income-tax Officer/Wealth-tax Vs. S.R. Kirloskar (Huf) - Court Judgment

Excerpt:
1. the father of the assessee died on 8-10-1962 intestate, leaving behind his separate and self-acquired property. at the time of his death, the deceased was survived by his only son and two daughters. at the time of the death of his father the assessee was a bachelor. he married in the year 1968 (17-2-1968), was blessed with a daughter on 16-8-1969 and with a son on 14-7-1970. before the birth of his son he disclosed income from property he inherited from his father as his individual income. however, after the birth of the son, the assessee declared that the income belonged to his huf.the dispute came up before the tribunal and by its order dated 14-10-1976 in it appeal nos. 434 and 435 (pune) of 1974-75 for the assessment years 1970-71 and 1971-72 and wt appeal nos. 42 and 43 (pune) of.....

Judgment:
1. The father of the assessee died on 8-10-1962 intestate, leaving behind his separate and self-acquired property. At the time of his death, the deceased was survived by his only son and two daughters. At the time of the death of his father the assessee was a bachelor. He married in the year 1968 (17-2-1968), was blessed with a daughter on 16-8-1969 and with a son on 14-7-1970. Before the birth of his son he disclosed income from property he inherited from his father as his individual income. However, after the birth of the son, the assessee declared that the income belonged to his HUF.The dispute came up before the Tribunal and by its order dated 14-10-1976 in IT Appeal Nos. 434 and 435 (Pune) of 1974-75 for the assessment years 1970-71 and 1971-72 and WT Appeal Nos. 42 and 43 (Pune) of 1972-73, 85 (Pune) of 1973-74 and 85 and 86 (Pune) of 1975-76 for the assessment years 1970-71 to 1974-75, the Tribunal accepted the assessee's claim that the income in his hands as well as the wealth arising from the property inherited in the above manner was liable to be assessed as the income of the HUF of which he is the karta for the assessment years 1971-72 and onwards.

The aforesaid orders of the Tribunal were accepted by the department and have, thus, become final. On 23-3-1977, i.e., after the department had accepted the abovesaid Tribunal's order, there was a partial partition of the property whereafter the income is shown by the separated members as their income. Similarly, the wealth is also shown by the separated members as their wealth.

2. The dispute has again arisen for the assessment year 1977-78 in regard to income-tax proceedings and for the assessment year 1975-76 in respect of wealth-tax proceedings. The Commissioner (Appeals) has, following the aforesaid Tribunal's orders, accepted the assessee's claim. This is how being aggrieved by the order of the Commissioner (Appeals), the department has come up in appeal.

Placing reliance on a number of High Court decisions where a contrary view has been taken, it was submitted on behalf of the revenue that the earlier decision of the Tribunal required reconsideration. The Pune Bench which originally heard the appeals was persuaded to take the view that the order passed by the earlier Bench, perhaps required reconsideration and, therefore, reference was made to the President for constitution of a larger Bench which was accepted. That is how the matter has come up before the Special Bench.

3. The main question in these cases is whether the property inherited by a Hindu from his father, after coming into force of the Hindu Succession Act, 1956, is his separate or ancestral property qua his sons for the purposes of assessments to income-tax and wealth-tax. In order to answer the question, it is necessary, first, to understand the purport and scope of the Hindu Succession Act.

In this context, it may not be out of place to refer to the preamble to that Act which is indicative of the scope of the Act. The preamble reads as under: An Act to amend and codify the law relating to intestate succession among Hindus.

It is evident from the preamble that what is intended is to amend and codify the law relating to intestate succession amongst the Hindus. It is neither intended to repeal the old shastric Hindu law altogether nor to merely amend it but to amend and codify the same. It, thus, follows that with respect to matters for which provision has been made in this Act, the old shastric Hindu law ceases to operate but in respect of matters for which there is no provision in this Act, the old shastric Hindu law continues. This heading of ours finds support from Section 4 of the Hindu Succession Act which specifically provides for the overriding effect of this Act in the following manner; (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.

(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.

Clause (a) of Sub-section (1) provides that any text, rule or interpretation of Hindu law or any custom or usage as a 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 a provision has been made in this Act and Clause (b) contains an identical overriding provision as regards any other law, i.e., other than the shastric Hindu law. By necessary implication it means that in respect of matters for which there is no provision in this Act, the old shastric Hindu law will continue to apply.

