Judgment:
This is an appeal filed by the accountable person against the orders dt. 28th Nov., 1988 passed by the ACED, Visakhapatnam. The sole question which arises in this estate duty appeal is whether severance in status took place between late Sri K. Subramanyeswara Rao and his three sons and if so whether there was disruption of the joint family headed by him on 31st March, 1963. Before proceeding further some important facts are to be borne in mind and they are the following.
2. Late Sri K. Subramanyeswara Rao had two brothers and they belong to Velicheru, a village in Kothapet Mandal, East Godavari District and used to constitute a bigger joint family. However, Sri Subramanyeswara Rao and his brothers were divided long back and in that division Sri Subramanyeswara Rao obtained agricultural lands as well as cash. With those ancestral property and cash Sri K. Subramanyeswara Rao came along with his family to Amalapuram and settled down there. He began doing business being a partner in Sri Ramakrishna Silk Palace in which he used to represent his family with 50% interest in it. In 1963 the family acquired agricultural land as well as house in Sakurru village and they also invested family funds in Sri Ramakrishna Silk Palace, Amalapuram.
3. It is the case of the accountable person that there was disruption in the joint family and severance in status had been settled from 31st March, 1963 and in fact from that date there was no joint family as such and the members of erstwhile joint family (namely the deceased and his three sons) were divided and enjoying their respective shares in the joint family properties as tenants-in-common and not as joint tenants and, therefore, on the death of the deceased which took place on 29th June, 1977, the lineal descendants share was not liable to be included for rate purposes under S. 34(1)(c) of the ED Act while making estate duty assessment against the estate left by the deceased. It is also the contention of the accountable person that both the Asstt. CED and the ACED went wrong in dismissing his plea that no aggregation of lineal descendants share is permissible under S. 34(1)(c) since there was no joint family from 31st March, 1963.
4. On the other hand, the Revenues contention is that the narration of the account entry dt. 31st March, 1963 on which the accountable person relies on does not spell out a complete division in status.
Impossibility to continue as joint family members after 31st March, 1963 was not recorded in that narration. Intention to sever their joint family status and the intention to live apart from each other as divided members from 31st March, 1963 was also not there in the impugned narration. The intention to enjoy the other undivided properties both movable and immovable as tenants-in-common, till they are completely divided by metes and bounds, cannot be culled out from the impugned narration. A fair and tolerable interpretation which the impugned narration bears and admits is that the business assets held by the joint family in Sri Ramakrishna Silk Palace, Amalapuram, were divided among the joint family members and thus there was partial partition of some of the movable properties among the erstwhile joint family members. Under law there can be a valid partial partition which can be effected either with reference to the properties or with reference to the persons or both. The partial partition effected among members of joint family with regard to movables, does not automatically bring out severance in status.
5. The impugned narration which is the sole basis for accountable persons plea is found in Telugu, a copy of which is provided and an English translation to it is also provided. Since one of us is a Telugu knowing person, we do not want to depend upon the English translation given by the accountable person. A free translation to the Telugu narration in the account entry dt. 31st March, 1963, according to us is the following : "Accounts of this firm upto 31st March, 1963 are settled. Towards our 50% interest of our joint family, the net investment came to Rs. 90,637.62. From now onwards we the four members of our joint family namely K. Subramanyeswara Rao, Nageswara Rao, Satyanarayana Murthy and Sitharamachandra Murthy became divided as regards this business and do not wish to carry on business as joint family members. We divide our 50% investment in the firm into four equal shares by debiting our investment in our joint family account in the firm and crediting each of our respective shares in our respective independent accounts in this firm. Apart from this we settled our joint family account where there was an investment balance of Rs. 104.87. Even that amount was divided into four equal shares by crediting our respective shares in it in our respective independent khatas in the joint family books of accounts.
There are no other assets relating to the business which remained to be divided : The above said narration was admittedly made in the capital account of the deceased representing the joint family in the ledger books maintained by Sri Ramakrishna Silk Palace, Amalapuram. It was a partnership firm in which the joint family headed by the deceased held 50% share or interest. His three sons have got separate ledger accounts with the said firm. Further, the joint family maintained its own books of accounts. However, it was not the case of the accountable person that an agreement among the joint family members about severance in status was recorded in their family accounts. The law with reference to severance in status was dealt with in Mullas Hindu Law, Fifteenth Edition at page 444 (Para 325), as far as it is pertinent to our case is as under : "Partition is a severance of joint status, and as such it is a matter of individual volition. All that is necessary, therefore, to constitute a partition is a definite and unequivocal indication of his intention by a member of a joint family to separate himself from the family and enjoy his share in severalty. The Supreme Court pointed out in the undermentioned case (AIR 1974 SC 136, AIR 1968 ASC 1018, AIR 1979 ASC 1880) that there should be an intimation, indication or representation of such intention and that what form that manifestation should take would depend upon the circumstances of each case. It is implicit in this principle that this manifestation or declaration of intention should be to the knowledge of the persons affected for a mere uncommunicated declaration may amount to no more than merely harbouring an intent to separate. It is immaterial, in such a case, whether the other members assent. Once a member of a joint family has clearly and unequivocally intimated to the other members his desire to sever himself from the joint family, his right to obtain and possess his share is unimpeachable whether or not they agree to a separation and there is an immediate severance of the joint status. The intention to separate may be evinced in different ways, either by explicit declaration or by conduct.
