go for personal cultivation of less than the permissible limit, he could be allowed so much of the land in personal cultivation so as to not to exceed the permissible limit under Section 26. Under Section 30, all lands allotted to an intermediary under Section 29 were to be held by him as a Khatedar tenant thereof.
12. Therefore, under the scheme of the Ajmer Act of 1955, all agricultural lands except the land in personal cultivation demarcated as Niji land under the Act of 1950 vested in the State Government free from all encumbrances and the Istimrardar was entitled to be allotted out of the lands held by him under personal cultivation or from amongst other lands a compact area within the permissible limit as Khudkasht land and his status qua that land was to be of Khatedar tenant only. Thus, as a result of the Ajmer Act of 1955, the institution of Istimrari stood abolished and all agricultural lands including Istimrari lands vested in the State Government free from all encumbrances and the Istimrari tenants were allowed to hold the land upto the maximum permissible limit under Section 26 as a Khatedar tenants thenceforth. This was apart from the compensation which was payable under the Act as a result of abolition of intermediaries. This all happened before the Rajasthan Revenue Laws (Extension) Act, 1957, was brought into force. It may be noticed that before the consequential amendments made in the Act of 1955 as a result of extension of laws, the terms used under Section 30 of the Ajmer Act of 1955 was "Bhu Swami" instead of "Khatedar".
13. Be that as it may, the present controversy to which we shall be referring shortly, arises as a result of the claim made by the assessee to treat the compensation received and partitioned by the assessee in August, 1955, and the income earned by him from other immovable properties situated at various places referred to above and income from the business of Vakil and Co. which has been treated to be part of the estate and was inherited by the assessee from his ancestors as a property of the Hindu undivided family and income therefrom as income of the Hindu undivided family to be taxed as such.
14. The assessee has filed first wealth-tax return under Section 14 of the Wealth-tax Act, 1957. The said return was filed in his capacity as Hindu undivided family. It was pleaded by the assessee that the Istimrari of Masuda was held as joint family property which was abolished under the Act of 1955 and the claim for compensation has been submitted in August, 1955, under the said Act, the assessee had three sons and in his capacity as father, he effected the partition of compensation on August 13, 1958, and thenceforth each of his three sons is the owner of 1/5th share allotted to him and he claimed 1/5th share as an exclusive owner of the compensation receivable, the remaining 1/5th share being the share allotted to his wife by partition. On this basis, the amount of compensation was excluded from the wealth of the joint family consisting of the assessee and his three sons. In the meantime, the income-tax returns of the assessee were showing his income as individual until 1955-56, which is in question was filed by the assessee in the status of an individual. In the said return, he claimed that the interest income received on the compensation amount was exempt as it was in the nature of capital receipt. The said return was revised by him on April 7, 1964, and a new return was filed along with that in the status of the Hindu undivided family and in the said return of the Hindu undivided family the assessee has shown his income from house property as well as income from Vakil and Co. In the income of the Hindu undivided family the interest from compensation receivable by the assessee was not shown. For the assessment year 1961-62, also the original return was filed in the capacity of an individual declaring income from house property and Vakil and Co. as individual. However, a revised return was filed for the assessment year 1961-62 also on November 26, 1965, wherefrom he excluded income from house property and Vakil and Co. from the return of individual and separate return of the income from the Hindu undivided family was filed on November 30, 1963 incorporating the income from house property and Vakil and Co. From 1962-63, the original returns were filed in his status of a Hindu undivided family showing income from immovable properties and Vakil and Co. as properties of the Hindu undivided family and income from the aforesaid sources as income of the Hindu undivided family.
15. The assessee has urged that on abolition of Istimrari, the impartibility of estate of the assessee has come to an end, and the property which was otherwise joint property of the Hindu undivided family became an ordinary joint property of the Hindu undivided family with normal incidence of joint property. Therefore, the incidence of impartibility having been abrogated, the income derived from property/business of the Hindu un- divided family could not be assessed to tax in the status of an individual on the basis of the legal fiction created under the Wealth-tax Act and the Income-tax Act.
16. As noticed above, Section 9(4) of the Indian Income-tax Act, 1922, provided for deeming the income from an impartible estate to be the income of the individual and corresponding provision was made in the Act of 1961 under Section 27 of the Act. It was also the case of the assesses that as the Istimrari was granted by the Sanad dated March 8, 1875, and read with the Regulation of 1877, it was subjected to the customary rule of primogeniture. It was not subjected to rule of succession by primogeniture to a single male lineal descendant but was governed by the statutory provision, and, therefore, the other property of the Hindu undivided family whether acquired as a result of succession or impressed with the character of a family by the erstwhile holder of the estate with a character of the Hindu undivided family could never become the part of the impartible estate and therefore was always separate from the impartible estate though both belonging to the Hindu undivided family. In this connection, the contention was also raised that since the assessee has effected a partition of the compensation expressing the intention of the holder of the impartible estate to make it subject to partition, which was competent for the holder of the impartible estate to do, it lost its character of impartibility and the property, being of a Hindu undivided family, the income therefrom had to be taxed only in the status of the Hindu undivided family and not as an individual.
17. The claim of the assessee before the Income-tax Officer was that part of his income belonged to him as an individual and that the rest of the income particularly from compensation, immovable property and Vakil and Co. belonged to him as the karta of the Hindu undivided family. The Income-tax Officer did not accept the aforesaid contention. It was contended by the assessee that the impartible estate had devolved on the basis of the principle of primogeniture in accordance with Section 23 of the Ajmer Land and Revenue Regulation, 1877, but according to the assessee's counsel the aforesaid Regulation was repealed by the Rajasthan Revenue Laws (Extension) Act, 1957, which came into being on January 7, 1958, and that with the repeal of the said Regulation of 1877, the impartibility of the estate and the law of primogeniture stood abolished. Thereafter, the assessee was governed by his personal law of Hindus because he received the properties in question from his ancestors and, therefore, the income from the aforesaid properties and also the income from business which belonged to his Hindu undivided family should be taxed separately.
18. The Income-tax Officer did not accept the contention on the ground that Section 9(4) of the Rajasthan Revenue Laws (Extension) Act, 1957, went against the claim of the assessee. The Income-tax Officer also did not accept the contention of the assessee that the Ajmer Lands Reforms Act, 1950, had brought about a change in the status. He also did not accept that the rule of primogeniture and the assessee's status as holder of the impartible estate no more survived for operation of Section 9(4) of the Indian Income-tax Act, 1922, or Section 27(ii) of the Act of 1961, and that the promulgation of the Rajasthan Revenue Laws (Extension) Act, 1957, could not revive which was already gone with the abolition of Istimrari and resumption of estate.
19. According to the Income-tax Officer, the rules of primogeniture were followed till they were repealed by the Rajasthan Revenue Laws (Extension) Act, 1957. That being so, because of Section 97, the succession to the properties in question would continue to be governed by dint of regulation 23 of the Regulation of 1877. The Income-tax Officer also did not accept the assessee's contention that he had partitioned the compensation between himself and other members of the family by his writing in his cash book.
