JOINT RECEIVERS OF THE ESTATE OF DEWAN BAHADUR C ARUNACHALA MUDALIAR Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) THE facts leading to this reference require to be set out at some length. THE estate of the Zamindar of Chunampet was all along assessed as a Hindu undivided family. THE joint Hindu family consisted of the father and his three sons the last of whom was a minor. THE two major sons commenced a partition suit, O. S. No. 64 of 1944, on the file of the Subordinate Judge, Chingleput, on the 11th September, 1944. In the course of that suit, a compromise was filed on the 16th September, 1948, whereby the two major sons, the plaintiffs in the suit, were appointed as joint receivers. Following this compromise, a preliminary decree was passed by the court on 5th October, 1948. It decreed that the admitted family properties set out shall be divided into four equal shares and that each of the two plaintiffs and the defendants (father and the minor son) be allotted a one-fourth share. It set out the common liabilities to be met by the entire family estate. It specified certain amounts to be provided for the fourth defendant, the sister of the plaintiffs, both for her marriage and settlement upon her. Several other payments to be made out of the estate were also provided. Clause 6 of the decree directed that the plaintiffs " shall forthwith take possession of all the suit properties ............ and manage them as receivers on behalf of the parties and that they shall also manage the salt pans belonging to the devasthanams as it has been administered all these years and that they should discharge and provide for the liabilities mentioned in paragraph 2 ....... Other clauses in the decree directed the plaintiffs as receivers to make certain allowances to the parties, that is, the plaintiffs and defendants Nos. 1 to 4, in specified sums. It is common ground that there were several final decrees in the suit, the first of which was on 27th November, 1951. It effected a division of the salt pans belonging to the family with effect from 1st January, 1952. THE second final decree, dated 15th April, 1953, effected a division of the cardamom estate belonging to the family. THE third and last final decree dated 18th January, 1954, brought about a complete division of all the remaining assets of the family Immediately following upon the appointment of the plaintiffs as receivers, an application seems to have been made to the Income-tax Officer under section 25A(1) of the Act claiming that by reason of the preliminary decree, a partition had taken place among the members of the family. This application was rejected for the reason that the preliminary decree was subsequent to the previous year in respect of which the assessment was under question at that time. In a similar manner, further applications seem to have been made in the succeeding years with the same result. In respect of the assessment year 1950-51, the Income-tax Officer, in dealing with a similar application under section 25A held that there had been no division of the various assets by metes and bounds and that the assessee continued to be a Hindu undivided family for the purposes of the Act. Assessments for the assessment years 1951-52 and 1952-53 were also made on the same basis. In respect of the assessment year 1953-54, however, since one of the items of the erstwhile joint family properties, viz., the salt pans, had been divided by metes and bounds by the first final decree dated 27th November, 1951, the profit from that source was left out from that assessment. THEre was, however, an assessment as on a Hindu undivided family in respect of the income from the other propertiesIt has to be mentioned here that all of these assessments were made on the receivers as representing the Hindu undivided family

(2.) APPEALS were taken to the Appellate Assistant Commissioner, the contention being that since the beneficial ownership of the various properties had passed on to the receivers, the Hindu undivided family was no longer the owner thereof, and that on and after the 5th October, 1948, when the preliminary decree was passed, separate assessments should have been made on the various erstwhile coparceners in respect of their individual shares under section 41 of the Act. This claim was shortly disposed of on the ground that though the joint status had been put an end to by the express declaration of their intention to separate the family properties were not divided by metes and bounds or in definite portions within the meaning of section 25A(1) of the Act. The Assistant Commissioner rejected the plea that the receivers were in possession of the properties on behalf of each and every one of the separated members of the family. A further appeal was taken to the Appellate Tribunal which came to a like conclusion and upheld the assessments in the status of the Hindu undivided family

(3.) THE three questions together call for the determination of two problems (1) Even if the order under section 25A(1) has not been made by the Income-tax Officer, is it permissible to make separate assessments on the erstwhile members of a joint Hindu family, or should the assessment be in the character of a Hindu undivided family " (2) Does section 41 permit, in circumstances as in the present case, assessments being made directly on the person on whose behalf income, profits or gains are receivable and are received by receivers, or is it mandatory that the assessment should be on the receivers alone "