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TMI Blog1987 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... a claim was made for the first time that the share from the firm of M/s B.D. Athane & Sons is assessable in the hands of HUF consisting of his wife Hemlata and two daughters Gayatri and Pallavi. The ITO rejected the claim relying on Madhya Pradesh High Court decision in CIT vs. Vishnukumar Bhaiya (1983) 35 CTR (MP) 38 : (1983) 142 ITR 357 (MP) which according to him holds the field. 3. The DR pointed out that on similar facts this Bench held in ITA No. 1603 and 1604/(PN) 1985 dt. 30th July, 1986 that the income is to be assessed in such cases in the hands of the assessee individual This view is further fortified by Patna High Court in the case of CIT vs. Shankar Lal Budhia (1987) 61 CTR (Pat) 298 (FB) : (1987) 165 ITR 380 (Pat) (FB). Taking us briefly through the various arguments raised in that appeal, the DR submitted that apart from the Madhya Pradesh High Court judgment relied upon by the ITO, Patna High Court judgment in Hanumanmal Periwal vs. CWT (1963) 67 ITR 320 (Pat) and observations of Mulla in Art. 223 (4) show clearly that when a person having no other member receives assets on partition, partial or full, he holds the same as separate property qua the whole world excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 380 (Pat). 4. In reply, Shri Bhide admitted that he was aware of the decision of this Bench in ITA No. 1603. He however, submitted that there are several new aspects which require to be noted. He fairly admitted that apart from the M. P. High Court judgment mentioned above, there is now a full Bench judgment of Patna High Court in (1987) 165 ITR 380 (Pat) which seems to support the view held by this Bench in ITA No. 1603 above. Accordingly Shri Bhide proposed to argue the various aspects afresh. On the factual side, Shri Bhide mentioned the three points of distinction between this case and ITA No. 1603. According to him, all the three points bring about a sea-change as far as the legal impact is concerned. Firstly a partial partition does not bring about the total disruption or break. Secondly, when the capital is invested in the business what is really to be seen is on whose behalf of the assessee is carrying on his business. Lastly, the fact that there are two daughters would show clearly that the joint family consists of more than one female member apart from one male member. 5. Tracing the history of the law on the subject, Shri Bhide submitted that all along it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have held is that something which at the point of its origin did not belong to the family cannot acquire the character of joint family property as long as that family has only one male. The ratio would not obviously apply where the original character of the property itself is one which is obtained as his share on partition. Art. 340 of Mulla leaves no doubt that the share obtained on partition is to be taken as joint family property. 7. Regarding the conflict between Art. 340 and 223 (4) of Mulla, Shri Bhide submitted that there is really no conflict the latter observations being correct only in the context in which they are made. The observations are as below: "The share which a coparcener obtains on partition of ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently…. As regards other relations, it is separate property." According to Shri Bhide the words other relations are to be taken as applicable to agnates and cognates and not wife and daughters who even otherwise are entitled to maintenance and security of provision of marriage expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by s. 3 (2)." Shi Bhide was aware of the later judgment of the Supreme Court wherein their Lordships have rejected the proposition of determining the status on the basis of possibility and potentiality in C. Krishna Prasad vs. CIT (1975) CTR (SC) 7: (1974) 97 ITR 493 (SC). He however, contended that the observations in C. Krishna Prasad's case are to be taken in the context in which they are made, viz., the concept of a family having only one person. In effect, therefore, the ratio of the Bombay High Court judgment mentioned above still stands. 9. Elaborating the point further in the light of N.P. Khedkar Shri Bhide submitted that the facts of the case are markedly similar to the facts of the present case. Larger family of P.L.K. was partitioned and the branch of N.P.K. got certain properties including the cloth business. On the same date the second partition took place in the branch of N.P.K. partitioning the cloth business capital, amongst N.P.K. and the members of his family. The question arose whether from the partnership so created the shares of the wife and the minor children could be clubbed in the hands of N.P.K. whose status was then on par with the assessee's status wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhuri Bai and Ors. AIR 1972 SC 1369. This judgment which is of a larger Bench is entitled to greater respect than the judgment in the case of C. Krishnaprasad case. Since the potentiality theory is still a factor to be reckoned and since in the assessee's case during the relevant period the assessee had wife and two daughters, the matter could stand concluded in favour of the proposition that there was a HUF on whose behalf the business in partnership in the name of B.D. Athane & Sons was carried on. 12. Shri Bhide then made a proposition that there is really no distinction between birth of a daughter and birth of a son. Originally, Hindu law