20. On appeal, the Appellate Assistant Commissioner accepted the plea of the assessee that the law of primogeniture did not survive and the legal fiction as to the income of the impartible estate belonging to the individual holder of the impartible estate continued to be applicable in the case of the assessee's family only uptil the abrogation of the estate by the Ajmer Act of 1955, thereafter the normal estate came to the surface and the income belonged to the Hindu undivided family to whom the properties already belonged. With this conclusion, the learned Appellate Assistant Commissioner held that the interest received by the assessee on the compensation cannot be said to be his individual income. He also gave credence to the writing dated August 18, 1955, made by the assessee in his cash book dividing the compensation amongst himself and other members of the family and held that the said narration also went to show that the compensation and the income therefrom belonged to the Hindu undivided family and that the same cannot be considered as the individual income and property of Rao Narain Singh. However, he was of the opinion that for recognition of the partition, an order is required to be made under Section 171 of the Income-tax Act under which the proceedings relating to the earlier period had continued. Such order has not been passed by the Income-tax Officer with regard to the alleged claim of partition. He directed the Income-tax Officer to hold an enquiry into the alleged partition and record a finding in respect thereof and to act thereupon by recording a finding under Section 171. For the same reason, he also held that the income from properties, viz., Masuda house at Ajmer, ancestral Garh at Masuda and Ramgarh property at Vijaynagar the owner of which was the Hindu undivided family and income from Vakil and Co. were to be assessed in the status of Hindu undivided family of Rao Narain Singh.
21. Aggrieved by the aforesaid order, the Income-tax Officer, Ward "A", appealed challenging the finding of the Appellate Assistant Commissioner directing him that the assessee be assessed in the status of the Hindu undivided family in respect of his incomes, referred to above, whereas Rao Narain Singh, the assessee filed a cross appeal challenging the direction so far as it related to holding an enquiry under Section 171 and for recording of a finding thereon.
22. The Tribunal, for the present purposes, recorded its findings as under :
(i) There is no substance in the submission of the Department that the estate of Masuda which was admittedly an ancestral impartible estate belonged exclusively to the assessee respondent in his individual capacity. It clearly belonged to his undivided family.
(ii) It is not correct to suggest that the aforesaid impartible estate of Masuda was granted to the grandfather of the assessee by the British Government vide Sanad dated March 29, 1875. The Tribunal pointed out that the Sanad makes it clear that the estate, in question, was with Sri Bahadur Singh, the then holder, even at the time when Sanad was granted. It, in fact, was with his family for the last 12 generations, counted from him as per the assessee's own admission in his writing in the cash book allegedly on August 18, 1955. This Sanad, according to the Tribunal merely fixed the rent of the said estate payable to the Government in perpetuity.
(iii) The correct position in law is that the holder of a customary impartible estate can, by a declaration of his intention, incorporate in the estate his self-impressed property with all its incidents. The immovable properties and the business of Vakil and Co. as part of the impartible estate ... in fact, he inherited them as part of the impartible estate, and himself continued to treat them so. In this view of the matter, we are unable to understand as to how the buildings and the business of Vakil and Co. suddenly ceased to be part of the impartible estate after May 30, 1955 (the correct date is July 31, 1955). Nothing, not even legislative interference, took place so far as the aforesaid two items of property are concerned ... There must be some act either of the Legislature or of the parties concerned, to remove the character of impartibility from the properties. Admittedly, there is no such Act; even the alleged partition dated August 18, 1955, does not intend to partition these properties. How will then they cease to be impartible ? We are, therefore, of the opinion that the immovable properties and the business of Vakil and Co. continued to belong to the impartible estate of the Hindu undivided family of which the assessee was the karta and, therefore, the income therefrom would continue to be assessed on the assessee as the holder of the impartible estate. Sub-section (4) of Section 9 of the Indian Income-tax Act, 1922 (Section 27(ii) of the 1961 Act), gives authority for assessing the income from property in the hands of the holder of the impartible estate as an indi-
vidual. As regards the income from the business of Vakil and Co., the general law which governs impartible estates lays down that the income of an impartible estate would belong exclusively to the holder of the impartible estate.
(iv) Referring to the compensation of Rs. 7,22,595.26, the Tribunal expressed the opinion that "they partake of the same character as of the Istimrari estate, in lieu of which they were received. Such Istimrari estate was admittedly impartible ; so the compensation would also be impartible in the hands of the assessee-respondent. Section 4 of the Ajmer Abolition of Intermediaries and Reforms Act, 1955, does not extinguish the estate held by the assessee. It merely takes over the estate from the assessee in the present form and gives in exchange to the assessee the compensation. Section 19 does not remove the impartibility of the said estate ; for it comes into operation on the death of the present owner of the impartible estate, if he dies after June 17, 1956, the impartibility would in any way come to an end as per the provisions of Section 5 of the Hindu Succession Act, 1956. We have the authority of their Lordships of the Rajasthan High Court in Thakur Gopal Singh v. CWT [1975] 99 ITR 354 for the above stand." The Tribunal further pointed out that so long as he, i.e., Shri Narain Singh, is alive, "it is not open to the members of his family to claim partition of the said property from him. This right was not with them admittedly till May 30, 1955 ; and no law has been brought to our notice, which might have conferred this right on them after that date. It is true that the Regulation No. 2 of 1877 was repealed by the Rajasthan Revenue Laws (Extension) Act of 1957, with effect from January 7, 1958, but the said Act took the precaution of introducing Sub-section (4) of Section 9 and thereby protecting the status and property acquired by the assessee-respondent before the commencement of the said Act in pursuance of the right conferred by the provisions of the enactment and the laws repealed by the said Act, namely, the Regulation 2 of 1877. Such a right was the right to hold the Istimrari estate ; and whatever came in place of it after the right in the Istimrari estate had been taken over in 1955 would continue to represent the said estate and enjoy the same character of impartibility. As such, the said compensation, in our opinion, would belong to the assessee in his capacity as the owner of the impartible estate and the income therefrom would, therefore, naturally be assessable in his hands."
(v) Referring to the alleged partition of the aforesaid compensation, by the writing in the cash book of the assessee dated August 18, 1955, the Tribunal pointed out that "In law, an impartible estate can be made partible, and then divided amongst the members of the family. How it can be done has also been stipulated by their Lordships of the Supreme Court in Chinnathayi v. Kulasekara, AIR 1952 SC 29......" After referring to the aforesaid observation of their Lordships of the Rajasthan High Court, the Tribunal observed : "This being the position of law, we are unable to accept the contention of the Department that the impartible property could not be partitioned at all during the life time of the present holder. If after looking into all the aspects of the matter and applying the law on the point as stipulated above, the finding is that the compensation has been made partible, the Income-tax Officer will have to undertake further enquiry as stipulated under Section 171, whether, in fact, the partition had taken place in accordance with law. Until such an enquiry is made, an order under Section 171 cannot be passed and without such an order having been passed, the income of the property cannot be assessed in the hands of the individual recipients. The Appellate Assistant Commissioner was, therefore, right in sending back the case to the Income-tax Officer to make an enquiry in terms of Section 171 and pass an order accordingly. We need not say that the question of passing an order under Section 171 would arise only after it has been determined by the Income-tax Officer, after apprising such evidence as may be brought on record, that the impartible character of the compensation has been abrogated in accordance with law."
(vi) On behalf of the Department, a point was raised whether the holder of an impartible estate can renounce the impartibility with regard to only a part of the estate. It will be recalled that the writing of August 18, 1955, by which the alleged partition had taken place, purports to divide only the compensation amongst the various members of the family as and when it would be received. It does not divide the buildings and the business of Vakil and Co. The Tribunal disposed of this contention as follows : "In our opinion, there is nothing in law to prevent the conversion of only a part of the impartible estate into a partible one. In fact, in the case of Th. Gopal Singh, only the sale proceeds of Garh of Badnore were partitioned, the rest of the property remaining intact. We, therefore, impliedly draw support from the aforesaid decision in holding that it is in law possible to have only partial conversion of the impartible estate into a partible one and then divide the same amongst the various members of the family consisting of the Hindu undivided family."
23. As a result of the aforesaid findings, the Departmental appeal was rejected, so also the cross objection by the assessee also failed.
24. The assessee made an application for referring the following questions of law said to be arising out of the order of the Tribunal dated July 31, 1975 :
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the aforesaid estate was different in nature than the estates created by the Crown Grants Act, Act 15 of 1895, and that, as such, the decision of the Privy Council in Rajendra v. Raghubans Kanwar, AIR 1918 PC 25, would not apply to the facts of the present case ?
