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TMI Blog1983 (2) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... a joint Hindu family of the parties and to constitute a joint family fund by virtue of such reunion so as to form a nucleus thereof by bringing in any or some of the properties allotted on partition of the erstwhile joint family and under this declaration the father and son brought a fixed deposit of Rs. 50,000 each kept with Rajkumar Chit Fund (P.) Ltd., as their contribution for the reunited joint family and declared their having reunited and the reunited joint family alone having the rights in respect of those assets totalling Rs. 1 lakh. The resultant position was that there were three units : firstly, Shri Vaiyapuri Chettiar with the separated assets claiming to be the karta of a smaller HUF consisting of himself and his wife, secondly, Rajkumar with the separated assets claiming to be the karta of a smaller HUF consisting of himself and his wife and thirdly, the joint family consisting of Vaiyapuri Chettiar, his son and their wives with this asset of Rs. 1 lakh. 3. On these facts, it was claimed that the interest arising from the sum of Rs. 1 lakh referred to above cannot be assessed in the hands of the two smaller joint families, which were being separately assessed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed that they will reunite, the fact that they get a tax benefit cannot invalidate such a reunion. Lastly, it was submitted that the amendment recently introduced cannot affect the transaction when such a transaction was valid in law. 6. On a consideration of the rival submissions, we are of the opinion that there are no merits in these appeals of the revenue. The incidents of a joint family and any partition and reunion thereafter are well recognised. In the case of Bhagwan Dayal v. Mst. Reoti Devi [1962] 3 SCR 440, the Supreme Court gave its full assent to the legal position summarised in Mayne's Hindu Law as follows : "As the presumption is in favour of union until a partition is made out, so after a partition the presumption would be against a reunion. To establish it, it is necessary to show, not only that the parties already divided, lived or traded together, but that they did so with the intention of thereby altering their status and of farming a joint estate with all its usual incidents. It requires very cogent evidence to satisfy the burden of establishing that by agreement between them, the divided members of a joint Hindu family have succeeded in so altering thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection of the revenue is that by the creation of the new joint family, the tax impact may have lessened and, therefore, as an agreement prejudicial to the revenue, it should be avoided. It is appropriate to refer to the observations of the Madras High Court in the case of M. S. M. M. Meyyappa Chettiar v. CIT [1950] 18 ITR 586 in the context of partition that the propriety of the partition, whether it should be effected at all, whether it should be effected at a particular time, what properties should be allotted to the different members, and how the family properties should be divided, are all matters for the coparceners to decide and once a real and de facto partition is found to have been effected, it is not for the revenue authorities to redress alleged inequalities in the partition by professing to ignore it in the interest of the minor coparceners. Again at page 606, it was observed that a coparcener governed by the Mitakshara Hindu law has the undoubted right to get his share separated, and if the separation entails the consequence of reducing the tax in any manner, the partition cannot be impeached on the ground that the motive was not laudable. On the same analogy, the copa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reunion. It would follow that the very intention to reunite would comprise also an intention to reunite with respect to a particular property and not all the properties which were once divided. The Supreme Court has summarised the position in Hindu law with regard to partition as follows in the case of Kalloomal Tapeswari Prasad : "Under Hindu law partition may be either total or partial. A partial partition may be as regards persons who are members of the family or as regards properties which belong to it. Where there has been a partition, it is presumed that it was a total one both as to the parties and property but when there is a partition between brothers, there is no presumption that there has been partition between one of them and his descendants. It is, however, open to a party who alleges that the partition has been partial either as to persons or as to property, to establish it. The decision on that question depends on proof of what the parties intended---whether they intended the partition to be partial either as to persons or as to properties or as to both. When there is partial partition as to property, the family ceases to be undivided as regards properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court viewed the ability of the other coparceners also to do likewise as sufficient proof of their intention to reunite. It was further pointed out by the Court that because of the unequivocable declaration of reunion, the income-tax authorities could not dispute that fact though it was open to them to consider the legal effect, namely, that all the properties received by the coparceners on a previous partition became available for common enjoyment among the reunited coparceners. This case has taken note of a decision of the Madras High Court in the case of Manorama Bai v. Rama Bai AIR 1957 Mad. 269. In that case, the facts were that there were two divided brothers, one of whom was issueless but rich. Instead of adopting the son of the other brother, they entered into an agreement of reunion and declared that they had decided to mingle the properties of the first individual with those of the second individual and to live jointly thereafter. The two brothers were killed in a boat tragedy and a dispute arose as to the succession to the properties. The Court held that the properties went by survivorship because the reunion had been proved. In that case, the question was not whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property of the reunited family and it would be necessary to consider whether the reunion is limited to any particular property. As long as the reunion is accepted, income from any property which has once been divided and which the coparceners claim should belong to the reunited family would have to be accepted as joint family income. The income from other properties which had also been divided earlier and which the assessee has not claimed to belong to the reunited Hindu family would not form part of the subject of this case and need not concern us, though as observed by the Karnataka High Court it may be open to the department to deal with that matter within the scope of their powers. From a different point of view, namely, that the agreement to reunite could even be with respect to specific property, the question will be whether the contract to reunite could be confined to certain properties alone without offending the basic tenets of Hindu law. As we have noted above, judge made Hindu law has accepted that specific properties could be converted from joint tenancy into tenancy-in-common and there is a division in status because the undivided family becomes a divided family with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on restraining the property being brought back to the reunited family merely waives the rights available to the coparceners in consideration of a similar waiver by the other coparceners. This is similar to a case where coparceners agree to divide the property unequally or a coparcener renounces his share, which will not be considered agreements defeating the provisions of Hindu law because they relate only to adjustments of rights in properties in respect of which the law preserves freedom of contract. Hence, such a condition cannot be considered to have defeated the provisions of Hindu law. Even assuming that such a condition would be opposed to the principles of Hindu law, it would not affect the validity of the contract of reunion itself since it is a condition which is severable from the main object of reuniting which relates to the status of the family. If this condition is avoided the result will be that the general rule of Hindu law that there is a junction of the entire estate which was originally the property of the family before division would come into play. Once again we arrive at the position that the contract to reunite is a valid contract and in any event the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requently happens in income-tax cases that the same result in a business sense can be secured by two different legal transactions, one of which may attract tax and the other not. This is no justification for saying that a taxpayer who has adopted the method which attracts tax is to be treated as though he had chosen the method which does not, or vice versa. . . ." Therefore, it is not possible to go behind the agreement of reunion to assume that its real motive was to bring back all the properties together and then have a partial partition and thereby ignoring it by invoking section 171(9). We have to go by the agreement as such and since it is an agreement of reunion not prohibited by any provision of the Act, it is not possible for the revenue to ignore it. 14. We are reminded by the revenue that the Bombay High Court has held in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 that the Tribunal has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question and, therefore, the decision of the Karnataka High Court in the case of Paramanand L. Bajaj should be followe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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