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One Arunachalam Chettiar died on February 23, 1938, leaving a considerable estate, including properties in Ceylon. He was married three times. By his first wife he had a son with a similar name, who died on July 9, 1934, leaving his second widow, Umayal Achi. His mother, Valami Achi, had died long before him. Arunchalam Chettiar (senior) left him surviving his two widows, Lakshmi Achi and Nachiar Achi, and also his last will and testament by which he nominated his widows as also the them to arrange for adoption of a son to each of his widows as also the widow of his pre-deceased son. When Arunachalam Chattiar (junior) died, the Government of Ceylon levied estate duty on his half share in the estate, which belonged to the joint family consisting of himself and his father. The levy as reduced in April, 1942, amounted to Rs. 2,21,743. This amount was paid on March 31, 1943. In the meantime, litigation between the three widows having arisen, the Court of the Subordinate Judge of Devakotta appointed receivers to take possession of the entire estate. On May 16, 1942, they instituted suit in the District Court of Colombo questioning the validity of the levy of estate duty on certain grounds. On these death of Arunachalam Chettiar (senior) a similar demand of estate duty on his share of the properties in Ceylon was made and a total sum of Rs. 6,33,601.76 was paid by March 31, 1943. On November 8, 1949, the District Court of Colombo set aside the levy of estate duty in the case of Arunachalam Chettiar (junior) and affirmed the levy the levy in the other case. On October 12, 1953, the Supreme Court at Ceylon, however, allowed the appeal of the receivers relating to Arunachalam Chettiar (senior). A further appeal by the Ceylon Government to the Privy Council was unsuccessful. The result of it was, as directed by the courts, the Ceylon Government deposited Rs. 7,97,072 towards interest, apart from the principal which had been paid out of the funds of the estate towards the estate dung s levied in both the cases. Deducting the litigation expenses amounting to Rs. 2,17,087, the balance of Rs. 5,79,985 was credited in the accounts of the estate. On June 16 or 17, 1945, each of the widows adopted a son. It would appear that the widow of Arunachalam Chettiar (junior) contested the validity of the will of Arunachalam Chettiar (senior) as to the direction for partition and separated possession of a third share for each of the adopted for sons. This litigation eventually reached the Privy Council and at that stage on February 17, 1947, a compromise was that as arrived at between the three widows, one of the terms of which was that of the adopted son was to take a third share in the estate along with his adoptive mother. In the case if the assessee, who is the adopted son of Arunachalam Chettiar (junior), there was pre-partition agreement between himself and his adoptive mother by which the assessee was entitled to 5/24 share in the estate. This share worked out to Rs. 1,20,830 out of Rs. 5,79,986.

So, the Tribunals view was based upon the primary grounds :

(1) there was no allocation of the receipt to any of the shares and (2) the entire receipt without any allocation, as so much for principle and so much for interest, was found credited to one account in the books of the estate. On these premises the Tribunal was prepared to take the view that when there was a division on February 17, 1947, the shares divided the fund as capital. In its opinion, whatever the charter of the amount might have been before partition, when the joint estate was divided, it went to the sharers only as capital.

In Veerappa Chettiar v. Commissioner of Income-tax this court, dealing with the nature of property allocated to a sharer, who was a member of a joint Hindu family, held :

"What is divided at a partition is the entire family estate consisting of the original family estate with all subsequent accretions to that estate in the shape of income or profits, the whole thing constituting one composite property without allocation to capital or profits. On a partition the sole right of a member of the family is t get an allotment of his share in the assets available after discharging the family debts.... What is distributed amongst the shares at the partition is the net residue of the estate after payment of family debts and no artificial dissection of the allotments into capital and profits is necessary and in many cases would be impossible."

Mr. Balasubrahmanyan submitted that the real principle which Veerappa Chettiar v. Commissioner of Income-tax, laid down was contained in the following sentence :

"For the reasons already stated by us, it is open to question whether the allotment of the business assets at the petition was liable to be apportioned as between capital and profit unless there was any such specific provision in the deed of partition."

According to Mr. Balasubrahmanyan all that this case divided was that if the terms of the partition deed showed that the entire property was treated as one whole and was divided as such, without any specific provision for sharing of this or that property as capital or interest, what fell to a sharer must be regarded as capital. We do not think that this is the scope of the decision. What will be the character of a share in the hands of a member of a joint Hindu family on division, if the terms of a partition showed its identity, does not arise for decision in the reference before us. We do not understand Veerappa Chettiar v. Commissioner of Income tax, as holding that the terms of partition would make any difference to the proposition. At any rate, on the facts in that case, this court had not to decide the effect of the terms of a partition on the character of property allotted to a share at a family partition. We are of the view that Veerappa Chettiar v. Commissioner of Income-tax, is authority for the proposition that when joint family properties are divided and a share is allotted to a member of the family, he gets it as capital and no part of it can regarded as anything of a different character. Mr. K. Srinivasan for the assessee, therefore, rightly relied on Veerappa Chettiar v. Commissioner of Income-tax when he urged that, so long as the joint Hindu family continued undivided, no differentiation could be made between interest and principal at the hands of the joint Hindu family from the standpoint of the character of allotment at partion. But this contention for the assessee does not take him the whole length for, in this case, as we said, there was disruption in the status of the family as on February 17, 1947. The effect of the disruption in status undoubtedly is that the joint Hindu family as such came to an end then. We are not at the moment thinking of a joint Hindu family as statutorily recognised under the provisions of the Indian Income-tax Act 1922. We may in passing mention that no argument for the assessee was addressed to us based on section 25A. After the disruption in status, the three adopted sons owned the common estate not as coparceners but as tenants-in-common. In Commissioner of Income-tax v. Keshavlal Lallubhai Patel the Supreme Court quoted with approval the following observation of this court in M. K. Stremann v. Commissioner of Income-tax :