(ii) Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that Section 4 of the Ajmer Abolition of Intermediaries and Reforms Act, 1955, does not extinguish the impartible estate held by the assessee and that it merely took over the estate from the assessee in the present form and gave in exchange to the assessee the compensation ?
(iii) If the answer to the above is in the affirmative whether the Tribunal is justified in holding that the compensation received by the assessee in lieu of the Istimrari estate partook of the same character as the Istimrari estate and, therefore, constituted part of the impartible estate in the hands of the present applicant ?
(iv) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the business of Vakil and Co., and the properties situated in Masuda, Ramgarh, Vijaynagar, which were admittedly part of the impartible estate of Masuda up to May 30, 1955, continued to remain the properties of the impartible estate of Masuda even after the abolition of the Istimrari estate of Masuda with effect from May 31, 1955, by the Ajmer Abolition of Intermediaries and Reforms Act, 1955 ?
(v) Whether, the Tribunal is justified in directing the Income-tax Officer under Section 171, whether the impartible character of the compensation has been abrogated ?"
25. The Tribunal, however, did not accept the request of the assessee for referring questions Nos. 2, 3 and 5. About questions Nos. 1 and 4, the aforesaid two questions for the opinion of this court were sent. Thus, the controversy about the nature of the compensation and its partition is concerned and necessity of making an order under Section 171 for recognition of the partition, are no more subject-matter of consideration in this reference.
Question No. 1 :
26. From the aforesaid, it is apparent that so far as the nature of the property is concerned, there is a quietus of dispute and is not required to be considered in detail inasmuch as a finding of fact has been recorded and about which there is no dispute that the Istimrari of Masuda estate was an ancestral and impartible estate and belonged to the Hindu undivided family. The immovable properties other than the estate, namely, the immovable properties situated in Masuda, Ramgarh, Vijay Nagar and Ajmer, and the business being done in the name of Vakil and Co., were acquired from the income of the estate by the ancestors of the present holder and he had succeeded to the same from his father in 1938. It is not the subject-matter of enquiry nor it has been so found in whose period of the ancestors of the present assessee the immovable properties were acquired or the business was set up. So far as the assessee is concerned, he has acquired by inheritance in 1938 and whether as a part of impartible estate or as a result of inheritance in his hands the said property also retains the char-
acter of ancestral property belonging to the Hindu undivided family. Albeit, the assessee has been claiming since beginning that all the three properties is a part of impartible estate held by him, inter alia, on the assumption that the property acquired with the income of the estate, though the income and the property acquired do not by itself become the property of the Hindu undivided family but can be impressed with the said character by impressing the same and on such character being impressed the same also becomes a part of impartible estate. However, before the Tribunal there has been a change in the stance of the assessee aimed at distinguishing the properties so acquired from the income of the impartible estate, which is governed by the rule of primogeniture under the statute, being immune from absorbing other properties therein. The property on being impressed with the character of the Hindu undivided family at any time in past does not become part of the impartible estate. The property can be impressed with the character of impartibility only if the impartibility is by custom and not by statute. This is so on the basis of a query raised in the decision of the Supreme Court in Pushpavathi Vijayaram v. P. Visweswar, AIR 1964 SC 118, wherein the court has said (headnote) :
"Unless the power is excluded by statute or custom, the holder of customary impartible estate, by a declaration of his intention, can incorporate with the estate self-acquired immovable property and thereupon, the property accrues to the estate and is impressed with all its incidents, including a custom of descent by primogeniture. It may be otherwise in the case of an estate granted by the Crown subject to descent by primogeniture."
27. The aforesaid principle is the subject-matter of controversy of question No. 1. It is, undoubtedly not in dispute that the property of grant was an impartible estate belonging to the Hindu undivided family. The grant of estate related only to the agricultural lands and not the other immovable properties or the business. As found by the Tribunal, the immovable property and the business is acquired out of the income from the impartible estate and has been impressed with the character of impartible estate. Until raising of this issue in these proceedings, the assessee has throughout treated all the three properties mentioned above as a part of the impartible estate since his inheritance.
28. On the basis of the Sanad dated March 29, 1875, and the Regulation of 1877, the assessee has sought to contend that the rule of primogeniture applied to the estate by dint of the aforesaid Crown grant and not because of any custom and, therefore, the property acquired out of the income of an impartible estate or for that matter any other property could not be impressed with the character of impartibility spelling out a succession to such property by the rule of primogeniture. For this purpose, the assessee has relied on the principle that the holder of an estate cannot by his own action or volition alter the normal rule of inheritance which in the present case is succession according to Hindu law, by his own act. In that event, the property on the death of the last holder would devolve on his male descendent as an unobstructed heritage in which his son, son's son or son's son's son shall have an interest by birth bearing all the incidence of a property belonging to the Hindu undivided family, namely, (i) right of partition, (ii) right to restrain alienation made by the head of the family except for necessity, and (iii) the right of maintenance, and (iv) the right of survivorship. In the case of an impartible estate, the right of partition by the very nature of the property being impartible cannot exist. The second, namely, right to restrain alienation is also incompatible with the custom of impartibility and even the right of maintenance as a matter of right is not applicable. It is only because the right of survivorship remains and it is by reference to this right that the property in question has to be considered as joint family property which is in the aforesaid context, relying on the query about impressing other property with the character of impartibility that "it may be otherwise in the case of an estate granted by the Crown subject to primogeniture", the assessee wants to hold the ground on the contention that impartibility through the rule of primogeniture was impressed not by customary rule of succession by rule of primogeniture but because of condition of the Sanad dated March 29, 1875, read with Section 23 of the Regulation of 1877. The Tribunal has not accepted this on the basis of a finding of fact that the Sanad itself recognises that the grant already existed and the grant of the Istimrari estate was not a grant for the first time vide Sanad on March 29, 1875. The Sanad of 1875 only spells out the concession in the form that the estate remains free from enhancement of assessment on fulfilling of the conditions mentioned in the Sanad but the document of March 29, 1875, is not a document of grant itself and the original Sanad having not been produced and it being admitted by the assessee throughout that the property has come by inheritance through the rule of primogeniture, the Tribunal has treated it to be an impartible estate by custom and not as a result of the Crown grant. This being a finding of fact, does not require to be upturned as the finding is based on relevant consideration and on the basis of material that was available on record. It cannot be doubted that on his own showing, and on the basis of the Sanad dated March 29, 1875, the grant of Istimardari was anterior to the Sanad and was already subjected to number of successions before that date, at least 12 times. Thus succession to estate by the rule of primogeniture was not for the first time through the rule of primogeniture under the Regulation of 1877. In fact, the Sanad itself recognises inheritance according to custom already prevailing. Section 23 of the Regulation of 1877 also referred to identification of the heir in the male line of descent from the last holder as per prevailing custom. Proviso first which said that the rule of primogeniture will govern, will not affect the rule of identifying the male heir in the male line of descent by custom, where such rule already existed. It is not even the case of the assessee that the property in question was not already subjected to succession or that the rule of primogeniture became applicable only after the Regulation of 1877, nor is it established anywhere that properties in question were acquired or set up after the Sanad of 1875 or the Regulation of 1877 or for that matter impressed with the character of property of the Hindu undivided family and became a part of impartible estate after these dates. The conclusion of the Tribunal on this ground does not call for interference.
Question No. 1, therefore, in our opinion, has to be answered in favour of the Revenue and against the assessee.
