Smt. K. N. Indira Devi and anr. Vs. Dy. Commissioner, Agricultural Income Tax and Sales Tax. - Court Judgment

SMT. K. K. USHA, J. :

The above original petitions are filed by an assessee under ss. 60(2) and 60(3) of the Agrl. IT Act, 1950 for orders directing the Commr. of Agrl. IT, Thiruvananthapuram to refer questions of law extracted in the petition for opinion of this Court. Common issue arising in these petitions is whether a sole coparcener with his wife and daughter or daughters can be treated as a joint Hindu family coming under s. 4(2) of the Kerala Joint Hindu Family System (Abolition) Act, 1975 and whether the members of that family can be assessed under the Agrl. IT Act, 1950 as tenants-in-common. Since the petitioners contended that the decision of this Court in Dy. Commr. of Agrl. IT vs. R. S. Chidambram (1994) 209 ITR 531 : 1993 KLJ (Tax Cases) 576 would require reconsideration in the light of the decisions of the Supreme Court in Gowli Buddanna vs . CIT : [1966]60ITR293(SC) N. V. Narendranath vs. CWT : [1969]74ITR190(SC) , and Surjit Lal Chabda vs. CIT : [1975]101ITR776(SC) the above petitions were referred by a Bench for consideration of a larger Bench. These original petitions have come up for our consideration on such reference.

2. Petitioners are the legal representatives of late Koloor Nanjappa, an assessee under the Agrl. IT Act, 1950. Relevant assessment years are 1983-84, 1986-87 and 1987-88. The assessee filed returns claiming status of tenants-in-common along with his wife and daughter. The parties are following Mitakshara School of Hindu law. The assessee obtained properties, income from which is sought to be assessed under a partition between himself, his father and fathers brother. The assessee had no sons. The contention raised by the assessee that consequent upon the coming into force of the Karala Joint Hindu Family System (Abolition) Act, 1975, himself, his wife and daughter should be treated as tenants-in-common by applying s. 4(2) of the Act was accepted by the assessing authority and assessments were finalised on the above basis. The Commr. of Agrl. IT, Trivandrum issued notice to legal heirs of the original assessee on 28th August, 1989 invoking the power under s. 34 of the Act proposing the revise assessment orders on the ground that the assessee was not entitled to have the assessment completed assigning status of tenants-in-common, that the properties should be treated as belonging to assessee as his absolute share and no other member of his family had any right over the same. Even though objections were filed by the legal heirs of the assessee, contending that even if they are not coparceners, the property subjected to assessment was still joint family property and sub-s. (2) of s. 4 of the Kerala Joint Hindu Family System (Abolition) Act, 1975 would be applicable in their case, the Commissioner was not inclined to accept the contention. The matter was remanded to the assessing authority for fresh disposal in accordance with law and in the light of the observations contained in the order passed by the Commissioner.

3. Application filed by the assessee under s. 60(2) of the Agrl. IT Act, 1950 seeking reference of certain questions of law for the opinion of this Court was rejected by the Commissioner. The original petitions are filed for compelling the Commissioner to refer those questions for the opinion of this Court.

4. The Kerala Joint Hindu Family System (Abolition) Act, 1975, hereinafter referred to as the Act, came into force on 1st December, 1976. The preamble of the Act shows that the statute was brought to abolish the joint family system among Hindus in the State of Kerala. The term 'joint Hindu family' as defined under s. 2 would take in (1) a tarwad or thavazhi governed by the Madras Marumakkathayam Act, 1932, the Travancore Nayar Act, 11 of 1100, the Travancore Ezhava Act 11 of 1100, the Najinad Vellala Act of 1101, the Travancore Kshatriya Act of 1108, the Travancore Krishnavaka Marumakkathayee Act, VII of 1115, the Cochin Nayar Act, XXIX of 1113, or the Cochin Marumakkathayam Act, XXXII of 1113, (2) a kutumba or kavaru governed by the Madras Aliyasanthana Act, 1949; (3) an illom governed by the Kerala Nambudiri Act 1958; and (4) an HUF governed by the Mitakshara law.

Admittedly the original assessee belonged to an HUF governed by Mitakshara Law and the properties income from which is proposed to be assessed under the Agrl. IT Act, 1950 were obtained by him under a partition between himself, his father and fathers bother; at the commencement of the Act the original assessee was the sole coparcener.

