1969 (6) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Determination of whether the income in the hands of the assessee was income of a Hindu undivided family (HUF) or liable to taxation as an individual.
2. Examination of whether the saranjam was an impartible estate.
3. Consideration of historical partitions and their legal implications on the nature of the saranjam.
4. Application of section 9(4) of the Income-tax Act, 1922.

Detailed Analysis:

1. Determination of whether the income in the hands of the assessee was income of a Hindu undivided family (HUF) or liable to taxation as an individual:

The primary issue was whether the income received by the assessee was to be taxed as an individual or as the karta of a Hindu undivided family. The assessee contended that the income was received as the karta of a HUF, while the department argued that the income was received by him as an individual. The assessment years in question were 1955-56, 1956-57, and 1957-58. The Appellate Assistant Commissioner had accepted the assessee's contention for the years 1955-56 and 1956-57, directing that only the salary income be treated as individual income and the rest as HUF income. The Tribunal upheld this decision, recognizing the historical and factual basis for treating the income as HUF income.

2. Examination of whether the saranjam was an impartible estate:

The department argued that the saranjam was impartible and governed by the rule of primogeniture, making it individual property. However, the Tribunal found that the saranjam was partible from its inception and throughout its history. The original grant in 1764 by the Peshwas to Govindrao Haribhat included shares for his brother's sons, indicating a partible nature. Subsequent partitions among family members, recognized by the sovereign powers (Peshwas and later the British), further reinforced this finding. The Tribunal and the Appellate Assistant Commissioner concluded that the saranjam was not impartible, thus supporting the assessee's claim of HUF income.

3. Consideration of historical partitions and their legal implications on the nature of the saranjam:

The historical context showed that the saranjam was divided among family members multiple times with the consent of the ruling authorities, indicating its partible nature. Key historical events, such as the partition between Chintamanrao and his uncle Gangadharrao, and later partitions recognized by the British, demonstrated that the saranjam was treated as partible property. These partitions were not clandestine but officially sanctioned, further supporting the conclusion that the saranjam was partible. The Tribunal's detailed examination of historical records and memoirs confirmed this interpretation.

4. Application of section 9(4) of the Income-tax Act, 1922:

Mr. Joshi, representing the Commissioner, argued that under section 9(4) of the Income-tax Act, 1922, the holder of an impartible estate is deemed to be an individual owner for tax purposes. However, this argument hinged on proving that the estate was impartible. Since the Tribunal and the Appellate Assistant Commissioner found the saranjam to be partible, section 9(4) was not applicable. The Tribunal noted that the requirement for sovereign consent for partitions did not alter the partible nature of the estate under Hindu law.

Conclusion:

The High Court held that the saranjam was partible and the income received by the assessee was to be treated as HUF income, not individual income. The Tribunal's findings were upheld, and the question referred was answered in the affirmative. The Commissioner was directed to pay the costs of the application for reference, with no order on the notice of motion and no order as to costs of the motion.