9911796707
TMI Blog1988 (4) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer completed the assessment for this yea on 30-10-1981 on a total income of Rs. 29.570 accepting the professional income returned by the appellant, but determining the income from property at Rs. 19,396 as against Rs. 14,346. The Income-tax Officer did not allow the assessee's claim for deduction of municipal taxes in full. The assessee preferred an appeal against this assessment order objecting to this disallowance originally. However, in the course of the appeal proceedings, the assessee raised additional grounds before the Appellate Asstt. Commissioner, contending that these properties belonged to his HUF and that therefore the income from properties should not be included in his individual assessment. 4. The Appellate Asstt. Commissioner after examining the assessee's contentions and the evidence produced by him in support thereof accepted the same and held that the properties belong to the joint family and that therefore the income therefore was not includible in the individual assessment of the assessee. He therefore directed the Income-tax Officer to exclude the said income from property from the assessee's individual assessment. In support of his conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty gifted to the assessee in the hands of the father. The appeal is restored to the AAC on this point. This disposes of the main issue raised by the revenue in this appeal." The Tribunal, however, upheld the order of the Appellate Asstt. Commissioner on the question of the allowance of the municipal taxes and treated the department's appeal as partly allowed. 6. Pursuant to this order of the Tribunal, the Appellate Asstt. Commissioner again examined the issue raised by the appellant in Supreme Court in the case of C. N. Arunachala Mudaliar v. C. A. Muruganatha Mudaliar [1954] 5 SCR 243. The AAC held in para 4 of his order that it appeared to him that the sum that was transferred by late Shri T. L. Venkatarama Iyer was not ancestral, nor it belonged to the HUF of late T. L. Venkatarama Iyer. He further held as follows in para 4 of his order : "The making of gifts by late Shri T. L. Venkatarama Iyer and acceptance of that gifts by the appellant were by themselves acknowledged by them at the money and property belonged to late Shri T. L. Venkatarama Iyer absolutely and he was competent to effect to that gift. In this regard, there is not gainsaying in mentioning that under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1981-82 the appellant filed his return admitting a total income of Rs. 12,980. In this he did not include the income from properties for the reason that the said income from properties belonged to his HUF. He pointed out that the assessee's father had provided funds for the construction of the property and that the said funds were being provided by him for the benefit of the joint family consisting of the assessee and his sons. The Income-tax Officer, however, did not accept this claim for the reason that the decision of the AAC for the year 1980-81 relied on by the appellant was not final, as the department had preferred an appeal to the Tribunal. He therefore included the income from properties in the hands of the appellant as an individual. For the next assessment year 1982-83 also the ITO included the income from properties in the hands of the appellant for the reasons stated by him in the assessment order for 1981-82. 8. The appellant preferred appeals objecting to these two assessments. The AAC dismissed these two appeals by following his order for the assessment year 1980-81 referred to above. 9. Aggrieved by these orders of the AAC, the appellant has come up on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls, Shri S. P. Subramaniam, the learned counsel for the appellant, submitted that the properties in question were acquired and constructed by the appellant with the aid of HUF funds and that therefore they would constitute only HUF property in the hands of the appellant. The learned counsel developed his case by submitting that the appellant had constructed the properties in stages as could be seen from his letter dated 15-1-1983 addressed to the AAC, that the properties in question consisted of three door numbers, as set out below : Sl.No. Old door No. New door No. 1. 26 52 2. 26-A 53 3. 26-B 54 The learned counsel explained that the appellant constructed the property at No. 26, Mowbrays Road in part during 1955 to 1957, having purchased the land itself from his cousin some time in 1954 for Rs. 10,000. Thereafter he extended it by putting up additional constructions in 26 and 26-A, which were let out to tenants, as these constructions were put up in the form of small tenements over a period of ten years from 1954 or 1955. He completed construction of the third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the present findings of the AAC in para 5 of his order were contrary to accepted principles of Hindu law and therefore deserved to be set aside. Shri Subramaniam argued that when the intention of the appellant's father, as made clear by his letter dated 3-3-1970, showed that the monies amounting to more than Rs. 80,000 were given by him to the appellant for the benefit of the appellant and his sons as members of a joint family, the said amount of Rs. 80,000 constituted the HUF nucleus, of which the appellant was the karta on the authority of the Supreme Court decision in C. N. Arunachala Mudaliar's case. The properties acquired with the aid and help of those funds received from the father would constitute HUF property only in the hands of the appellant vis-a-vis his two sons and that the income from these properties should therefore be excluded from the individual hands of the appellant in these three years. The learned counsel submitted that the fact that the appellant had been returning the income from these properties in his individual hands in the earlier years, would not affect or alter the legal position in Hindu law and that it is always open