5. Sec. 4 of the above Act reads as follows :

'4. Total agricultural income :- (1) subject to the provisions of this Act, the total agricultural income of any previous year of any person comprises all agricultural income derived from land situated within the State and received by him within or without the State, but does not include -

(a) any agricultural income derived from land situated without the State;

(b) any agricultural income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in the State;

(c) any agricultural income derived from property held under trust in part only for such purposes, to the extent to which such income is applied to such purposes in the state;

(2) For the purposes of sub-s. (1), agricultural income derived from any land situated within the State, which is in the possession of the mortgagee thereof, shall, notwithstanding anything contained in s. 23, be deemed to be agricultural income received by the mortgagor :

Provided that where the agricultural income-tax charged on such agricultural income cannot be recovered from the mortgagor, such tax shall be payable by and recoverable from the mortgagee, and the mortgagee shall be entitled to recover from the mortgagor the amount of the tax so paid.'

The original assessee had no case that he, his wife, and daughter can be treated as members of HUF holding coparcenary property when the Act came into force in order to apply sub-s. (1) of s. 4. But, according to the assessee, they are to be treated as members of a joint Hindu family holding joint family property when the Act came into force and, therefore, sub-s. (2) of s. 4 has to be applied in their case. It is contended by the learned senior counsel, Sri S. V. S. Iyer, that the impact of sub-s. (2) of s. 4 is a disruption of the abovementioned joint Hindu family and its members should be deemed to hold the family property as tenants-in-common as if a partition of such property, per capita has taken place among the assessee, his wife and daughter. On the other hand, Sri V. V. Asokan, learned special Govt. Pleader (taxes), would submit that sub-s. (2) of s. 4 has no application in the case of the assessee. The joint Hindu family referred in sub-s. (2) are those coming under categories 1, 2 and 3 under the definition clause. According to the learned Government pleader, the provision that is applicable to a joint Hindu family governed by Mitakshara law is sub-s. (1) of s. 4. But in the case of the original assessee, since he was the sole coparcener at the time when the Act came into force, he cannot be treated as a member of an HUF governed by Mitakshara law holding any coparcenary property. His wife and daughter cannot be treated as coparceners. This position was not disputed by the assessee also. But, according to the Revenue, the assessee should be treated as holding the property as full owner in the absence of another coparcener. The view taken by a Bench of this Court in 1993 KLJ 576 (Supra) is in support of the contention raised by the Revenue. In the above mentioned case also the assessee was sole coparcenar when the Act came into force. He contended that himself and his wife would form a joint family and by operation of s. 4(2) of the Act his wife is entitled to one half share and the assessee can be assessed only for the other half of the property as tenants in common. This Court took the view that the property allotted to the assessee in the partition between himself and his only son, with no other male member in the joint family will be his separate property. He could deal with it in any way he likes. It can again assume the character of joint family property only if a son is born subsequently or an adoption is made. The assessees wife is not entitled to any share in the property when the Act came into force on 1st December, 1976. She had no claim for partition for the property held by the assessee. Under these circumstances, there is no question of the assessee and his wife holding the property as tenants-in-common by applying s. 4(2) of the Act.

6. The learned counsel for the assessee would submit that the above decision requires reconsideration. According to him, even if the wife and daughter of the assessee are not coparceners and not holding any coparcenary property, they could still be members of joint family holding joint family property and that sub-s. (2) of s. 4 would be applicable in their case. Support was sought from the following decision of the Supreme Court for the contention that there could be a joint Hindu family governed by Mitakshara law even without two male members. : [1966]60ITR293(SC) (supra) : [1969]74ITR190(SC) (supra), C. Krishna Prasad vs. CIT : [1974]97ITR493(SC) and Surjit Lal Chhabda vs. CIT (supra).

