COMMISSIONER OF INCOME TAX Vs. BABUBHAI MANSUKHBHAI DR

JUDGEMENT

(1.) IN this reference, at the instance of the Revenue, the following question has been referred to us for our opinion:

(2.) THE facts giving rise to this reference are as follows: The assessment years under consideration are 1966 67 and 1967 68. The assessee who seems to have died during the pendency of the proceedings was one Dr. Babubhai Mansukhbhai. The assessee's father, Mansukhbhai, died intestate on 8th Oct., 1963, leaving certain self acquired properties. On the death of Mansukhbhai these self acquired properties devolved upon his widow and his son, that is, the assessee. The properties left by the deceased father of the assessee consisted of loans advanced by the deceased to certain parties and also bank deposits. The assessee inherited one half share of the said loans and bank deposits. Income by way of interest on the one half share amounted to Rs. 4,588 in the year of account relevant to asst. year 1966 67 and to Rs. 4,986 in the year of account relevant to asst. year 1967 68. The assessee contended before the ITO that the interest income should be assessed as income of the HUF consisting of the deceased himself, his sons and his wife. The ITO rejected the contention of the assessee and following the decision of the Allahabad High Court in CIT vs. Ram Rakshpal, Ashok Kumar (1968) 67 ITR 164 (All) held that since the father had his individual properties, the question of treating the said individual properties in the hands of the assessee as HUF properties did not arise. According to the ITO, the Mysore High Court in the case of CIT vs. Smt. Nagarathnamma (1970) 76 ITR 352 (Mys) had also confirmed the view of the Allahabad High Court. Consequently, the ITO assessed the income from interest in the hands of the assessee as his individual income and not the income of the HUF. Against the decision of the ITO, the matter was taken in appeal by the assessee but the AAC confirmed the order of the ITO and dismissed the appeal. Against the order of the AAC, the matter was taken in further appeal by the assessee to the Tribunal and it was urged before the Tribunal on behalf of the assessee that, according to the principles of Hindu law as applicable prior to the passing of the Hindu Succession Act, all properties inherited by a Hindu male from his father are ancestral property in his hands as between himself and his male issues. It was also contended that under S. 4(1)(a) of the Hindu Succession Act, the provisions of Hindu law would continue to apply for determining the nature of the property inherited by his son from his father qua his male issues. On behalf of the Revenue it was submitted that in view of the decisions of the Allahabad High Court and Mysore High Court referred to above, the position in law was well settled. The Tribunal held that the ITO had erred in assessing the income from properties inherited by the assessee on the death of his father in the individual assessment of the assessee. The Tribunal held that this income from interest could not be assessed in the hands of the assessee in his individual capacity but it could be assessed in his hands as representing the HUF. Thereafter, at the instance of the Revenue, the above question has been referred to us. In CIT vs. Ram Rakshpal, Ashok Kumar (1968) 67 ITR 164 (All), the learned judges of the Allahabad High Court were concerned with the following facts. One Durga Prasad and his son, Ram Rakshpal, and his grandson, Ashok Kumar, constituted an HUF until 11th Oct., 1948, when there was a partition in the family so that Durga Prasad separated from the joint family. After that, Durga Prasad carried on his own business in the name of Murlidhar Mathura Prasad until his death on 29th March, 1958, and Ram Rakshpal and his son, Ashok Kumar, carried on their own separate business under the name and style of Ram Rakshpal, Ashok Kumar, who was the assessee firm before the Allahabad High Court. Durga Prasad also left behind him a widow, Jai Devi, and a daughter, Vidyawati. Upon his death, Vidyawati took her 1/3rd share of the property left by Durga Prasad, but his widow, Jai Devi, and his son, Ram Rakshpal, entered into a partnership with 2/3rd of the assets of the business known as Murlidhar Mathura Prasad which was, as already indicated, the separate business of Durga Prasad. A partnership was entered into between Jai Devi and Ram Rakshpal and its terms were incorporated in a deed which was duly registered on 23rd April, 1958. In the asst. year 1959 60, immediately following the death of Durga Prasad, the question arose whether the income from the one third share which had come to Ram Rakshpal from Durga Prasad should be assessed as part of the income of the HUF of Ram Rakshpal, Ashok Kumar or as income from the separate property of Ram Rakshpal. The ITO assessed it as the income of the HUF applying the well recognised principle of Hindu law that the property left by the grandfather in the hands of the father is ancestral property in which the grandson has a right by birth. It was on these facts that the Allahabad High Court held that in view of the provisions of the Hindu Succession Act, 1956, the income from assets inherited by a son from his father from whom he has separated by partition cannot be assessed as the income of the HUF of the son. Beg J., delivering the judgment of the Division Bench of the Allahabad High Court, has referred to the provision as it prevailed prior to the enactment of the Hindu Succession Act. The Division Bench there held that in view of the provisions of S. 6 and S. 8 of the Hindu Succession Act, the old position no longer prevailed and the income from assets inherited by a son from his father must be held to be his individual and not the income of the HUF consisting of himself and his son. Main reliance in support of this conclusion was placed by the Allahabad High Court on the provisions of ss. 6 and 8 of the Hindu Succession Act.