to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the appellant had described the property at 49-B Mowbrays Road, which he sold during the accounting year relevant for 1974-75 as his self acquired property. On the above materials Shri Gopal argued that the conduct of the appellant showed that he had been treating all these properties as his self-acquired properties only. It was also clear that his intention was to keep these properties only as his self-acquisitions, as could be seen from his declarations in the sale deeds executed by him in 1967 and 1973 or 1974. The learned departmental representative also referred us to the gifts made by the appellant in respect of two of these properties in favour of his fours married daughters during the period 1-4-1981 to 31-3-1982 and further pointed out that the appellant had filed gift-tax returns for the assessment years 1981-82 and 1982-83. The learned departmental representative pointed out with reference to the recitals in the settlement deeds executed by the appellant that the appellant had described himself as the sole and absolute owner of these properties and not as the karta of his HUF. The learned departmental representative therefore submitted that the appellant has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HUF and not to claim as an individual. 14. We have carefully considered the submissions urged on both sides in the light of the materials placed before us. 15. The most important piece of evidence on which the appellant's case is based, is the letter dated 3-3-1970, written by the appellant's father to the appellant. For facility of reference, we set out the letter in its entirely : "T. L. Vendatarama Aiyar Retd. Supreme Court Judge "Sri Vidya Vilas" 81 Mowbray's Road, Alwarpet, Madras-18 Phone 71674 Dated : 3rd March, 1970. To, Mr. T. V. Balakrishnan, Advocate, 26 Mowbray's Road, Alwarpet, Madras-18. Dear Bala, I have from time to time advanced to you funds amounting to more than Rs. 80,000 for construction of the houses and marriage expenses of your daughter. All this has been in lieu of your share in the family properties. As against this, I am giving the residential house, (81, Mowbray's Road) to your elder brot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Sitamma Colony that he ultimately constructed the new block No. 26-B with the sale proceeds. The appellant therefore explained that the amount of Rs. 35,000 received by him from his father was always available in one form or another for the acquisition and the construction of the various properties. Thus, it is clear from the materials placed before us that the appellant had received in all a sum of Rs. 40,000 to Rs. 43,000 for the construction of the house properties from 1954 to 1961, apart from other funds received from his father on the occasion of the marriage of his daughter. 17. The letter dated 3-3-1970 written by the appellant's father, which we have quoted above, clearly establishes that the appellant's father intended to give these funds amounting to more than Rs. 80,000 to the appellant in lien of the appellant's share in the family properties. As against this, the appellant's father gave his residential house at No. 81, Mowbrays Road to the appellant's elder brother T. V. Srinivasan, and his sons in lieu of his elder brother's share. Thus, it is apparent from a perusal of this letter that the appellant's father was making a division of his properties between hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant. This position is also now equally well settled by the decision of the Supreme Court in N. V. Narendranath v. CWT [1969] 74 ITR 190. We have already referred to the facts which clearly established that nearly a sum of Rs. 40 to 43 thousand have been received by the appellant from 1954 to 1961 from his father for the purpose of acquiring the land and construction of the various properties in question from time to time. The said sum of more than Rs. 40,000 would constitute sufficient joint family nucleus in the hands of the appellant. When he acquired and constructed these house properties with the help of the said joint family nucleus, the said properties would belong only to his joint family consisting of the appellant, his wife and two sons and of which is the karta. We find considerable force in the contention of the learned counsel for the appellant that the rental income from these properties were also available with the appellant for being utilised by the appellant for the latter constructions of the properties. 21. The second way of looking at the letter dated 3-3-1970 is that the appellant had received more than Rs. 80,000 as gifts from his father for the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and that the legal incidence of the property might change on the birth of a son, but until that event happened the assessee would have to be assessed only as an individual for the purposes of wealth-tax and income-tax. After referring to the decision of the Supreme Court in C. N. Arunachala Mudaliar's case and the later Supreme Court decisions. Their Lordships held as follows at page 535 of the reports :- "It is clear from these decisions that the donor or testator dealing with self-acquired property may, by evincing the appropriate intention, render the property, or, as the case may be, a separate property in the hands of the done vis-a-vis his male issue. In the present case, therefore, no exception could be taken to the terms of the letter dated 5th June, 1966." Again, after discussing the various decisions of the Supreme Court and of the Privy Council, their Lordships finally held at page 539 of the reports as follows :- "If in the present case the property had been obtained on partition, then as a result of the daughter, it would have been possible to hold that the income belonged to the HUF or that the assets belonged to an HUF as in Narendranath's case [1969] 74 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccession Act, 1956 giving equal rights to daughters and whereas our father and mother suggested arrangements should be made