Question No. 2, on the admitted facts, to us, it appears that the legal fiction of deeming the impartible estate to be owned by the assessee in his individual capacity which is owned by the Hindu undivided family and the income derived therefrom, as liable to be assessed in the status as an individual under the provisions of the Income-tax Act and Wealth-tax Act operates only so long as the incidence of impartibility is attached with the property and as soon as its character of impartibility is lost, whether by act of parties or by operation of law, the normal incidence of property as a property of the Hindu undivided family and the income derived from that as an income from the Hindu undivided family has to be given full effect as in the case of any other income of the Hindu undivided family, liable to be taxed in the status of the Hindu undivided family.
29. In this regard, the two factors have utmost importance, for considering the question of continued nature of impartibility, one is abrogation of the Istimrari estate as a result of the Ajmer Act of 1955. If the character of impartibility is impressed with the property as a result of its nature as an Istimrari estate, would it survive after the basic foundation for applying the rule of primogeniture is removed ? For that the provisions of the Act of 1955 may be relevant, which we shall presently consider ; and, secondly, whether under the law of succession to which the petitioner is subject, the basic incident of impartibility, viz., rule of succession by primogeniture to male line of decent remains in existence after the Hindu Succession Act, 1956, to which undisputedly the parties are subject, which came into force with effect from June 17, 1956, the succession to all properties, including a coparcener's interest in coparcenary is governed by the provisions of that Act and not by any other custom or law ; except as envisaged under the provisions made thereunder.
30. It may be clarified here that so far as compensation receivable by the assessee in lieu of vesting of the estate in the State, on abolition of Istimardari and its partition is concerned, it is not the subject-matter of this reference and it has been held to be partitioned by volition by the erstwhile holder of the estate. Agricultural lands and agricultural income not being subject to application of the Income-tax Act or Wealth-tax Act, have not been included in the question, but has a vital importance inasmuch as the immovable properties in question are held to be impartible because they have been impressed with the character of impartibility by act of parties in some time of antiquity, at least before the assessee has inherited in 1938, inasmuch as the case set up by the assessee had been that he inherited the property as an impartible estate in 1938. Therefore, the property which has been impressed with the original impartible estate, on the resumption of the original estate, the remainder cannot retain the character different from the character of compensation given in lieu of the resumed estate, or the property which is allowed to be retained by the assessee after resumption under the relevant provisions of the Act of 1955.
31. Firstly, if we notice the provisions of the Act of 1955, so far as compensation in lieu of the resumption of estate is concerned, the provisions of Section 10 read with Clause (1) of the Schedule throw light on it.
"10. Liability to pay compensation.--(1) Subject to the other provisions of this Act, there shall be paid to every intermediary whose rights, title or interest in any estate are acquired under this Act, such compensation as shall be determined in accordance with the principles laid down in the Schedule".
32. Clause (1) of the Schedule reads :
"(1) Every intermediary to be treated as a separate unit--for purposes of assessment of compensation under the Act, every intermediary shall be treated as a separate unit :
Provided that, in the case of a joint Hindu family,
(a) a father with his male lineal descendents in the male line of descent shall be deemed to be one unit where the father was alive on the date of vesting;
(b) except as provided under Clause (a) every other member of a joint Hindu family shall be treated as a separate unit.
Explanation.-- Notwithstanding any partition made on or after the 1st day of June, 1952, a family shall be deemed to be joint".
33. A perusal of the aforesaid provisions suggest in unmistakable terms that compensation is to be determined on the basis of the nature of Istimrari whether it is an individual or a joint Hindu family estate. In the case of a joint family estate, Clause (1) of the Schedule considers the joint family consisting of father, his male lineal descendents in the male line of descent as one single separate unit and compensation is paid to that family as a unit. It is to be noticed that the Legislature has not used merely the expression "joint estate" nor merely "joint family estate", but has used the expression "joint Hindu family estate". This is clear acceptance of the existence of intermediary estates as belonging to joint Hindu family consisting of all the coparceners consisting of lineal male descendents of the last holder of the estate, who had acquired the property by succession, albeit by the rule of primogeniture. On the undisputed facts the Istirarari estate of the assessee was an ancestral estate belonging to the Hindu undivided family of which Rao Narain Singh was the last holder. The compensation granted to the holder of the estate namely, father Narain Singh was not only for himself alone but for himself and his family which included all members in the male line of descent. Thus, the family, accepting the basic principle of Hindu coparcenary, as a unit was recognised to be allotted compensation on resumption of estate which is held by the holder at the time of vesting as a property of the Hindu undivided family. On that premise, the estate on resumption for the purposes of compensation is to be considered to be an undivided coparcenary and the compensation is so determined and paid to the family. It may be further pertinent to notice that for the purposes of determination of compensation payable to a unit, as per Clause (1) of the Schedule partitions made after the first day of June, 1952, were not recognised, and no separate compensation was determinable in respect of any person who is considered as member of the family, if he has separated after June 1, 1952. Therefore, it must be held that on resumption, the compensation paid to the assessee was in his capacity as karta of the Hindu undivided family, notwithstanding that he has expressed his intention to partition the same in 1955, the compensation receivable by him and which was paid to them.
34. No separate compensation was payable to such person considered to be a member of joint Hindu family, unless he was separated from it prior to June 1, 1952, and interest of all members was included in compensation payable to the unit ; and other members were considered separately as unit and their compensation was to be determined separately, who will not be entitled to claim any share in the compensation paid/payable to joint Hindu family. This position necessarily implies that where joint interest has been awarded a single joint compensation, and other persons having any interest in such resumed estate are paid separate compensation, the joint estate holders can claim their share from joint compensation and can separate their share by partition if so desired. This is also apparent from the fact that if any property of an impartible estate resumed under the Act, was given to such member by partition prior to June 1, 1952, he will get independent compensation for such resumption, else his claim is satisfied by joint compensation by ignoring partition made thereafter.
35. The other provisions which are relevant for present purposes are related to the lands which have been allowed to be retained by the holder of the estate as Khudkasht. Section 7 draws attention that notwithstanding anything contained in the last preceding section, i.e., Section 4, viz., abolition of intermediaries and vesting of their estate in State, such intermediary was allowed to continue to remain in possession of such Khudkasht land as was in his personal cultivation on the date of vesting, to the extent and subject to the conditions and restrictions specified in Section 26. Chapter VI deals with the management of land and estate acquired under the Act. As noticed by us above, Section 26 defines the "permissible limit" of land which the intermediary can be allowed to hold after abolition of the estate, Section 27 requires the erstwhile intermediary to make application for allotment of land disclosing the land which is in his possession as Khudkasht or under personal cultivation and other relating particulars revealing whether he holds the land in excess of the permissible limit or less than the permissible limit or holds no land under personal cultivation. It is after enquiry under Section 29, that the estate holder is allotted land whether out of the land retained by him in his possession under Section 7 or other land on the basis of the principle laid down in those provisions, but apart from compensation. He holds such land only as allowed under Section 29 after resumption of the estate and on resumption of estate the allotment of land under Section 29 puts him in the status of a Khatedar tenant subject to the same limitations and obligations no more no less. Therefore, the very nature of the estate held by the assessee is altered from landlord of an impartible estate to that of an ordinary "Khatedar tenant" subject to incidence attached with interest of any other Khatedar tenant. None of the attributes of the Istimardari estate are retained. This, in our opinion, results in denuding the property of its character as impartible and the incidence of impartibility gone, it is left with its ordinary character of property owned by the Hindu undivided family with partibility as its essential character and income derived therefrom shall bear the character of income of the Hindu undivided family.
36. In coming to this conclusion, we are fortified by a chain of decisions holding that on alteration of the character of the holding of the estate and on abolition of the office or the estate, the incidence of impartibility is lost and the property if otherwise Hindu undivided family property, assumes the character of a fullsome Hindu undivided family property minus incidence of impartibility.
