BHARATKUMAR CHINUBHAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE questions of law arising in these two references are inter related and it would, therefore, be convenient to dispose them of by a common judgment. We will, however, for the sake of convenience, first deal with the question arising in IT Ref. No. 9 of 1967 and then proceed to examine the question arising in WT Ref. No. 5 of 1967.

(2.) IT Ref. No. 9 of 1967 : One Chinubhai, his wife, Shantaben, his son, Bharatkumar, who is the assessee before us, and his two unmarried daughters formed an HUF. In respect of the income of the properties of the HUF, Chinubhai was assessed during his lifetime as manager and Karta and the income was assessed as income of the HUF. Chinubhai died on 16th May, 1951, and on his death, his undivided share in the joint family properties devolved on his widow, Shantaben, under s. 3(2) of the Hindu Women's Rights to Property Act, 1937, and the HUF continued with only the assessee, his mother, Shantaben, and his two unmarried sisters as members. The income of the properties continued to be assessed as income of the HUF as was being done hitherto until 5th Nov., 1958, when, according to the Revenue, a change took place in the legal position owing to the death of Shantaben. The ITO assessing the income for the asst. year 1960 61, the relevant year of account being Samvat year 2015, took the view that, on the death of Shantaben, her undivided half share in the properties of the HUF devolved by succession on her children in equal shares under the provisions of the Hindu Succession Act, 1956, and the assessee was, therefore, entitled to two thirds share in the said properties but, since the assessee was a sole surviving coparcener having full power of disposition over his two thirds share, he was the absolute owner of it and his income was liable to be assessed in his hands as his individual income. This view taken by the ITO was affirmed in appeal by the AAC and the Tribunal and, no reference having been sought by the assessee, the assessment became final so far as the asst. year 1960 61 was concerned. The same view was taken by the ITO also in the next asst. year 1961 62 and the WTO assessing the net wealth of the assessee for the asst. year 1961 62 also adopted the same view and included the two thirds share in the properties in the individual assessment of the assessee to wealth tax. The assessee challenged both the assessments and contended that the properties continued to belong to the HUF of which the present members were the assessee and his two unmarried sisters and the assessee was, therefore, liable to be assessed as the manager and Karta of the HUF both in respect of wealth tax and income tax and no part of the properties or income was liable to be assessed in the hands of the assessee as his individual property or income. But this contention was rejected by the AAC in the appeals preferred to him and further appeals to the Tribunal also proved futile. The assessee thereupon applied for a reference in each of the two appeals, one in respect of wealth tax assessment and the other in respect of income tax assessment, and on the applications of the assessee a common order was made by the Tribunal referring a common question of law for the opinion of this Court. The question of law was in the following terms :

(3.) NOW it is necessary to clear the ground at the outset by pointing out that under S. 3 of the IT Act (here the assessment year being 1961 62 we are concerned with the old Act) as also under S. 3 of the WT Act, not a Hindu coparcenary but an HUF is one of the assessable entities. "The phrase 'HUF' ", as observed by the Privy Council in Kalyanji Vithaldas vs. CIT (1937) 5 ITR 90 (PC) "is used in the statute with reference, not to one school only of Hindu law, but to all schools," and it would, therefore, be "a mistake in method to begin by pasting over the wider phrase of the Act the words 'Hindu coparcenary' ". A Hindu joint family consists of all persons lineally descended from the common ancestor and includes their wives and unmarried daughters. A Hindu coparcenary, on the other hand, is a much narrower body than the joint family; it includes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grandsons and great grandsons of the holder of the joint property for the time being. There may, therefore, be an HUF even where there is a single coparcener and if there is property belonging to the HUF, assessment can be made on the single coparcener in the status of an HUF. This position must now be regarded as settled, in view of the decision of the Supreme Court in Gowli Buddanna vs. CIT (1966) 60 ITR 293 (SC).