7. On perusing the above decisions we note that they arose either under the IT Act or WT Act. In : [1966]60ITR293(SC) (supra) which arose under the IT Act, 1922, it was held that the assessable entities under s. 3 was not a Hindu coparcenary but an HUF. The phrase 'Hindu undivided family' ('HUF') is used in the statute with reference not to one school only of Hindu law, but to all schools. The expression 'HUF' in the IT Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the IT Act does not indicate that an HUF as an assessable entity must consist of at least two male members. In : [1969]74ITR190(SC) (supra), which arose under the WT Act, the question considered was whether HUF is one of the assessable legal entity under s. 3 of the WT Act. A Hindu joint family consists of all persons lineally decended from a common ancestor and includes their wives and unmarried daughters. A Hindu coparcenary is a much narrower body than the Hindu joint family. It includes only those persons who acquire by birth an interest in the joint or coparcenary property, they being the sons, grandsons and grant-grandsons of the holder of the joint property for the time being. There is nothing in the scheme of WT Act to suggest that an HUF as an assessable unit must consist of at least two male members. In : [1974]97ITR493(SC) (supra) the question came up for consideration was whether an unmarried male Hindu on partition of a joint Hindu family can be assessed in the status of an HUF where no other person besides him is a member of the alleged family. It was held that s. 2(31) of the IT Act, 1961, treats an HUF as an entity distinct and different from an individual and the expression 'HUF' in the IT Act is used in the sense in which a Hindu joint family is understood under the various schools of Hindu law. Therefore, assessment in the status of HUF can be made only when there are two or more members of the HUF. In : [1975]101ITR776(SC) (supra) also the question considered was under s. 3 of the IT Act, 1922. It was held that the expression HUF under the IT Act is not synonymous with Hindu coparcenary and therefore, HUF with one male member and other female members can be treated as a taxable unit. In the decision of the Andhra Pradesh High Court in Ashok Kumar Ratanchand vs. CIT & Anr. (1991) 93 CTR (AP) 202 the question that came up for consideration was again under the IT Act and therefore, the above referred Supreme Court decisions were followed.

8. A close examination of the above decisions would show that what was considered therein was the difference between the term 'Hindu joint family' which is treated as taxable unit under the IT Act or the WT Act and a Hindu coparcenary. But in none of the above decisions it is seen stated that the wife and daughters of the sole coparcener have a right to claim a share in the so-called joint family property. The learned counsel appearing on behalf of the assessee before us also did not contend for the position that under the Hindu law wife and daughters of the sole coparcener have any right to claim a share in the coparcenary property obtained by the sole coparcener under a partition. But the contention is by virtue of sub-s. (2) of s. 4 of the Act a right is created in the female members of a joint Hindu family governed by Mitakshara law. According to the learned counsel the following words in sub-s. (2) viz., 'whether such members were entitled to claim such partition or not under the law applicable to them' would indicate that even those members who have no right to claim share to claim share in the joint family property would also be entitled to allotment of a share on per capita basis, as if a partition of such property had taken place.

9. Going by the scheme of the Act we find it difficult to accept the contention that any new right has been recognized in favour of any class of persons covered by the Act. The preamble of the Act itself would show that the main object sought to be achieved by the statute is abolishing of the joint family system among Hindus in the State of Kerala. Sec. 3 provides that on and after the commencement of the Act no one is to get any right in property by the mere fact of his birth in the family of the ancestor. Sec. 5 abrogates the rules of pious obligation of Hindu son. Sub-s. (1) of s. 7 provides that 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 the Act shall cease to have effect with respect of any matter for which provision is made in the Act. Sub-s. (2) of s. 7 repeals the following enactments, to the extent they apply to the whole or any part of the State of Karala :-

'1. The Madras Marumakkathayam Act, 1932 (XXII of 1933)

2. The Madras Aliyasanthana Act, 1949 (IX of 1949);

3. The Travancore Nayar Act, II of 1100;

4. The Travancore Ezhava Act, III of 1100;

5. The Nanjinad Vellala Act of 1101 (VI of 1101);

6. The Travancore Kshatriya Act of 1108 (VII of 1108);

7. The Travancore Krishnavaka Marumakkathayee Act (VII of 1115);

8. The Cochin Thiyya Act, VIII of 1107;

9. The Cochin Makkathayam Thiyya Act, XVII of 1115;

10. The Cochin Nayar Act, XXIX of 1113;

11. The Cochin Marumakkathayam Act, XXXIII of 1113;

12. The Kerala Nambudiri Act, 1958 (27 of 1958)'.

The effect of sub-s. (1) and sub-s. (2) of s. 4, according to us, is only immediate crystallization of existing rights, as if a partition had taken place among all the members of the HUF. While sub-s. (1) deals with the right of coparceners in the coparcenary property, the proviso thereto covers the members of the undivided family having the right to maintenance, or the right to marriage or general expenses or right to residence. In spite of the disruption of the coparcenary and division of the coparcenary property as a result of the statute the right to maintenance of the widow, widowed daughter-in-law and other dependent females, right for marriage expenses of unmarried daughter, right for residence of the widow, etc. are protected by the proviso. As mentioned earlier, no contention is raised in these petitions by the assessee that his case would come under sub-s. (1) of s. 4. It is also admitted that the female members of the assessees family have no existing right as such to claim a share in the property obtained by the original assessee under a partition. But the contention is that sub-s. (2) of s. 4 gives a new right to the female members. It applies to all members of a joint Hindu family other than an HUF referred to in sub-s. (1), which, according to the assessee, takes in only coparceners and coparcenary property of an HUF governed by Mitakshara law. The wording of sub-s. (2) does not persuade us to accept the above contention. Sub-s. (2) deals with all members of a joint Hindu family other than an HUF referred to in sub-s. (1), which, according to us, would take in the entirety of the 4th category referred in the definition clause viz., an HUF governed by Mitakshara law.