(3.) THEREFORE , we have to examine whether anything has been provided in the language of any of the sections of the Hindu Succession Act which derogates from the provision of old Hindu law regarding the property which comes to a Hindu son in a Mitakshara family on the death of his father by succession. Under S. 6 provision is made for devolution of interest in coparcenary property. When a male Hindu dies after the commencement of the Hindu Succession Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Hindu Succession Act. Provided that, if the deceased had left him surviving a female relative specified in Class I of the Schedule or a male relative, specified in that class, who claims through such female relative, the interest of the deceased in the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under the Act and not by survivorship. Similarly, under S. 30 of the Hindu Succession Act, provision is made for the testamentary succession and it has been provided that any Hindu may dispose of by will or other testamentary disposition any property, which is capable of being so disposed of by him, in accordance with the provisions of the Indian Succession Act, 1925, or any other law for the time being in force and applicable to Hindus. Explanation to S. 30 says that the interest of a male Hindu in a Mitakshara coparcenary property shall, notwithstanding anything contained in the Act or in any other law for the time being in force, be deemed to be property capable of being disposed of by him or by her within the meaning of the sub section. The result is that it is open to any Hindu to dispose of by will or other testamentary disposition his share in the Mitakshara coparcenary property. This right of disposing of his share in the Mitakshara coparcenary property was not available to a Hindu prior to the coming into force of the Hindu Succession Act. Similarly, under S. 6 if at the time of his death a male Hindu had an interest in a Mitakshara coparcenary property, then ordinarily the interest in the coparcenary property would devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Hindu Succession Act but if the deceased had left him surviving a female relative specified in Class I of the Schedule or a male relative, specified in that class, who claims, through such female relative, then the interest of the deceased in the Mitakshara coparcenary property is not to devolve by survivorship but as on testamentary or intestate succession, as the case may be, under the provisions of the Hindu Succession Act. It will be noticed that both S. 6 and S. 30 deal with the undivided share of a Hindu in a Mitakshara coparcenary property. They do not deal with his individual self acquired property. Therefore, it is obvious that what has been provided for in S. 6 and S. 30 of the Hindu Succession Act can in no way affect the character of the property in the hands of the son when the son gets the property by inheritance. from his own father. Neither S. 6 nor S. 30 deals with such a situation. Under S. 8 of the Act it has been provided that the property of a male Hindu dying intestate shall devolve according to Chapter II upon the heirs, being the relatives specified in Class I of the Schedule. If there is no heir of Class I, then upon the heirs, being the relatives specified in Class II of the Schedule ; and if there is no heir of any of the two classes, then upon the agnates of the deceased and if there is no agnate, then upon the cognates of the deceased. The result, therefore, is that so far as the property is concerned, it devolves according to the provisions of the Chapter in which s. 8 is located but that does not again deal with the character of the property in the hands of the person to whom the property devolves by succession. With respect to the learned judges of the Allahabad High Court, it is impossible to read into the words of S. 8 any provision which interferes with the scheme of Hindu law as it prevailed prior to the enactment of the Hindu Succession Act. Neither S. 6 nor S. 8 nor S. 30 affect this principle of Hindu law as to in what capacity or in what character the son would enjoy the property once he received it from his father in succession. We find the following observations in Sir Dinshaw Mulla's Commentaries on Hindu Law, Fourteenth Edn., at p. 847 :