COMMISSIONER OF INCOME TAX Vs. BALASUBRAMANIAN M

JUDGEMENT

(1.) THE above two cases relate to the same assessee, the first case arising under the income-tax assessment for 1972-73 and the second case arising under the wealth-tax assessment for 1972-73. THE common question in both the cases is whether the assessee is to be assessed as a Hindu undivided family both in relation to income-tax as well as wealth-tax or as an individual. In both the cases, the Tribunal, following certain decisions of the Supreme Court holding that the existence of two male members is not necessary to constitute a Hindu undivided family and not in his individual status. Aggrieved against the orders of the Tribunal arising under the Income-tax Act as well as the Wealth-tax Act, the Revenue has come before this court questioning the view taken by the Tribunal in both the cases. In the assessee's own case arising out of the income-tax assessment for the previous year 1971-72, a Division Bench of this court in CIT v. M. Balasubramaniam has held that the assessee has to be assessed in the status of an individual and not as a Hindu undivided family till the birth of a son. According to the Revenue, since in the assessee's own case, this court has taken a contrary view for the preceding assessment year 1971-72, namely, CIT v. M. Balasubramaniam , the assessee is to be assessed only in his individual status and not as a Hindu undivided family, and the decision of the Tribunal in these cases cannot be accepted as correct.

(2.) HOWEVER, learned counsel for the assessee contends that the decision of this court in CIT v. M. Balasubramaniam requires reconsideration as it did not give due weight to the relevant observations made by the Supreme Court in Gowli Buddanna v. CIT [196] 60 ITR 293; Narendranath v. CWT [1969] 74 ITR 190 and Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, and as, after considering the said decisions, the Punjab and Haryana High Court in CIT v. Ghansham Dass Mukim [1979] 118 ITR 930 has held, on more or less similar facts, that the assessee is to be assessed as a Hindu undivided family and not in his individual status. According to him, as per the said decisions of the Supreme Court, the normal presumption in Hindu law is jointness of the family and there is not necessity for the existence of a second male member to constitute a Hindu undivided family and a Hindu undivided family cannot be equated to a Hindu coparcenary. Before proceeding to consider the question as to whether the said decision in CIT v. M. Balasubramaniam requires reconsideration as contended by learned counsel for the assessee, it is necessary to set down the relevant facts which gave rise to these cases. In June, 1966, the assessee's father gave a gift of Rs. 10,000 out of his self-acquired property to the assessee expressing his intention that the benefit of the said sum should go to the assessee's wife and children also as and when he got married and that he should enjoy it as a joint family. The assessee invested this amount as a portion of his capital in a firm. The profits which accrued to is credit in the from were invested in another firm as his capital. He transferred to the credit of a separate account styled as Hindu undivided family account a sum of Rs. 10,100 in December, 1966, and another sum of Rs. 5,000 in April, 1967. The assessee then got married in 1970 and he got a daughter in February, 1971. For the accounting year ending on March 31, 1971, relevant for the assessment year 1971-72, the assessee claimed that the income derived by him should be assessed in his hand as a Hindu undivided family and not as an individual. The Tribunal held that the assessee had accepted the gift with the condition imposed by his father at the time of making the gift and that there was a legal obligation on the part of the assessee to treat the property as joint family came into existence and, therefore, the assessment has to be made in the assessee's hands as a Hindu undivided family. In the corresponding wealth-tax assessment, the Tribunal upheld the assessee's claim to treat the wealth represented by the accretions to the original gifted sum of Rs. 10,100 as the wealth of the Hindu undivided family. The correctness of the order of the Tribunal came up for consideration before this court in CIT v. M. Balasubramaniam . This court held that the gift was made out of the self-acquired property of the father at a time when the assessee was not even married and, therefore, the legal incidence of the property might change only on the bright of a son but, until that event happened, the assessee would have to be assessed only as an individual for purposes of wealth-tax and income-tax. the reasoning given by the learned judges to reach that conclusion is that unless there is an individual for purposes of wealth-tax and income-tax. The reasoning given by the learned judges to reach that conclusion is that unless there is an antecedent jointness at the time of the gift, the donation cannot be said to create for the first time a joint family, and that though a joint Hindu family may consist of a man, his wife and a daughter, for tax purposes the mere existence of a wife and daughter would not justify the assessment of income in the status of the joint family. The learned judges have proceeded on the basis that at the time of the gift, the assessee was not even married and, therefore, there was no joint family in existence, that a single person, male or female, could not constitute a family and that, therefore, the assessment could not be made in the status of a Hindu undivided family. But the above reasoning of the learned judges can hardly be reconciled. with the principles laid down by the Supreme Court in the three decisions referred to above.

(3.) THE gift was accepted by the assessee. THE assessee was a bachelor at the time of the gift. Subsequently, he married and during the relevant assessment year, namely, 1972-73, he had a wife and a daughter. THE Revenue wanted and wants to treat the assessee as an individual under the Income-tax Act regarding the income from the sums gifted as well as under the Wealth-tax Act regarding the said sums and the accretions thereto. THE assessee claimed them as belonging to the Hindu undivided family and wanted assessment to be made only on that basis. THE Income-tax Appellate Tribunal has ultimately accepted the stand of the assessee. THE questions have come to be referred to this court at the behest of the Revenue.