4. Coming to the facts of the case, it is found that the assessee has inherited the separate property of his father who died intestate under Section 8 of the Hindu Succession Act which reads as under: 8. The property of a male Hindu dying intestate shall devolve according to the provisions of this Chapter:-- (a) firstly, upon the heirs, being the relatives specified in Class I of the Schedule; (b) secondly, if there is no heir of Class I, then upon the heirs, being the relatives specified in Class II of the Schedule; (c) thirdly, if there is no heir of any of the two classes, then upon the agnates of the deceased; and (d) lastly, if there is no agnate, then upon the cognates of the deceased.

The section lays down on whom the property of a male Hindu dying intestate and leaving a separate property will devolve. It also refers to different classes of heirs who inherit the property in order of preference. Apart from the fact that the section does not contain anything to indicate the character of the property in the hands of the inheritor, i.e., the recipient, it is, perhaps, not within the scope of the Hindu Succession Act to provide for such a contingency. As we understand, the word 'devolve' used in Section 8 and the expressions 'inherit' and 'succeed' occurring elsewhere in this Act merely indicate the person(s) who inherit/ succeed(s) or on whom the property devolve(s) and that is all. On the face of it, it is not possible to infer from these words that the person who inherits, succeeds or on whom the property devolves gets the property absolutely so as to exclude his son's interest by birth in case the concerned person is a male Hindu or otherwise. At best, the inference can be that this Act is silent on this aspect.

5. Considering the problem from another point of view, we find that Section 8 provides for different categories of heirs who inherit the property of a male Hindu, dying intestate in order of preference. The heirs mentioned in Section 8 are different from the heirs referred to in Article 29 of Mulla's Hindu Law. Therefore, the provision contained in that article representing the old shastric Hindu law would cease to have effect. Similarly, Section 19 of the Hindu Succession Act provides that the heirs, if any, succeeding shall take the property as tenants-in-common and not as joint tenants. The result will be that the provision contained in Article 31 of the Mulla's Hindu Law representing the old shastric law to the effect that particular type of heirs would take the property as joint tenants will cease to have effect. However, the same cannot be said of Article 223 of Mulla's Hindu Law which provides that the property inherited by a male Hindu from paternal ancestor, i.e., his father, father's father, and father's father's father, is ancestral property and that the sons, grandsons and great-grandsons acquire an interest in such a property by birth. We say so as there is not even a suggestion that there is as such any provision in the Hindu Succession Act laying down a contrary proposition. In the circumstances, the property inherited by a male Hindu from his father would be ancestral property qua his sons. In other words, it will become HUF property for the purpose of assessment to income-tax and wealth-tax the moment a son is born to such a male Hindu.

6. It is pertinent to mention that three main arguments have been advanced on behalf of the revenue against this proposition, namely (i) mention of a son only as the heir as distinct from son and his son in the Schedule to Section 8 is indicative of the fact that the son inherits absolutely and not along with his son or sons; (ii) this interpretation, if accepted, will make male heirs inferior to female heirs who inherit the property absolutely; and (iii) there is no specific provision in the Hindu Succession Act envisaging that such a property constitutes an ancestral property. The third argument is obviously without any force. As stated by us earlier, the Hindu Succession Act has not repealed the old shastric Hindu law absolutely.

The old shastric Hindu law stands ceased to operate only to the extent there is a provision to the contrary in the Hindu Succession Act.

Therefore, the query has to be whether there is a provision contemplating the particular situation in the Hindu Succession Act and not the other way round. The first argument is equally fallacious.

Absence of son's son with the son is fully justified as the inheritance is branchwise, i.e., per stirpes and not per capita and, therefore, so long as the son is alive his sons would not come into the picture except through him. The second argument though justified in point of fact, is not germane to the point at issue. Male Hindus are entitled to much bigger share in the coparcenary property. In the case of intestate succession, they would suffer in the sense that their sons will acquire interest in the property by birth, It may be clarified that this does not involve interpretation of Section 8 of the Hindu Succession Act as such. So far as that section is concerned, it indicates the persons who will inherit the property. How the said property will He treated in the hands of those who inherit will be governed by the provisions of the old shastric Hindu law, if any, unless there is a specific provision to the contrary in this Act. This is the scheme of the Hindu Succession Act and no fault can be found with this scheme and, in any event, this cannot be advanced as a reason for taking the view which is, otherwise, not justified on the basis of the plain language of the section.