37. This is the view taken by a learned single judge of this court in Gopal Singh v. State of Rajasthan, AIR 1984 Raj 174. This question arose in connection with determination of the ceiling limit land he could hold after resumption of erstwhile Amli Jagir in Bhilwara District. The Jagir was resumed on August 23, 1954. Proceedings for determination of the extent of ceiling area which lawfully could be held by Gopal Singh were initiated under Chapter III-B of the Rajasthan Tenancy Act, 1955. The assessee has claimed that since the estate was an ancestral impartible estate belonging to the Hindu undivided family, on resumption of Jagir, Khudkasht lands of the Jagirdar were allowed to be held by him as a Khatedar tenant and accordingly though after the resumption of the Jagir, the petitioner, Gopal Singh, became a Khatedar tenant of lands standing in his name, yet the said lands were held by him not as individual but the lands were ancestral property held by him as a karta of the Hindu undivided family.
38. The court noticed Section 10 of the Rajasthan Land Reforms and Resumption of Jagir Act, 1952, and held (page 178) :
"The very fact that the Jagir was an ancestral property and the jagirdar was holding the jagir as property of the Hindu undivided family, with a rider that the members of the family could not get a partition effected because of the fact that by custom the jagir property was impartible in nature and was governed by the rule of primogeniture. However, since the jagir was resumed, the impartible character of the property was lost and the joint family property became subject to partition. So the co-sharers could exercise other rights as coparceners, in the joint family property. The Khudkasht land held by the jagirdar must, therefore, be held by him on behalf of and for the benefit of the joint Hindu family, of which he was the karta and although the ex-jagirdar became the khatedar tenant in respect of such khudkasht land, yet the khatedari rights were held by him on behalf of the joint Hindu family of which he was the karta. The junior members of the family were entitled to seek partition of the joint family property, namely, the khudkasht land held in the name of Gopal Singh".
39. This decision of the learned single judge was referred by a Division Bench with approval in Maharajadhiraj Himmat Singhji v. CWT [1984] 150 ITR 416 (Raj). That was also a case of claiming the status of the Hindu undivided family after resumption of Jagir granted in favour of Maharajadhiraj Himmat Singhji. Not only this but the ratio fully accords with the later decisions of the Supreme Court, which we shall presently advert to.
40. It may be pertinent to notice that by a long chain of decisions commencing from Sartaj Kuari v. Deoraj Kuari [1888] ILR 10 All 272 (PC); the First Pittapure case : Raja Rao v. Court of Wards [1899] ILR 22 Mad 383 (PC); (he Second Pittapure case : Ram Rao v. Raja of Pittapure, AIR 1918 PC 81, Shiba Prasad Singh v. Rani Prayag Kumari Debi, AIR 1932 PC 216 ; Pushpavathi Vijayaram Gajapathi Raj v. Pushavathi Visweswar Gajapathiraj, AIR 1964 SC 118 and State of U.P. v. Raj Kumar Rukmini Raman Brahma, AIR 1971 SC 1687, it is well settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the estate, if the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture. It will still be part of a joint estate of an undivided family. In the ordinary case of joint estate of a Hindu undivided family, members of the family can claim four rights : (1) the right of partition ; (2) the right to restrain alienations by the head of the family except for necessity ; (3) the right of maintenance ; and (4) the right of survivorship. It is obvious from the very nature of property which is impartible that the first of these rights cannot exist so long as the property remain impartible, second is also compatible with the custom of impartibility. The right of maintenance and the right of survivorship still remained and it is by reference to these rights that the property though impartible in the eye of law to be regarded as joint family property.
41. What happens when property of this nature, which undoubtedly the property in the present case is, ceases to be subject to succession to a single heir in the male line of descent by the rule of primogeniture, the reason for which the property assumes the character of impartibility, is the question that calls for an answer.
42. In Nagesh Bisto Desai v. Khando Tirmal Desai, AIR 1982 SC 887, the question arose in connection with the effect of the Bombay Merged Territories Miscellaneous Alienations Abolition Act of 1955 read with the Bombay Pargana and Kulkarni Watans Abolition Act of 1950. The question had arisen in a somewhat similar set of circumstances. By the Watan Abolition Act the office of watan was abolished and the estate of watandar was resumed. However, on resumption of the property of watan lands, watan lands were regranted to the holders for the time being on the ordinary tenure. A suit for declaration was filed by the erstwhile holder of the watan against his two brothers and mother that the property in question formed part of impartible estate and the plaintiff being watandar was entitled to remain in full and exclusive possession and enjoyment of the suit properties and that the other members of the family had no right, title or interest therein but were only entitled to maintenance and residence. He demanded a decree for exclusive possession of the family residential house. The court after examining the provisions of the watan, held (page 900) :
"It seems plain to us that the effect of Act No. 60 of 1950 and Act No. 22 of 1955 was to bring about a change in the tenure or character of holding as watan land but they did not affect the other legal incidents of the property under personal law. It will be convenient to deal first with the provisions of Act No. 60 of 1950. Section 3 of the Act lays down that, with effect from, and on, the appointed day, notwithstanding anything contained in any law, usage, settlement, grant, Sanad or order, all watans shall be deemed to have been abolished and all rights to hold office and any liability to render service appertaining to the said watans shall stand extinguished. It further lays down that subject to the provisions of Section 4, 'all watan land is hereby resumed' and 'shall be deemed to be subject to the payment of land revenue under the provisions of the Code and the rules made thereunder as if it were an unalienated land'. The term 'Code' as defined in Section 2(b) means 'the Bombay Land Revenue Code, 1879'.
All incidents pertaining to the said watans stand extinguished from the appointed day."
43. The court noticed that the Watan Act under which the watan lands had been granted specifically restrained the alienation of the property in any manner by the watandar as was the condition imposed on the Istimrardar under the Sanad. Moreover, the succession to the office of watan and watan land by a single heir in the male line of descent by the rule of primogeniture by custom ; on abolition of intermediary, the vesting of the estate in the State by resumption ; and regrant of some land as ordinary tenure, are the basic features which have commonality with the case in hand.
44. This decision was followed by the Supreme Court in Anant Kibe v. Purushottam Rao, AIR 1984 SC 1121. It arose under the Madhya Pradesh Land Revenue Code, 1959. It was a case in which a grant was made by the late Maharaja Harihar Rao Holkar in 1837 in favour of the ancestors of the parties before the Supreme Court who were termed as inamdar under the grant. That grant underwent some changes in the identity of the land with the original grant, with which we were not concerned, but importantly was subject to succession to a single male heir in male line of descent by the rule of primogeniture in customary form. The last inheritor by such succession Raghunath Rao had died in 1928. The said Raghunath Rao had three sons of which Madhav Rao had died issue less, Sadashiv Rao's son was Purushottam, the respondent before the Supreme court. The appellants before the Supreme Court were the legal heirs of the third son, Gopal Rao. The heirs of Gopal Rao had filed a suit for partition and separate possession of their half share consisting of the said inam grants. The controversy before the Supreme Court surrounded the inam lands and houses and building properties built from the income of inam lands, the said inam lands and the properties acquired therefrom were held to be ancestral impartible estates since succession to them was governed by the rule of primogeniture and constituted joint family property. It was further held that rule of impartibility and the special mode of succession by the rule of lineal primogeniture were nothing but incidents of the inam which stood extinguished by Section 158(1)(b) of the Code and the land which were allowed to be retained by the inamdar were conferred with the bhumiswami rights very much the same as khatedari rights in the present case.
