V.A. Mohta, J.
1. Following two questions have been referred to this Court under s. 256(1) of the IT Act, 1961 at the instance of the CIT, Bombay City :
'1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that 2/3rd of the income from the Gwalior Estate for the asst. yrs. 1970-71, 1971-72, 1972-73 and 1973-74 was assessable in the hands of the HUF consisting of Sri Madhavrao and his mother and the balance 1/3rd of the income was assessable in the hands of the 'AOP' consisting of the legal heirs of the late Maharaja, Sir J. M. Scindia, and that no part of such income was assessable in the hands of Sri Madhavrao individually
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the partial distribution of the assets effected by the Administrator of the estate of the late Maharaja, Sir J. M. Scindia, on 1st February, 1968 was valid in law ?'
2. The ultimate question is whether the Gwalior estate left behind by His Highness Maharaja J. M. Scindia of Gwalior was his individual property or the HUF property.
3. The relevant assessment years are 1970-71 to 1973-74. Maharaja - a Hindu died on 16th July, 1961 leaving behind as legal heirs. Her Highness Maharani Vijaya Raje - a widow, Shri Madhavrao Scindia - a son and Maharani Padmavati of Tripura, Princess Usha Raje, Princess Vasundhara Raje and Princess Yashodhara Raje - four daughters. Estate duty as well as income-tax returns were filed on the basis that the property was of HUF. The CBDT obtained opinion from the then Attorney General Shri C. K. Daphtary in the estate duty assessment proceedings. He opined that the stand of the accountable person was correct, the said opinion was accepted by the CBDT and estate duty assessment was completed on that basis. Following the same, the income-tax returns filed for the assessment years 1962-63, 1963-64 and 1964-65 were also accepted by the IT Department and assessments were finalised.
4. Later on the Department reopened the estate duty assessment proceedings on the ground that as per decision rendered by the Gujarat High Court in the case of D. S. Maramwalla vs. Ba Shri Amarba 1568 GLR 609 the rule of primogeniture applied to the succession as it was impartible estate and hence property could not be assessed in the HUF status. In the income-tax assessments of assessment years 1965-66 and 1966-67, the Department brought to charge the entire income of the Gwalior Estate in the hands of the legal heirs of the Maharaja as AOP and 2/3rd of the income protectively in the hands of the HUF. The Tribunal, however, held that the property was of HUF, the late Maharaja had only a 1/3rd share of the Gwalior estate, the said share belonged to the legal heirs and the 2/3rd share to the HUF as per the provisions of the Hindu Succession Act, 1956. For the subsequent asst. yrs. 1967-68 to 1969-70 also the Tribunal took the same view in its still more detailed order dt. 23rd August, 1976. The Tribunal has disposed of appeals for the relevant assessment years also on the same basis.
5. Facts found by the Tribunal are :
(a) The House of Scindias descent from Rajput family of Sihilledars under the Bhamini Kings, one branch of which was holding Patelship of a hamlet Kannerkhera near Satara in the state of Maharashtra. The founder of the present Gwalior House was Rangoli Scindia who rose in the favour of Peshwas along with Malharrao Holker, the founder of House of Indore. They were authorised by Peshwas to collect Chauth (25%) and Sardeshmugh (10% over and above 25%) in the district of Malwa. Ranoji had three legitimate sons Jayappa, Dattaji and Jotiba and two illegitimate sons, Tukoji and Mahadji. Tukoji pre-deceased the father. Upon death of Ranoji, Jayappa succeeded to the huge Scindia possession in Malwa region. Jayappa had left behind son Jankoji and brother Dattaji. Dattaji and not Jankoji succeeded to the estate. Upon death of Dattaji Jankoji succeeded to the huge Scindia possession in Malwa region. Jayappa had left behind son Jankoji and brother Dattaji. Dattaji and not Jankoji succeeded to the estate. Upon death of Dattaji Jankoji succeeded. When Jankoji died the only surviving lineal descendant of Ranoji was Mahadji, the illegitimate son. Illegitimacy was a normal bar to his succession but considering the great qualities of leadership with which he was adomed, Peshwa Madhavrao confirmed him in the family Jagir. Mahadji left behind no son. In keeping with his wishes Daulatrao, the grandson of Tukoji succeeded to the estate. Daulatrao entered into a treaty of friendship with the East India Company in which Inam lands are described as held by the family. Daulatrao died leaving behind no son. His widow adopted a son by name Mugatrao in accordance with the wishes of Daulatrao. The new name of Mugatrao was Jankojirao. He also died leaving behind no son. His widow Tarabai adopted a son by name Bhagirathrao who was named as Jayajirao. For his services in the mutiny, the British Government made over to Jayajirao several properties including the lands. Jayajirao was succeeded by a son Madhavrao. When Madhavrao died in 1925, Maharaja, the only son ascended to the throne.