giving some properties to each of the daughters, representing their shares in the interest of the father in the family properties to avoid any possible misunderstandings either with regard to value or mode of partition and whereas we were willing parties to such an arrangement and whereas a contiguous superstructure with the land in Door No. 53, separating 52 and 54, Mowbrays Road, had been settled on the daughters along with part of No. 52, Mowbrays Road, Alwarpet, Madras-600 018 by separate registered documents representing the family arrangements with our full concurrence and whereas our sisters have been fully provided, we hereby confirm and accept the settlement documents as a fair and equitable family arrangement in regard to the claims of our sisters." From a perusal of the aforesaid recitals from the deed of confirmation, it is clear that these settlement deeds were executed by the appellant in favour of his daughters with the full concurrence of his two sons as part of a family arrangement. There is no dispute before us that the settlement deeds exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raju AIR 1968 SC 1276 referred to the decision of the Madras High Court in R. Subramania Iyer v. CIT [1955] 28 ITR 352 and held as follows at page 324 of the reports : "Reference may also be made to Subramania Iyer v. Commissioner of Income-tax, wherein this court observed : "The assessee and his son undoubtedly constitute members of a joint Hindu family. They might have started with no ancestral nucleus or other joint family property but there was nothing to prevent the assessee from impressing upon any self-acquired property belonging to him the character of joint family property. No formalities are necessary in order to bring this about and the only question is one of intention on the part of the owner of the separate property to abandon his separate rights and invest it with the character of joint family property.' These principles were applied by the Andhra Pradesh High Court in Sadasiva Vittal v. Rattalu AIR 1958 AP 145. Decisions thus establish that the two essential requisites for the conversions are : (1) the existence of a coparcenery, and (2) the deliberate intention formed by the coparcener owning separate property to treat the same as joint family property. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dha and sapratibandha. In the former case one person acquires rights in another's property even while the other is alive by reason of relationship. In the latter case the existence of the owner is an obstruction. In Lakshminarasamma v. Rama Brahman AIR 1950 Mad. 680, 687 referring to the true character of the interest which the son had in his father's self-acquired property, Rajamannar, CJ. observed : 'According to Mitakshra, the son has a right by birth in every kind of property. This must always be borne in mind. Mr Mayne evidently overlooked this in his argument in Jagampet case : Venkayamma v. Venkatarananayamma 1902 ILR 25 Mad. 678, 688 (PC), when he cited the instance of sons taking the self-acquired property of the father as an instance of obstructed heritage (In Jagampet case, Lord Lindley, in delivering the judgment, apparently found the instance not satisfactory, for his Lordship observed : "But it may be that where sons succeed the inheritance as to them is unobstructed"). The description is extremely misleading, because it is neither heritage nor is it obstructed. The misconceptions prevailing in this branch of the Hindu law are mostly due to the mistake of equating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to as pitru prasada. From the nature of things, all that happens when separate property is converted into the property of joint family is a mental resolution by the father to the effect, a resolve not to exercise his special rights over the property. There is only self-abnegation or denial to himself of his powers. There is no passing of property from the father to the son in this process to make it a transfer of property by the father, however widely the word 'transfer' is used. In the acquisition of full coparcenery rights by the son, what is nascent becomes active under the doctrines of Hindu law. True, the father's intention has to manifest itself. But, as it is the intention that matters, no formality is required and the mode in which the intention is manifested cannot alter the true nature of the process. The blending by a coparcener of his separate property may manifest itself 'either by bringing his self-acquired property into the joint family account or by bringing joint family property into his separate account'-Rajanikanta Pal v. Jagamohan Pal AIR 1923 PC 57. In the latter case, the manifested act is a disposition from the family to individual; but the result is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty as that of the joint family property, the property assumes the character of joint family property. The doctrine of throwing into the common stock is a doctrine peculiar to the Mitakshara school of Hindu law. When a coparcener throws his separate property into the common stock, he makes no gift under Chapter VII of the Transfer of Property Act. In such a case there is no donor or donee. Further, no question of acceptance of the property thrown into the common stock arises." 28. When we examine the facts of the present case in the light of the passages quoted from the decision of the Supreme Court in Goli Eswariah's case and from the Full Bench decision of the Madras High Court in P. Rangaswami Naidu's case, there can hardly be any dispute that the appellant's case is squarely covered by the ratio of these two decisions. There can be no dispute that the assessee, his wife, sons and daughters constituted a HUF governed by Mitakshara law, we have already found earlier as a fact that the assessee had received more than Rs. 80,000 in cash from time to time his father, out of which more than Rs. 40,000 had been invested by there assessee in the acquisition and construction of the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
