2001 (7) TMI 72 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in distinguishing the estate from those created by the Crown Grants Act, 1895.
2. Whether the Tribunal was justified in holding that the business and properties remained part of the impartible estate after the abolition of the Istimrari estate by the Ajmer Abolition of Intermediaries and Reforms Act, 1955.

Detailed Analysis:

Issue 1: Distinguishing the Estate from Crown Grants Act
The Tribunal held that the Istimrari estate of Masuda was ancestral and impartible, belonging to the Hindu undivided family. The Sanad of 1875 only fixed the rent payable to the government and did not constitute the original grant of the estate. The Tribunal found that the estate was already in existence and governed by custom, not by the Crown Grants Act. The Tribunal's conclusion was based on the finding that the estate had been inherited through the rule of primogeniture long before the Sanad of 1875. This finding was upheld as it was based on relevant considerations and material on record, indicating that the rule of primogeniture was customary and not statutory.

Issue 2: Status of Properties and Business Post-Abolition
The Tribunal found that the properties and business acquired from the income of the impartible estate retained their character as part of the impartible estate. The Tribunal held that legislative interference or partition did not alter the impartible nature of these properties. However, the High Court disagreed, stating that the abolition of the Istimrari estate by the Ajmer Act of 1955 and the subsequent legislative changes altered the nature of the estate. The properties and business, which were part of the ancestral estate, lost their impartible character and became ordinary joint family properties. The High Court emphasized that the Hindu Succession Act, 1956, abrogated the rule of primogeniture, making the properties partible and subject to the normal incidents of Hindu undivided family property.

Conclusion:
The High Court concluded that the impartibility of the estate was destroyed by the abolition of the Istimrari estate under the Ajmer Act of 1955 and the enactment of the Hindu Succession Act, 1956. The properties and business in question were to be treated as joint family properties without the incidence of impartibility. Consequently, the income derived from these properties and the business was to be assessed in the status of the Hindu undivided family, not as individual income. The Tribunal's findings on the continued impartibility of the estate were overturned, and the assessee's contention was upheld.