10. A reference to the statement of objects and reasons attached to the bill would also show that the legislature never intended to include under sub-s. (2) of s. 4 an HUF governed by Mitakshara law. The Kerala Joint Hindu Family System (Abolition) Bill, 1973 was prepared on the basis of a draft bill furnished by the Kerala Law Commission. In the first report of the Commission, the question considered was unification of the personal laws of Hindus in Kerala other than those governed by Mitakshara law or the Kerala Namboodiris Act, 1958. In the second report, the Law Commission adverted to the question of brining the Hindus governed by Mitakshara law or the Kerala Namboodiris Act, 1958 within the scope of the proposed legislation for abolition of joint family system. The recommendation of the Commission was as follows :

'(i) the joint family system among the Hindus governed by the Kerala Nambodiri Act or the Mitakshara law be abolished by legislation, replacing joint tenancies by tenancies-in-common;

(ii) among the Namboodiries all male and female members of the illom do become co-owners as on a given date each taking an equal share on a per capita basis; and

(iii) among the Hindus governed by the Mitakshara law, all members of the joint family who are entitled to shares if a partition takes place on a given date be co-owners, their shares being what they would be entitled to on such a partition.'

A revised draft bill was also proposed by the Commission in its second report and as mentioned earlier, the bill as introduced in the Kerala Assembly was on the lines of the revised bill prepared by the Law Commission. The relevant portion of the statement of objects and reasons as quoted above would clearly show that the legislature had no intention to carve out a special class from the Hindus governed by Mitakshare law as an HUF without coparceners or coparcenary property. For the purpose of understanding the background in which the legislation was introduced, it is permissible to look into the statement of objects and reasons of the Bill. So also, the notes on clauses appended to the statement of objects and reasons are permissible external aid while interpreting a clause in the statute.

11. We are fortified in our view regarding the effect of s. 4(2) by the statement in the notes on clauses explaining the provisions of the Kerala Joint Hindu Family System (Abolition) Bill, 1973 published in Kerala Gazette, Extraordinary, dt. 16th June, 1973. Under cl. 4, which is equivalent to s. 4, it is stated as follows :

'This clause is intended for putting an end to the joint character of family property and covering joint property into co-ownership property.

Sub-cl. (1) deals with HUFs governed by the Mitakshara system of law. It provides that on the date of the coming into force of the Act all members holding coparcenary property will become co-owners, each taking the share that he would be entitled to if a partition takes place on that date among all members of the family. The proviso saves the existing rights as regards maintenance, marriage and funeral expenses and residence.

Sub. cl. (2) deals with joint Hindu families other than Mistakshara families. In the case of these families, all the members of the family will hold the family property as co-tenants with equal shares. The Madras Aliyasanthana Act, 1949, recognises only kavaru partition. Under that Act and the (Travancore) Nanjinad Vellala Act of 1101, the division on partition is partly on the per capita and partly in the per stripes basis. But such distinction is not maintained under s. 7 of the Hindu Succession Act, 1956, where per capita basis alone has been adopted as regards inheritance. The same principle is adopted in this sub-clause.'

The above would show that all joint Hindu families other than Mitakshara families are dealt with under sub-s. (2). The exclusion is not the coparcenary alone, as contended on behalf of the assessee. Therefore, we find no merit in the case of the assessee that a joint Hindu family following Mitakshara law consisting of the sole coparcener, his wife and daughter would come under sub-s. (2). Sub-s. (2) provides that the members of the joint Hindu family will be deemed to hold that family property as tenants-in-common, as if a partition of such property per capita has taken place among all the members of the family, whether such members were entitled to claim such partition or not under the law applicable to them. The underlined portion was necessary, since there are limitations and restrictions in the matter of claiming partition for the members of the tarwad or tavazhy coming under the first category of the definition clause under s. 2 of the Act. For example, s. 33 of the Travancore Nair Act provides that subject to the provisions of ss. 34, 35 and 36 every adult member of a tarwad shall be entitled to claim his or her share of the properties of the tarwad. Sec. 34 provides that no member of a tarwad can claim partition during the life time of female ascendant without her consent. The conditions under with the partition could be allowed during life time of female ascendant are also provided under s. 34. Sec. 35 provides that an adult member cannot be allowed to divide from minors. By virtue of the provisions contained under s. 36 every female member who claims to get share of the tarwad properties shall also claim and shall also be entitled to get the shares of her minor children in such properties. Similarly, there are restrictions regarding the claim for partition under ss. 28 to 31 of the Travancore Ezhava Act also. It is under these circumstances, the words whether such members were entitled to such a partition or not under the law applicable to them were incorporated in sub-s. (2) of s. 4 when the intention of the legislature was to bring about an automatic disruption of the joint family and partition of the joint family property on the coming into force of the Act. It is relevant to note that the wording is not 'whether such members were not entitled to claim a share in the property on such partition or not under the law applicable to them'. It is therefore, clear that there is pre-existing right to share in the family property to all the members of the joint Hindu family to be covered by sub-s. (2) is contemplated. Since the assessees wife and daughter have admittedly no right to claim a share in the family property, they would not come within sub-s. (2). The object of the statutory provision is clear from its working.