45. The question that arose before the Supreme Court was whether inam lands which became bhumiswami under Section 158 of the Code were self-acquired property of the bhumidar and could not be subjected to partition at the behest of the suitors. The court following the principle laid down in Nagesh Bisto Desai's case, AIR 1982 SC 887, and after referring to the principles governing the impartible estate belonging to the joint Hindu family as laid down in Sartaj and other cases referred to above, held (page 1126):
"Impartibility is essentially a creature of custom. Here it is a term of the grant. The junior members of a joint family in the case of an ancient impartible joint family estate take no right in the property by birth and therefore have no right of partition having regard to the very nature of the estate that it is impartible. The only incidence for joint property which still attaches to the joint family property is the right of survivorship which, of course, is not inconsistent with the custom of impartibility. The incident of impartibility attached to inam lands, no longer exists by reason of Section 158(1)(b) of the Code as they have now become bhumiswami lands. The right of junior members of the family for maintenance is governed by custom and not based upon any joint right or interest in the property as co-owners."
46. The above principle is very much the same as was enunciated by the learned single judge in Gopal Singh v. State of Rajasthan, AIR 1984 Raj 174.
47. In Dattatraya v. Krishna Rao, AIR 1991 SC 1972, a suit was filed by the respondent in appeal before the Supreme Court in the year, 1962, that all the linked properties mentioned in Schedules 1 to 5 are coparcenary properties and he is entitled to a half share therein on partition. The respondent received maintenance from Jagir income at the rate of Rs. 125 per month. The properties included the compensation received in lieu of Jagir lands which had been resumed, the properties which became part of the erstwhile impartible estate acquired out of the incomes of the estate but were not resumed and the movable properties. The plaintiffs had received compensation in their own rights as a maintenance holder and the erstwhile Jagirdar has been awarded compensation in respect of his claims. The court in respect of all the three properties has opined as under (page 1982) :
"Under Section 3 of the Act what was resumed was only Jagir lands. Resumption means taking back what was given ; what was resumed are the lands and not the property of a person from whom it was taken by the rightful owner. Therefore, what was resumed is the right, title and interest in the Jagir lands covered by the provisions of the Act and compensation was paid in lieu thereof. Under Section 5(b)(i) notwithstanding the vesting in the State under Section 4 thereof all open enclosures used for... domestic purposes and in continuous possession for 12 years immediately before the date of the resumption ; (ii) all open house sites purchased for valuable consideration ; (iii) all private buildings, places of worship, wells, etc., situated in house site specified in clauses (i) and (ii); (iv) all groves wherever situated and lands appurtenant thereto shall continue to belong to and be held by the Jagirdar and be settled on him ; (v) all tanks, trees, private wells and buildings in the occupied lands shall continue to belong to or be held by the family. Thus it is clear that all private properties including buildings in the jagir belonged to or held by the Jagirdar remained to be the property of the Jagirdar. All private properties in the Jagir other than impartible Jagir, therefore, remained to be joint family property. We, therefore, hold that Schedule I properties are partible. The preliminary decrees for partition of them are upheld.
It is seen that 100 bighas of land in Chandurpura was granted as Jagir. What had remained after the Act is hardly 5.41 bighas. So the rest of the lands obviously, was resumed by the Government, under the Act. By operation of Section 18 of the Act it is the Jagirdar who is entitled to receive, compensation money payable under the Act. Therefore, the money received towards compensation of Jagir lands also retains the character as impartible. Under the Act by operation of Section 19 of the Act the Jagirdar is declared to be a pucca tenant of khudkhast lands of Dwarkanath. From the impugned judgment it is clear that there are plethora of precedents of the Madhya Pradesh High Court that after the abolition of the estates under the Act the lands became joint family properties which received approval from Anant Kibe v. Purushottam Rao, AIR 1984 SC 1121 ; [1984] (Suppl.) SCC 175, relied on by Sri Bobde. Therein this court held that the combined effect of sections 158(1)(b) and 164 of the M.P. Land Revenue Code was that the incident of impartibility and the special mode of succession by the rule of primogeniture which were granted in terms of the grant of inam lands under the Jagir Manual stood extinguished. Bhumiswami right was conferred on the holder of the land, i.e., Dwarkanath. In the Madhya Bharat Land Revenue and Tenancy Act, 1950, by operation of Sections 54(7), 69 and 82, the lands become the pucca tenancy of Bhumiswami, i.e, Dwarkanath. Therefore, the devolution of the right of pucca tenancy is by succession opened to appellants Nos. 1 and 2. Accordingly we hold that items 2, 3 and 5 of Schedule 2 lands become the properties of the appellants."
48. Thus, the court reiterated the principle enunciated in Anant Kibe's case, AIR 1984 SC 1121, and held that all private properties in the Jagir other than impartible Jagir therefore remained to be joint family properties. That was so in view of the fact that all other private lands were allowed to be continued to be held by the erstwhile Jagirdar resulting in detachment of impartibility attached with Jagir from the said properties and the properties retaining its character as belonging to the Hindu undivided family simpliciter. So far as compensation received by the respective members was concerned, it was held that the money received towards land also bears the same character as of impartible and by holding that the respondent had already received maintenance as junior member of the family independently in lieu of their share in compensation and so is not entitled for further share in compensation payable to the appellants, once again.
49. The aforesaid facts are very much akin to the case of the assessee in the present case in respect of immovable house properties and business of Vakil and Co. which were undisputedly part of the ancestral property belonging to the Hindu undivided family of the assessee which was attached with incidents of impartibility because of the status of its holder as Istimrardar holding Istimrardari estate. On the resumption of Istimrardari, his status as Istimrardar came to an end and the properties held by him were detached from the incidences of impartibility which it had so acquired because of the fact that the same were held by the holder as Istimrardar and regained its character as an ordinary property of the Hindu undivided family.
50. The principle was reiterated by the Supreme Court in Annasaheb Bapusaheb Patil v. Balwant alias Balasaheb Babusaheb Patil, AIR 1995 SC 895. This was again a case of resumption of watan lands and the court referring to Dattatraya's case, AIR 1991 SC 1972, said (page 899) :
"The statute also can abrogate the operation of the custom and succession to watan property by rule of primogeniture and the Act in fact did achieve that object, abolished the office of watan and liabilities appertaining to it including the burden of service and made the lands ryotwari lands. On regrant the erstwhile watandar holds the lands for and on behalf of the Hindu joint family impressed with the character as joint family property."
51. Thus, it is apparent from the aforesaid decisions of the Supreme Court that an estate which is of a Hindu undivided family, but governed by the rule of primogeniture in the matter of succession to a single heir in the male line of descent by surviorship, due to the status of holder in which the land is held, viz., watandar, or inamdar or Istimrardar, which results in attaching impartibility to such joint estate, on abrogation of such status and resumption of estate held in that status, the custom or statute governing the succession to such estate by the rule of primogeniture is also brought to an end. It results in disturbing its character as impartible estate and the property comes into pure form of joint estate without attached incidence of impartible estate.
52. If that be so, the claim of the assessee that after the Istimrari status was abolished by the Ajmer Act of 1955, and Istimrari land was resumed by the State, the lands that were reallotted under the said Act, on regular khatedari tenure, as well as the properties which had become part of the impartible estate but remained with the assessee, became free from incidence of impartibility and continued to remain the properties of the joint Hindu family minus the incidence of impartibility. It may be pertinent to notice that in the case of Dattatraya, AIR 1991 SC 1972, as also in Annasaheb Bapusaheb Patil, AIR 1995 SC 895, the Supreme Court has reiterated that resumption of the estate whether of Jagir or of inam or of watan, the impartibility, which incidence was a condition of such estate, comes to end. The nature of compensation payable in lieu of the lands resumed, is to be considered in the light of the provisions of compensation with other provisions under the resumption Acts. So far as the property which is allowed to be retained as private estate or the properties which are made subject of regrant are as an ordinary tenure or ordinary khatedari tenants they are free from impartibility because the impartibility follows the rule of succession by primogeniture whether by custom or by statute, which stands abrogated on change of character in the property. In the present case, as noticed above, so far as compensation is concerned, it is payable to the family, in case the last holder is holding the estate as a joint family under Section 10 read with Clause (1) of the Schedule. It is the family as defined in Clause (1) of the Schedule that gets the right to secure the compensation through the holder, for the benefit of all the members constituting the family. The position of the other maintenance holder to whom compensation has been granted or the distant members of the family who have a share in the compensation may have to be governed by different consideration with which we are not presently concerned. But so far as the property remaining in the hands of the holder is concerned, which otherwise was part of joint ancestral property, it retains its character as such joint ancestral property, but is detached of its impartible character because it no more remains an estate of "Istimrardar" who was governed by the rule of primogeniture to a single heir in the male line of descent, but is held by the erstwhile Istimrardar unburdened of his status of Istimrardari, as any other commoner.