7. From the above discussion, the legal position emerges to be that the old shastric Hindu law continues to operate even after the passing of the Hindu Succession Ac! except with respect to any matter for which a provision has been made in the Hindu Succession Act. The character of the property inherited by the assessee from his father who died intestate leaving a separate property is that of ancestral property as laid down in Article 223 of Mulla's Hindu Law. This property will be HUF property qua his sons, again, as laid down in that article. The query was and is whether there is a contrary provision in the Hindu Succession Act. After analysing various provisions, we find that the Hindu Succession Act does not have any provision regarding the situation obtaining before us, far less, a provision contrary to the old shastric Hindu law in this regard. In the circumstances, we are inclined to hold that the character of the property in the hands of the assessee is HUF property as claimed by the assessee.

8. Before concluding, it is desirable to mention that the standing counsel had relied on a decision of the Supreme Court in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440, (SC).

On going through the decision in Giani Ram's case (supra), we find that their Lordships had held in that case that the rights conferred on the female Hindu by Section 14(1) of the Hindu Succession Act make a clear departure from the previous law and, as such, the previous law cannot be used for circumventing these rights. However, there is no dispute in the case before us about the principle laid down by the Hon'ble Supreme Court. What has been laid down in the decision in the case of Gurupad Khandappa Magdum (supra) is that the purpose of the Hindu Succession Act is to give more rights to Hindu women and that, therefore, such an interpretation should be given as will result in enlargement of the share of the female heirs quantitatively and qualitatively. These decisions, to our mind, are not germane to the point at issue before us.

9. Also, that the Allahabad High Court in the case of CIT v. Ram Rakshpal, Ashok Kumar [1968] 67 ITR 164, the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 (FB), the Calcutta High Court in the case of Malchand Thirani & Sons v. CIT [1980] 121 ITR 976, the Madhya Pradesh High Court in the case of Shrivallabhdas Modani v. CIT [1982] 138 ITR 673 and last but not the least, a Full Bench of the Andhra Pradesh High Court in the case of CWT v. Mukundgiriji [1983] 144 ITR 18 have held that the property inherited by a male Hindu under Section 8 of the Hindu Succession Act will be his separate property and his sons will not acquire any interest by birth in the said property. On the other hand, the Gujarat High Court in the cases of CWT v. Harshadlal Manilal [1974] 97 ITR 86 and CIT v. Dr.

Babubhai Mansukhbhai [1977] 108 ITR 417 and the Punjab and Haryana High Court in the case of Brijlal [1977] 79 Punj. LR and the Allahabad High Court in its unreport-ed decision in the case of Radhey Shyam Sri Krishna v. CIT dated 2-2-1978 have taken a contrary view. A Special Bench of the Tribunal at Hyderabad in the case of K.S. Mohan Rao v. ITO [1983] 4 ITD I has followed the decisions given by the other High Courts in preference to the Gujarat High Court's decision (as at that time only the Gujarat High Court had the latter view).

10. It is evident that the High Courts have taken conflicting and contrary views on the issue. So far as the Tribunal is concerned, it is not a question of counting the number of High Courts taking one view or the other. Propriety demands of the Tribunal to accept the interpretation that appeals to it more when different High Courts have interpreted the same section of the Hindu Succession Act in a different and conflicting manner. The other method could possibly be that the Tribunal in such a case prefers the interpretation favourable to the assessee on the basis of well settled maxim (see the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192) that when two interpretations of a provision are reasonably possible, the one in favour of the taxpayer should be accepted. It will be too much to expect the Tribunal even to think that a view taken by a High Court is not reasonable or a possible view.

11. The Special Bench of the Tribunal at Hyderabad has no doubt preferred to follow the decisions given by the other High Courts in preference to the decision of the Gujarat High Court then available in the case of Harshadlal Manilal (supra). The case before us has its own peculiar facts. In this case, the Tribunal had accepted the assessee's claim that the property was HUF property in income-tax proceedings for the assessment year 1971-72 and in wealth-tax proceedings for the assessment years 1971-72 to 1974-75. The said order of the Tribunal was accepted by the department; for subsequent years, the department itself has held the property to be HUF. In fact, after the Tribunal's order was accepted, the property has been partitioned amongst the members of the family. Apart from what is stated by us above, the view taken by the Gujarat, the Punjab and Haryana High Courts and subsequently the Allahabad High Court has appealed to us. In this view of the matter, we are inclined to hold that on the peculiar facts of this case, the property and the income therefrom should be treated as belonging to the HUF of the assessee.