1972 (6) TMI 20 - HC - Income Tax

Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee as a member of the Hindu undivided family was entitled to throw her separate property into the common hotchpot of the Hindu undivided family

Summary

Issues Involved:
1. Whether the assessee, a member of a Hindu undivided family (HUF), can throw her separate property into the common hotchpot of the HUF.

Issue-wise Detailed Analysis:

1. Whether the assessee, a member of a Hindu undivided family (HUF), can throw her separate property into the common hotchpot of the HUF:

The key question referred by the Income-tax Appellate Tribunal to the High Court was whether the assessee, as a member of the Hindu undivided family, was entitled to throw her separate property into the common hotchpot of the HUF.

The facts of the case reveal that the assessee, governed by Mitakshara law, and her husband jointly purchased a property and later declared it as belonging to the HUF. The Income-tax Officer included the assessee's share of income from the property up to February 27, 1964, in her taxable income. The Appellate Assistant Commissioner upheld this, stating there was no effective transfer of the property to the HUF during the year 1963-64. However, the Income-tax Appellate Tribunal ruled in favor of the assessee, holding that the property had become HUF property from February 27, 1964.

The High Court outlined the characteristics and legal principles governing Hindu undivided families and coparcenary under Mitakshara law. It emphasized that a coparcener, who is a male member of a coparcenary, can throw his separate property into the joint family hotchpot, thereby transforming it into coparcenary property. This act does not constitute a transfer or gift but a change in the mode of ownership and devolution of the property.

The Court distinguished the legal consequences for female members, noting that a female member cannot manage joint family property, her creditors cannot sell it, and she cannot seek partition (except when permitted by statute). Thus, a female member loses control over the property, except for a potential maintenance charge.

The Court referenced the Supreme Court's decision in Mallesappa Bandappa Desai v. Desai Mallappa, which held that the blending of self-acquired property with joint family property applies only to coparceners and not to female members. The rationale is that blending requires the owner to be a coparcener with an interest in the coparcenary property, which a female member lacks.

The Court rejected the argument that modern principles of justice, equity, and good conscience should extend the right to female members. It emphasized that the principle of blending is an exception to the general law requiring formal transfer instruments, and cannot be extended beyond coparceners.

The Court also noted that Hindu law allows limited owners, like widows, to surrender their estate to the nearest reversioner, but this principle does not apply to female members blending their separate property with joint family property.

The Tribunal's reliance on certain cases to support the assessee's position was found misplaced. The High Court of Delhi's decision in Commissioner of Income-tax v. Pushpa Devi was cited, which held that only a coparcener could throw self-acquired property into the family hotchpot, not a female member.

The High Court concluded that the right to throw separate property into the joint family hotchpot is available only to coparceners. Since the assessee in this case was not a coparcener, she could not convert her separate property into joint family property by mere declaration.

Conclusion:

The High Court answered the question in the negative, holding that the assessee, being not a coparcener, could not treat her separate property as joint family property from the date of her declaration. The assessee was directed to pay costs to the Commissioner of Income-tax.