Prima facie a document expressing the intention to divide brings about a division in status, but it is open to a party to prove that the document was a sham or a nominal one not intended to be acted upon and executed for some ulterior purpose, or proceed upon ignorance of the true position : and it is not their statements but their relations with the estate which is the determining factor.
It is often a question of interpretation of a document as to whether there was the intention to separate. The mere fact that it is recited in a document that owing to lack of amity a person has been residing separately would not establish that he had gone out of the family." The accountable person relies upon the Kerala High Court decision reported in AIR 1985 Ker 265 which was published by the Andhra Pradesh Law Journal as one of the cases in its Digestive Notes of Cases in (1986) (1) APLJ (DNC) page 8. In the headnote of the said decision the following is held : "Actual physical division or partition by metes and bounds is not an essential ingredient for the purpose of effecting severance in status.
That is only a procedural formality to be undergone in the process of partition. Even without undergoing that formality severance in status could be had. Expression of an unequivocal intention to separate resulting in division of status is sufficient to bring about the severance of status. That is the question of fact to be decided on the merits of each case. Simply because properties are not physically divided and allotted to members, a partition will not cease to be such, provided there are no facts and circumstances evidencing severance in status. When severance is attained, the joint family status is definitely disrupted. A business as a going concern could attain a status of division even by dividing book balance. Mere specification of shares in the accounts will be sufficient to attain a divided status regarding a family business. For that purpose it is not necessary that there should be a physical division of the business." We have kept in mind all the above principles before deciding the question of division in status in this case. According to the accountable person, the narration given in the accounts books of Sri Ramakrishna Silk Palace, Amalapuram dt. 31st March, 1963, translation of which was done by us, as already provided above, proved the division in status. After having given our thought and consideration, we are unable to agree with the contention put forward on behalf of the accountable person. Firstly we hold that the question whether there is a division in status set in, is a question of fact to be determined in the facts and circumstances of each case. Secondly, it depends upon the interpretation of the document which is said to contain unequivocal intention to divide from the family. In our view, the narration dt.
31st March, 1963 clearly shows that the members of the erstwhile joint family became divided only with reference to their assets or interest in the firm - Sri Ramakrishna Silk Palace, Amalapuram. It evidenced only partial partition with reference to some of the assets of the firm. We are not able to cull out any intention on the part of any of the four members to disrupt the whole joint family to pull out of the joint family with reference to all the assets held by it, or expressed intention to live separate with each other. Perhaps each of them wanted to become independent partners in the firm and to carry out that intention only the impugned narration as stated above was made.
6. The argument that ordinarily partition should be presumed to be whole and complete but not partial, leads us neither here nor there especially in view of the admitted case that immovable properties held by the joint family were not divided. The members of the joint family were not signatories to the impugned narration dt. 31st March, 1969. If really the four members of the family intend to divide and live separately from each other, it is reasonable to presume that the agreement to live apart from each other or the intention of any one member or members to separate from the family, would have manifested at least by appropriate entries made in the family books of accounts since it was a family affair and it is quite unlikely that a narration bringing about division in status between them, would be made in third partys books of accounts like M/s. Ramakrishna Silk Palace, Amalapuram.
It is the case of the accountable person that partial partition dt.
31st March, 1963 was recognised by the ITO by means of an order passed under S. 171 of the IT Act. If in fact there was division in status set in even on 31st March, 1963 and the members of the erstwhile joint family began separately living in pursuance thereof the necessary allegation or recital in that regard would have certainly found place in the petition filed before the ITO for recognition of the partition dt. 31st March, 1963, since it can be fairly taken to be contemporaneous document. Necessary arguments before the ITO would have been advanced to recognise a total disruption of the joint family or a severance in status set into the joint family on and from 31st March, 1963. Necessary arguments in that regard would have been advanced before the ITO, who passed the S. 171 order. However, neither petition copy seeking recognition of partition nor the order passed thereon by the ITO, were filed before us. An adverse inference has to be drawn from their non-production and we have to presume that had they been produced they would go against the present plea of the assessee.
Admittedly upto 31st March, 1963, the joint family was an income-tax assessee. Whether for subsequent years also it filed its IT returns, if so upto which assessment years it had filed IT returns, are not made known to us. However, we do not consider this aspect as decisive. It would have served only a piece of evidence either in favour of or against the accountable person. It is common knowledge that several joint families exist without having taxable incomes. In fact there is no presumption that the joint family should always possess some property. Thus, joint family can exist also without property.