(b) the Gwalior Estate was a family property having its origin in Jagirs given to the family and the ancestors of Madhavrao had made accumulations and accretions to the estate on the basis of the nucleus of the ancestral property.
(c) The Ruler of the Gwalior Estate had no unlimited sovereign powers. In a Treaty between the East India Company and the Ruler, the Company enforced against the Ruler Her Highness Tarabai's right of maintenance from the estate.
(d) The Gwalior Estate owned properties even outside the territory of the State which was subject to normal law.
(e) In furtherance of the Indian Independence Act, 1947 Maharaja signed on 15th August, 1947 an instrument of accession of his State to the Dominion of India. On 22nd April, 1948 Maharaja as a Ruler signed a covenant with the other Rulers of the surrounding areas and the United State of Madhya Bharat was formed on 15th June, 1948. When the Constitution of India was brought into force, the said State became a Part B State. On the passing of the Constitution (Seventh Amendment) Act, 1956, the said Madhya Bharat State Ceased to be a Part B State and was incorporated with the State of Madhya Pradesh as provided in the States Reorganisation Act, 1956. Upon death of Maharaja, the President of India issued a certificate under Art. 366(22) of the Constitution recognising the Maharaja's only son Shri Madhavrao as Ruler in succession of Maharaja w.e.f. 17th July, 1961.
(f) Maharaja was filing returns of income from Gwalior Estate in the individual status.
(g) Maharaja made certain gifts of the property. But it was within reasonable limits.
6. Now it will be seen from the above established factual back ground that the succession to the Estate was not always as per rule of primogeniture. Neither custom nor grant in the matter is established. The Ruler also did not have unlimited sovereign powers. The estate is noticed as family property having origin in Jagirs given to family. From the said property maintenance was given to the family members. All these factors are against the impartible character of the property. No doubt Maharaja was filing returns of income in the status of individual and had also made gifts of some property. But these factors are not decisive of the matter. The circumstances of filing of returns in individual status by Maharaja cannot outweigh the wealth of the material indicating the real character of property. In no case it will affect the rights of the others. Gifts of property were in the reasonable limits. Even if the limit was exceeded, that conduct may be assailed but on that basis the character of the property cannot be determined. Certificate issued by the President of India under Art. 366(22) is merely a recognition as Ruler of Gwalior. The said certificate is not concerned with the rights in private properties of the Ruler particularly when rights of third parties are involved. Hence, the finding of the Tribunal that the property was neither impartible nor subjected to the rule of primogeniture in the matter of succession is based on material on record and is binding on this Court.
7. There is yet another important angle to this case and it relates to the effect of the Hindu Succession Act. There can be no doubt that after 1956 the Hindu succession is governed by the Hindu Succession Act which is a complete Code on the subject. Secs. 4(1) and 5(ii) of the Hindu Succession Act are reproduced here for ready reference, since they are vital to the issues.
'4. Overriding effect of the Act - (1) Save as 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 to 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.'
'5. Act not to apply to certain properties. - This Act shall not apply to -
(i) ..... ...... ...... ......
(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.'
Sec. 4 gives an overriding effect to the Act Sec. 4(1)(a) speaks of old and pure Hindu Law and s. 4(1)(b) speaks of that part of the statutory law which is inconsistent with any provisions of the Hindu Succession Act, Sec. 5 lists exceptions to the general overriding effect brought above by s. 4 Sec. 5(ii) deals with an estate which descends to a single heir by terms of the covenant or by an agreement with the Government of India. The combined effect of ss. 4 and 5 has been summarised by the Supreme Court in the case of Sundari vs. Laxmi Air 1980 SC 1989 as follows :
'Sec. 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.'