developed on the footing that the daughters would be entitled to a share but since the daughters were migrating to the husband's family and since giving them a share became impracticable, shastric texts gave the female only a right of maintenance and meeting of marriage expenses in lieu of the share. Thus, obligation on the coparcenary or the joint family as far as the daughters are concerned are the same as in the case of any other joint family having more than one male. In support of this proposition, Shri Bhide relied on Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i derived as a result of partition partial or otherwise. Thus in the ultimate analysis therefore, there is no difference between the case having no other persons except one male individual and a case having one male and more than one female. Thus, the Madhya Pradesh and Patna High Courts have incorrectly applied the ratio of Narendranath and Surjitlal Chhabda's case. 15. Referring to Prem Kumar vs. CIT (1986) 121 ITR 347 (All) Shri Sathe submitted that this represents correct legal position even though their Lordships did not have the benefit of Supreme Court judgment in (1975) 101 ITR 776 (SC). As pointed out above, the Supreme Court judgment, if read as a whole, does not really make any difference as far as character of the property is concerned. Lastly, Shri Sathe placed reliance on Madras High Court decision in CIT vs. M. Balasubramaniam (1981) 132 ITR 529 (Mad). Although in this case, the ultimate ratio is in favour of treating assets as belonging to the individual, the observations of Their Lordships show clearly that even where the family consists of widow and deceased co-parceners there will still be joint family property and property which was originally of joint family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion equally applies to partial partition because the tie with the bigger HUF is not severed by the wife and children of Jawahar. Thus if accountability is the test, partial partition makes the Department's case stronger. Similarly, regarding staking of the family capital what is important is who carries on the business rather than at whose cost the business is being carried on. Since the partnership does not make in clear terms, that Shri Jawahar is representing his HUF (actually he could not have because in April, 1968 he did not have any). Again if the wife could not have brought about any metamorphosis in the character of the property, the arrival of the two daughters would not in any way make the assessee's position better because all the females are in the same category, viz., category of persons not entitled to share on partition but entitled at best only to maintenance and meeting of marriage expenses. There is really no contradiction between Arts. 340 and 223 (4) enunciated by Mulla. This is because there is no universal doctrine of once HUF always HUF approved by any Court. In fact, the judgment of the Supreme Court in CWT vs. Chander Sen (1986) 58 CTR (SC) 119 : (1986) 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular, Shri Srinivasan brought to our notice the observations at page 280 of the judgment when their Lordships have given a clear finding that when the sum of Rs. 71,000 was divided among the four coparceners each got 1/4th in their individual capacity. 20. Regarding the contention that the Patna High Court is not good law because CWT vs. N.V. Narendranath (1967) 65 ITR 579 (AP) & Hanumanmal Periwal vs. CWT (1968) 67 ITR 321 (Pat) have been disapproved, the DR submitted that Hanumanmal Periwal case derives its strength from the well known principles of dissolution and disruption of the family and the circumstances under which that family status so broken can be restored. Thus what applies to unbroken ancestral property does not apply to ancestral property where there is a break of the tie as found in this case. 21. Regarding the argument that birth of a daughter is no different from the birth of a male Shri Shrinivasan pointed out that whatever might be the position in the ancient days the distinction today is quite clear. Whereas the females are not entitled to a share on partition but are entitled only for the maintenance and marriage expenses, the male acquires interest by b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the new facts canvassed. The new factual and the legal aspects attempted to be brought out are not sufficient to hold that Shri Jawahar received property on partial partition of that of the HUF. All the case law relied upon by the assessee's advocates has been effectively met by the DR. We need not, therefore, repeat all the legal aspects. Briefly restated we hold that when there is a partition partial or otherwise it means a disruption or termination of the HUF bond with respect to the partitioned properties. Thus with reference to the property obtained on partition partial or full unless at the time of partition itself there was more than one member, the break or disruption is complete. The same can get restored if and when a male arrives. One need not dispute the principle that the character of the property does not depend upon the number of births and deaths and surviving members at any point of time. The main question, however, is whether the later events can have any effect on the right of persons who obtained the share on partition. In this case, it is not disputed that in 1968 when the bigger HUF was partially partitioned Shri Jawahar became the owner and became as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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