7. On behalf of the accountable person, reliance was placed upon the two following earlier decisions of this Tribunal : (1) P. Venkatapati Raju vs. ACED, Kakinada EDA 23/Hyd/80 A Bench Order, dt. 17th July, 1982 (2) R. Jayalal Gowda vs. ACED, Guntur EDA 52/Hyd/75-76 A Bench Order, dt. 15th March, 1977 It is submitted to us that following the earlier orders of the Tribunal, here also the decision on the severance in status should be given in favour of the accountable person. Copies of the orders mentioned above are given to us. We have gone through those orders minutely and we hold that those orders were delivered on the facts of those respective cases. It is already stated that the division in status is to be found out with reference to the facts and circumstances of each case. In those two cases decided earlier by the Tribunal also different documents were interpreted and no doubt the orders went in favour of accountable persons in those cases and findings in favour of division in status having been set in were given in the respective joint families which were the subject-matter of those two cases.
However, the recitals in the documents which came for interpretation in those two cases were quite different and distinct from the recitals of the document of the impugned narration dt. 31st March, 1963 which calls for our interpretation in this case. For instance in the first of the above cases the Tribunal had to interpret the following part of the partition deed containing the narration as stated below. The earlier Tribunal was interpreting the documents of the partition deed on 20th May, 1957. The following narration in the said deed filed for the interpretation of the Tribunal : "the properties that fell to the share of Ramabhadraraju are being managed by Ramabhadra Raju since then. But 2, 3, 4 and 5 of us are not interested in such joint management and as No. 1 among us is being demanded by mother of 2 to 6 on their behalf for the partition of the said joint family properties, and as No. 1 of us being felt that it will be beneficial to partition the properties and cultivate the same individually than joint cultivation and management, for the improvement and enjoyment of the same and as No. 1 of us also wanted to partition the properties with others, we all have decided to partition our family properties." Parties 2 to 6 in the said partition deed are the minor sons and wife of Ramabhadraraju. The above recitals bring out an intention to partition of the properties in the family in unequivocal terms. They felt that such a partition is for the benefit of the minors. So also No. 1 among them who is the father of the family as patria potestas is entitled to partition the properties himself and he exercised that right as is evidenced by the above recitals. Thus, the above case which was decided by the Tribunal bears no comparison to the impugned narration dt. 31st March, 1963. For instance there was no recital in the impugned narration that it was impossible for the erstwhile joint family members to continue the joint family or to live together and to have a common mess. Intention to sever their joint family and intention to live separate from each other as divided members from 31st March, 1963 was also not there in the impugned narration. So also the intention to enjoy the other undivided properties both movable and immovable as tenants-in-common till they are completely divided by metes and bounds was also not there in the impugned narration.
8. In the second of the Tribunals orders relied on by the accountable person, the Tribunal was called upon to decide plea of division is status with reference to the following narration found in the agreement entered into between the parties thereto namely Sri M. R. Raghupathy Gowda and his four sons : "Whereas we, the parties, hereto, have been constituting an HUF and have been carrying on business in money lending as a joint family concern till this date; whereas for some time now dissension and misunderstandings arose between all of us and the necessity has arisen for us to become divided and also to divide our family properties." "All along we have been upto this date carrying on money lending business as a family business. Due to some differences of opinion which have arisen recently and considering the welfare of our family, a necessity has arisen to partition our properties." Compare the above narration with the impugned narration dt. 31st March, 1963 which is before us now, no mention of dissension or misunderstanding between erstwhile joint family members was recorded.
So also no recital about the necessity having arisen to become divided and also to divide the family properties was recorded in the impugned narration. So also a recital about the necessity having arisen to partition properties was also not made in the impugned narration dt.
31st March, 1963. Thus, whereas in the two earlier decided cases by the Tribunal there was a clear intention expressed by the members to live apart from each other spelt out from the narration of the respective documents which they have considered, there was no such recital present in the impugned narration dt. 31st March, 1963. Finding regarding division in status being a question of fact, had to be determined on the facts and circumstances of each case. We hold that the facts of the earlier decisions of the Tribunal are quite different from the facts of the present case before us and, therefore, those decisions of the Tribunal cannot be applied to the fact of the present case. From the impugned narration dt. 31st March, 1963 the intention is (sic not) to live apart from each other or to deny to themselves the right to go together or the privilege of having the right to reside jointly under the same roof, the right to have a common mess and the right of common worship. Therefore, in our considered view every partial partition with regard to some of the properties held by the joint family does not necessarily bring about a division in status. Even after a partial partition of the properties among its members, a joint family can still exist having commonality of residence, mess and worship. According to us, the lower authorities are perfectly in holding that the impugned narration did not bring about a division in status. On the other hand they are perfectly justified in holding that the integrity of the family is still maintained even after 31st March, 1963. It follows that even by the date of death of the deceased, the joint family in which the deceased is a members, existed. Therefore, the lineal descendants share is liable to be added under S. 34(1)(c) of the ED Act for aggregation.
9. In the result, we fall to see any merit in the assessees appeal and, hence, it is dismissed.