12. In 1993 KLJ (Tax Cases) 576 (supra) an assessee under the Agrl. IT Act, 1950 contended that in respect of the income received from the property which he obtained under a partition between himself, his brother and father has to be assessed in the hands of the assessee and his wife as tenants-in-common after coming into force of the Kerala Joint Hindu Family System (Abolition) Act, 1975. A Bench of this Court rejected the contention. It was held that the ancestral property when allotted to the assessee under a partition and when there was no male member in the joint family the property will take the character of his separate property. He could deal with it is any way he likes. It can gain the colour of joint family property again only if a son is born subsequently or an adoption is made. Even if the wife of the assessee was alive at the time of the partition between the assessee and his son, she may be a member in the family or unit but not entitled to claim partition as she is not a coparcener. So long as the assessees wife was not entitled to any share in the property on the date when the Act came into force on 1st December, 1976, it cannot be taken that she holds the property as tenants-in-common with her husband. In coming to the above conclusion the learned judges relied on passages in Maynes Law and Usage, Mulla on Hindu Law, N. R. Raghavacharias Hindu Law and Hindu Law by S. V. Gupta. It was therefore, hold that the assessee who obtained the property in a partition was holding the same as separate property on the day when the Act came into force and entire income should be assessed only in his hands as individual. Even though reliance was placed by the assessee in that case on the decisions of the Supreme Court in : [1966]60ITR293(SC) (supra), the learned judges took the view that those decisions are not applicable to the facts of the case. We find no reason to disagree with above considered view taken by a Bench of this Court.

13. The questions of law sought to be referred for opinion this Court are as follows :

'(i) Whether, on the facts and circumstances of the case, was the Dy. Commissioner justified in holding that the assignment of status as tenants-in-common with 3 members consisting of the assessee, his wife and daughter is irregular in view of the statutory disruption of joint family status and a per capita partition of the joint family property;

(ii) Whether, on the facts and circumstances of the case, was the Dy. Commissioner justified in holding that the property from which the income subjected to assessment was belonging to the assessee as his absolute share with full ownership and right of alienation, in view of the clear recitals contained in the partition deed No. 166/1944 in which the property allotted to each share is set apart for the enjoyment of the sharer along with his offspring.

(iii) Whether on the facts and circumstances of the case, the Dy. Commissioner was justified in finding that the assessment completed by the assessing authority assigning the status of tenants-in-common is irregular on the ground that only male members can be coparceners and female members are excluded from the coparcenary ignoring as it were the provisions contained in s. 4(2) of the Kerala Joint Hindu Family System (Abolition) Act, 1975 providing for a statutory disruption of a joint Hindu family and a per capita partition of the joint Hindu family property and a deeming provision by which each member of the family irrespective of whether such member is male or female is considered to hold his or her share separately as full owner thereof;

(iv) Whether, in the facts and circumstances of the case, was the Dy. Commissioner justified in setting aside the order of the assessing authority as neither ancestral nor coparcenary property, but the self-acquired property of the assessee when it is an undisputed case that the property subjected to assessment came into the hands of the assessee by virtue of the partition effected in the family of the virtue of the partition effected in the family of the assessee, his father and his brothers and evidenced by document No. 166 of 1944 of the Sub-Registry Officer, Mananthavady.'

In view of our conclusion that the Bench decision of this Court in 1993 KLJ (Tax Cases) 576 (Supra) does not require any reconsideration and that the Commr. of Agrl. IT has correctly set aside the assessment orders assigning the assessee and his wife status of tenants-in-common we hold that there is no referable question of law arising out of the orders passed by the Commissioner.

In the result, the petition stands dismissed.