1966 (9) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the partnership between Anoop Kunwar and Jugraj.
2. Interpretation of "possessed" under Section 14(1) of the Hindu Succession Act.
3. Determination of Anoop Kunwar's interest in the family properties.
4. Applicability of Section 3(2) of the Hindu Women's Right to Property Act, 1937.

Issue-wise Detailed Analysis:

1. Validity of the Partnership between Anoop Kunwar and Jugraj:
The primary question for decision was whether the partnership formed between Anoop Kunwar and her adopted son Jugraj was valid and should be granted registration under Section 26A of the Indian Income-tax Act, 1922. The Tribunal had previously reversed the Appellate Assistant Commissioner's order, which had affirmed the Income-tax Officer's rejection of the registration application. The Tribunal directed that the firm be registered, leading to this reference at the instance of the Commissioner.

2. Interpretation of "Possessed" under Section 14(1) of the Hindu Succession Act:
Section 14(1) of the Hindu Succession Act states that any property possessed by a female Hindu shall be held by her as full owner and not as a limited owner. The court had to determine whether "possessed" referred to physical possession or possession in law. The term "possessed" has been interpreted broadly in numerous decisions, including the Supreme Court's ruling in Kotturswami v. Veeravva, where it was held that "possessed" means the state of owning or having in one's hand or power, including both actual and constructive possession.

3. Determination of Anoop Kunwar's Interest in the Family Properties:
The court examined whether Anoop Kunwar had an independent share in the family properties or merely an interest as a member of a Hindu undivided family. Upon the death of her husband Seshmull on September 15, 1955, Anoop Kunwar obtained the same interest in the family properties as her husband had. With Jugraj's adoption, it was deemed that there were two coparceners in the family at the time of Seshmull's death, each holding a half share. The share of Seshmull devolved on Anoop Kunwar, and she became the full owner of that interest on June 17, 1956, when the Hindu Succession Act came into force.

4. Applicability of Section 3(2) of the Hindu Women's Right to Property Act, 1937:
The court considered the rights obtained by Anoop Kunwar under Section 3(2) of the Hindu Women's Right to Property Act, 1937. Although she initially had only a life interest in the property, Section 14(1) of the Hindu Succession Act transformed this limited estate into an absolute estate. The court noted that the estate obtained by a Hindu widow under Section 3(2) of Act 18 of 1937 is a statutory estate, defined and fixed, unaffected by subsequent births or deaths in the family.

Conclusion:
The court concluded that Anoop Kunwar had a definite interest of her own in the partnership assets when she and Jugraj entered into the partnership on September 5, 1959. Therefore, the partnership was valid, and the Tribunal was right in holding that registration should be granted to the firm. The assessee was entitled to the costs of this reference, with an advocate's fee of Rs. 250.