8. In the 3rd Edition of Hindu Law by Shri S. V. Gupte, Vol. 2, the learned author has made the following observations (page 416) :
'The second category of property excluded from the operation of this Act is any estate which descend 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. The object is to exclude from the operation of the Act succession to the estate which goes by the rule of primogeniture but not in all cases; it is only where the estate descends to a single heir by reason only of the terms of the 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. Under the old law of succession an estate could descend to a single heir by the rule of primogeniture by reason of the terms of a grant or custom or usage. This was one of the features of impart able estates. In view of the restricted exclusion under this clause the rule of primogeniture now stands abolished even where primogeniture was recognised by the terms of a grant or custom or usage. Sec. 5(ii) only excludes from the operation of the Act estates which descend by the rule of primogeniture in a limited class of cases.'
There can be no manner of doubt that s. 5(ii) has been added in the Hindu Succession Act pursuant to Art. 362 of the Constitution, the object being to protect the guarantee given by the Government to the Rulers of the India at the time of accession. That by the Constitution (Twenty-sixth Amendment) Act, 1971 the said Art 362 has been subsequently omitted is a different matter.
9. Common ground is that the rule of primogeniture did not apply to the Gwalior Estate under any law. Covenant dt. 22nd April, 1948 does not indicate that the estate stands guaranteed to a single heir by the terms thereof, as will be seen from the following relevant extracts.
'Art XII : (1) The Ruler of each covenanting State shall be entitled to the full ownership, use and enjoyment of all private properties (as distinct from State properties) belonging to him on the date of his making over the administration of the State to the Raj Pramukh.
(2) He shall furnish to the Raj Pramukh before the 1st day of August, 1948 an inventory of all the immovable properties, securities and cash balance held by him in such private property.
(3) If any dispute arises as to whether any item of property is the private property of the Ruler or State property, it shall be referred to such person as the Government of India may nominate, in consultation with the Raj Pramukh, and the decision of that person shall be final and binding on all parties concerned :
Provided that no such dispute shall be referable after the 1st day of July, 1949.
Art. XIII : The Ruler of each covenanting State is also the members of his family, shall be entitled to all the personal privileges, dignities and titles enjoyed by them, whether within or outside the territories of the State immediately before the 15th day of August, 1947.
Art. XIV : (1) The succession according to law and custom to the gaddi of each covenanting State, and to the personal rights, privileges, dignities and title of the Ruler thereof, is hereby agreed.
(2) Every question of disputed succession in regard to a covenanting State shall be decided by the Council of Rulers after referring it to a Bench consisting of all the available Judges of the High Court of the United States and in accordance with the opinion given by that High Court.
Art. XV : No enquiry shall be made by or under the authority of the United States, and no proceeding shall lie in any Court in the United States against the Ruler of any covenanting State, whether in a personal capacity or otherwise in respect of anything done or omitted to be done by him or under his authority during the period of his administration of that State.'
10. Thus it will be seen that succession to the estate would be governed by s. 6 and other relevant provisions of the Hindu Succession Act under which the legal status of the property is clearly HUF.
11. This takes us to the consideration of the case of Meramwalla (supra) which has been the bass for the rethinking of the Department. The context was the dispute pertaining to the civil rights of parties in a civil Court filed long before the Hindu Succession Act came into force. A perusal of the judgment will indicate that the effect of ss. 4 and 5 of the Hindu Succession Act has not been considered in the said judgment, perhaps because the question did not arise. The whole context was different. That apart there are certain striking distinguishing features which make the ratio of the said decision clearly inapplicable to the matter at hand. That was a case where a common ground was that the entire estate was in a territory over which the chief of the estate had sovereign power and the rule of primogeniture applied to the estate by a long custom upto the lapse of paramountcy. In that very decision there are observations to the effect that legal position would be different if rule of primogeniture applied on above basis.
12. It is well settled that impartibility is essentially a creature of custom and in the case of ordinary joint family property, the members of the family have : (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. In law, the first of the three rights could not exist in the case of an impartible estate, but the right of survivorship was never superseded. As rightly held by the Patna High Court in the case of CIT vs. Maharaja Chintamani Saran Nath Sahdee : [1986]157ITR358(Patna) , the eclipse on the rights of 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 s. 4(1) of the Hindu Succession Act.
13. Under the circumstances, question No. 1 is answered in the affirmative and in favour of the assessee. Answer to question No. 2 is merely consequential. Hence question No. 2 is also answered in the affirmative and in favour of the assessee. No order as to costs.