53. From the statement of law emerging from the aforesaid decisions, it is clear particularly in the case of Dattatraya, AIR 1991 SC 1972, that where an estate is governed by the rule of primogeniture in the matter of succession whether by custom or by statute, the same can be abrogated by the provisions of the statute and on such abrogation of the custom or statute governing the succession by the rule of primogeniture the impartibility is destroyed.
54. In this connection, reference to Sections 4 and 5 of the Hindu Succession Act, 1956, which came into force on June 7, 1956, after the Ajmer Act of 1955 had come into force, becomes very relevant.
"4. Overriding effect of Act--(1) Save as otherwise expressly provided in this Act,--
(a) any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of this Act shall cease to have effect with respect of any matter for which provision is made in this Act ;
(b) any other law in force immediately before the commencement of this Act shall cease to apply to Hindus in so far as it is inconsistent with any of the provisions contained in this Act.
(2) For the removal of doubts it is hereby declared that nothing contained in this Act shall be deemed to affect the provisions of any law for the time being in force providing for the prevention of fragmentation of agricultural holdings or for the fixation of ceilings or for the devolution of tenancy rights in respect of such holdings."
5. Act not to apply to certain properties--This Act shall not apply to-
(i) any property succession to which is regulated by the Indian Succession Act, 1925 (39 of 1925), by reason of the provisions contained in Section 21 of the Special Marriage Act, 1954 (43 of 1954) ;
(ii) 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;
(iii) the Valiamma Thampuran Kovilagam Estate and the Palace Fund administered by the Palace Administration Board by reason of the powers conferred by Proclamation (IX of 1124) dated 29th June, 1949, promulgated by the Maharaja of Cochin."
55. Sections 4 and 5 of the Hindu Succession Act read together make it abundantly clear that while under Clause (a) of Sub-section (1) of Section 4 any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of this Act ceased to have effect with respect to any provision made in the Act : Clause (b) gives an overriding effect to the provisions of the Hindu Succession Act to the extent that any other law in force immediately before the commencement of this Act ceased to apply to Hindus in so far as it is inconsistent with any of the provisions contained in this Act. Sub-section (2) only excludes from the operation of the Hindu Succession Act, 1956, the law relating to prevention of fragmentation of agricultural holdings or for the fixation of ceilings or in respect of devolution of tenancy rights in such holdings in force immediately before the commencement of this Act. Obviously, Sub-section (2) governs only the law of succession to agricultural lands and is not extended to any other properties movable or immovable. In the present case, the properties with whose income we are concerned are either immovable properties consisting of lands and buildings other than agricultural lands or the business run by the assessee as part of his ancestral property. Hence, to both the types of properties Section 4(1) operates. Section 5(ii) only saves the special mode of 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 providing for such estate to descend to a single heir. Obviously, Clause (ii) of Section 5 has only relevance to erstwhile Rulers of an Indian State. The exception is only to impartible estates succession to which is governed by the terms of the covenant and agreement or is regulated by previous legislation. All other forms of custom or law governing succession of Hindus ceased to be effective. It may in this connection be noticed that succession to a single heir by the rule of primogeniture is contrary to the provisions of the Hindu Succession Act and therefore cannot survive after the commencement of the Hindu Succession Act, even otherwise. Thus any existing impartible estate which was hitherto governed by the rule of primogeniture in the matter of succession to a single heir in the male line of descent, ceased to be subject to rule of such mode of succession, which made the estates impartible. It may particularly be noticed where in the present case the Tribunal has found the estate to be impartible prior to the grant of Sanad, therefore, on the plain reading of Sections 4 and 5, the impartibility of any estate ceased to be operative, with effect from the date of the commencement of this Act on which date all customs and any law concerning succession to estate in any manner ceased to be effective in so far as it was contrary to the provisions of the Hindu Succession Act, 1956.
56. It was contended by learned counsel for the Revenue that the question of succession would arise only when the succession opens on the date of the fateful event to such an estate and will not affect the status of impartibility in presenti.
57. Undoubtedly, who shall be the heir of the estate and what shall be his share in the estate will have to be governed on the basis of existing heirs in terms of the Hindu Succession Act when the holder dies. But the question to which law of succession the property is subject for the time, is not dependent on the opening or not opening of the succession. Who shall be the heir when succession opens, relates to the identity of actual inheriter, and can be amenable to answer only at the time the succession opens. However, by what rules of succession the property of any person is governed, and what are the incidence of such rules governing the principle of succession is a matter of law to which any property for the time being is subject. The latter question always refers to state in present and depends on personal law or a codified law governing succession of any person. If the law is abrogated, the applicability of the new law becomes immediately effective from the date the law is changed and the property becomes subject to new law. It may further be noticed that an estate becomes impartible not because succession has taken place by the rule of succession to a single heir or by the rule of primogeniture to a single heir in the male line of descent ; but it becomes impartible because as and when succession opens it shall be subject to the rule of inheritance by primogeniture in the male line of descent. Because it was subject to rule of succession to a single heir in the male line of descent, it became impartible importing unrestricted power to alienate and excluding claims to partition. Impartibility shall stand destroyed when it becomes subject to rule of succession otherwise. Therefore partibility or impartibility is to be decided on the date the rule of inheritance is attached to the property when acquired or when such rule is altered else the provisions of Section 4 would be superfluous. Sections 4 and 5 read together mean that any property which is impartible because it is subject to the rule of inheritance by primogeniture to a single heir in the male line of descent impartibility of the same is destroyed as soon as that property becomes subject to the Hindu Succession Act. The incidents of rule of inheritance with which the property is governed is replaced by a new rule and it has to be judged in that light.
58. In this connection, attention may be drawn to the decision of the Supreme Court in Sundari v. Laxmi, AIR 1980 SC 198. It was a case arising in the like provisions made in the case of properties governed by the Madras Aliyasanthana Act. Section 7 of the Hindu Succession Act dealt with the devolution of interest on marriage. The court said (page 201):
"Section 4 of the Act gives overriding application to the provisions of the Act and lays down that in respect of any of the matters dealt with in the Act all existing laws whether in the shape of enactment or otherwise which are inconsistent with the Act are repealed. Any other law in force immediately before the commencement of this Act ceases to apply to Hindus in so far as it is inconsistent with any of the provisions contained in the Act. It is therefore clear that the provisions of Aliyasanthana law whether customary or statutory will cease to apply, in so far as they are inconsistent with the provisions of the Hindu Succession Act."
59. The court further said (page 203) :
"The effect of the provisions of Hindu Succession Act above referred to is that after the coming into force of the Hindu Succession Act an undivided interest of a Hindu would devolve as provided for under Section 7(2) while in the case of separate property it would devolve on his heirs as provided for in the Hindu Succession Act."
60. The Act provided that such interest shall devolve by testament under the provisions of the Hindu Succession Act and not according to the Mitakshara or Nambudari law. So also a provision was made for giving overriding effect to the provisions of the said Act the rules prevailing under the Aliyasanthana law. This was a case in which before succession had opened, a suit for partition was filed by a member of a Kutumba governed by the Aliyasanthana law. The court said that the effect of the provisions of the Hindu Succession Act above referred to is that after the coming into force of the Hindu Succession Act an undivided interest of a Hindu would devolve as provided for under Section 7(2) while in the case of separate property it would devolve on his heirs as provided for in the Hindu Succession Act and on that basis the suit for partition was held to be maintainable.
61. The said statement was again reiterated by the Supreme Court broadly in Annasaheb Bapusaheb Patil, AIR 1995 SC 895, that the statute also can abrogate the operation of custom and abolition of watan and acquisition of watan property governed by the rule of primogeniture, in fact did achieve that object. Any provision which abrogates the provision of custom and succession to any property, will have its immediate effect on the continuance or discontinuance of the impartibility of the estate with effect from that date. The principle was accepted by the Gujarat High Court in Pratapsinhji N. Desai v. CIT [1983] 139 ITR 77. The court said (page 87) :
"The clear effect of Section 4 is that if there is any provision made in the Act in respect of any matter governed by the custom or usage of Hindu law previously, then the said provision would prevail and the previous Hindu law to the extent it related to those matters would stand nullified. The question, in the present reference, is whether any provision has been made in the Act with reference to the rule of inheritance by a single heir. If any provision is made contrary to classical Hindu law in that behalf in any of the sections of the Hindu Succession Act, that provision would prevail against the earlier law as ordained by custom, usage or interpretation of Hindu law as in force immediately before the commencement of the Act. The effect of Section 5(ii), read with Section 4, is that any custom or usage which enjoined the devolution of an estate on a single heir unless it is by the terms of a covenant or agreement entered into by a Ruler of any Indian State with the Government of India or by the terms of any enactment passed before the commencement of the Hindu Succession Act, would stand repealed. Section 5(ii) saves and excepts only that estate which descends to a single heir by the terms of any covenant or agreement entered into by the ruler of an Indian State with the Government of India, or by the terms of any enactment passed before the commencement of the Hindu Succession Act. In other words, the conjoint reading of Sections 4 and 5 drives us to the conclusion that any custom or usage, which enjoins the devolution of an estate on a single heir is no more effective, except in those cases where in respect of an estate such a descent is 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 any terms of an enactment passed before the commencement of the Hindu Succession Act."
62. The principle was followed by the Patna High Court in CIT v. Maharaja Chintamani Saran Nath Sah Deo [1986] 157 ITR 358. The court, after referring to the decision in Shiba Prasad Singh v. Rani Prayag Kumari Debi, AIR 1932 PC 216, said (page 361) :
"It is plain from the law laid down by the Privy Council that the joint family of a Mitakshara Hindu family persisted all along and the estate retained its character of joint family property. Of course, the general law of the Mitakshara in regard to joint family property was superseded by the custom of impartibility and lineal primogeniture. The incident of right of survivorship was, however, never superseded. The eclipse of the rights of the members of a joint family in regard to (1) right of partition, (2) right to restrain alienations by the head of the family except for necessity, and (3) right of maintenance, fell apart consequent upon the enactment of Section 4(1) of the Hindu Succession Act. The rights of the members of the joint family shined forth in full lustre. Thus, although the status of the assessee was that of an 'individual' from 1950 till September, 1956, after that period he was entitled to the status of member of a Hindu undivided family. He is, therefore, entitled to be treated and assessed as such."
63. The court in coming to this conclusion, referred to the decision of the Supreme Court in Sundari v. Laxmi, AIR 1980 SC 198, and followed the decision of the Gujarat High Court referred to above in Pratapsinghji N. Desai's case [1983] 139 ITR 77. We are in respectful agreement. The contrary view taken by the Calcutta High Court in CIT v. U.C. Mahatab, Maharaja of Burdwan [1981] 130 ITR 223 (Cal), with utmost respect does not state the law correctly and we express our inability to agree with the same.
64. The question of abrogation of custom or any provisions of law contrary to the provisions of the Hindu Succession Act under Section 4 is not postponed in each case until a succession opens the abrogation of custom or , the law contrary to the provisions made in the Act is forthwith. The succession in each and every case after the commencement of the Act shall be in accordance with the principles emanating from the provisions of the Act of 1956, The reasoning adopted by the Calcutta High Court, in our opinion leads to anomalous situation that a custom applicable to a particular class of property is not projected simultaneously on the date of the enactment but is projected in the case of each property depending upon when the succession opens in future as if the same custom will be abrogated as many times new succession opens and a provision of law inconsistent with the Hindu Succession Act, 1956, will be repealed not once but as many times as succession will open in future in relation to different properties.
65. Apart from the aforesaid, it is apparent that there was no enactment governing the succession of the immovable property and business acquired out of incomes of Istimrari estate nor the rule governing succession to properties held by the assessee by the rule of primogeniture, general or specific, was in operation. The only provision on which the reliance was placed by the Revenue is Section 23 of the Regulation of 1877 read with Section 9 of the Rajasthan Revenue Laws (Extension) Act, 1957.
66. It may be noticed that Section 23 of the Regulation of 1877 only provides for succession to an Istimrari estate on the death of the Istimrardar but does not affect the succession of an Istimrardar generally in all circumstances. Once the estate of Istimrari is abolished in 1955, before the commencement of the Revenue Laws (Extension) Act, the rules under the Regulation of 1877 relating to Istimrardari stood impliedly repealed inasmuch as there remained no Istimrari estate which could be governed by Section 23 after the Ajmer Act of 1955 became operative and the Istimrari estate stood vested in the State. The contention of the Revenue as has been accepted by the Tribunal, in our opinion, is not correct when it says that because the Regulations of 1877 were not repealed nor the Ajmer Act, 1955, was repealed specifically, by dint of the provisions of Section 9 of the Revenue Laws (Extension) Act the provisions of Section 23 were resurrected. No provision under the General Clauses Act or the provisions of the Tenancy Act as extended to the Ajmer area could revive the provisions which were no more applicable to any estate which itself has ceased to exist. It is not even the case of the Revenue that Istimrari continued up to the period when the provisions of the Revenue Laws (Extension) Act came into force. The provisions of Act No. 2 of 1958 in no circumstances could revive the existence of Istimrari along with the applicability of Section 23 thereto. Section 23 of the Regulation of 1877 became inoperative as soon as Istimrari was abolished and no more remained in existence. What has been said under the General Clauses Act or by the provisions of Section 9 of Act No. 2 of 1958 are only about the existing rights as on the date but not the revival of non-existing rights.
67. As a result of the aforesaid discussion, we hold that question No. 2 is to be answered in favour of the assessee and against the Revenue holding that the impartibility attached to the estate held by the applicant assessee stood destroyed on the abrogation of Istimrari under the Ajmer Abolition of Intermediary and Biswedary Act, 1955, and the property in the hands of the assessee remained the property of the Hindu undivided family without the incidence of impartibility. Therefore, the provisions of Section 9(4) of the Indian Income-tax Act, 1922, or Section 27(1)(ii) of the Income-tax Act, 1961, did not apply thereto and the assessee has to be assessed in respect of the income derived from the immovable properties referred to above which are owned by the Hindu undivided family and income from the business of Vakil and Co., which is also an ancestral business carried on by the assessee as the karta of the Hindu undivided family in the status of the Hindu undivided family for the assessment year 1960-61.
68. Before parting with the case, we may notice the fact brought to the notice of the court and not denied by the respondents that for the entire period subsequent to the assessment in question the assessee has been subjected to tax in respect of income derived from Vakil and Co., in his status as Hindu undivided family in terms of the Tribunal's order dated April 26, 1985, which has neither been subjected to reference nor any application in respect thereof is pending and the same has attained finality. Thus only the assessment for the year 1960-61 remained singularly isolated to be treated differently.
69. In the aforesaid facts and circumstances, the parties are to bear their own costs.