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TMI Blog1983 (3) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ara A of Schedule I to the Finance Act, 1974, as in his opinion there was at least one member of the HUF having an income exceeding the taxable limit, inasmuch as the petitioner did not fill in the particulars as per annex. I whether the family had at least one member whose total income exceeded the taxable limit. The petitioner filed an appeal before the AAC who allowed the appeal on August 16, 1975, holding that there was a partition and the family consisted only of the petitioner and his wife, that his wife was not having any taxable income and, therefore, he directed the ITO to apply the rates as per Sub-para. 1 of Para. A of Sch. I to the Finance Act, 1974. The Department preferred an appeal, I.T.A. No. 1449/Hyd/75-76, before the Tribunal which allowed the appeal on November 17, 1976. Before the Tribunal, the petitioner raised a new question, namely, that the petitioner should have been assessed as an " individual " and not as a HUF and the Tribunal allowed the said question to be raised. The petitioner then contended that after the partition, dated October 27, 1970, among the petitioner, his son and wife, of the joint family properties, there was no Hindu joint family in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the status of the assessee was Hindu undivided family ? (2) In case the answer to the first question is in the affirmative, whether the Tribunal was justified in holding that the rates of tax applicable to the assessee are as per Sub-para. II of Para A of Schedule I to the Finance Act, 1974, and not as per Sub-paragraph I ?" Answer to these two questions will, having regard to the above facts, govern the other R.Cs. also. The first question referred to us is whether the petitioners in each of these cases have to be assessed as individuals or as a HUF ? The learned counsel for the petitioner, Sri Rathi, contended that in view of the partition among the petitioner, his wife and son, the property allotted to the petitioner is at the absolute disposal of the petitioner, and as his wife has been given a share which is in lieu of maintenance, the petitioner has to be treated as an individual. In other words, the existence of his wife has to be ignored as she has, according to the petitioner, no right to maintenance in the property allotted to her husband. On the other hand, the learned standing counsel for the Department, contended that the petitioner has been all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the rule in Gowli Buddanna's case [1966] 60 ITR 293 (SC). The absence of any female member was the fact which distinguished the case from the rule in Gowli Buddanna's case [1966] 60 ITR 293 (SC). We shall revert to this case a little later. Gowli Buddanna's case and other cases were elaborately considered by the Supreme Court in Surjit Lal Chhabda's case [1975] 101 ITR 776. It was pointed out by the Supreme Court that in Gowli Buddanna's case, the property belonged to a subsisting undivided family before the sole coparcener came to own it (pp. 792-793). It was also pointed out that in Narendranath's case [1969] 74 ITR 190 (SC), the property was already impressed with the character of joint family property before coming into the bands of the single coparcener (pp. 792, 793). Two other cases were then referred to. Referring to Gomedalli Lakshminarayan [1935] 3 ITR 367 (Bom), it was stated that there the property belonged to a HUF before it survived to the son and it was ancestral with the father and thereby the son had acquired a right by birth (p. 791). Veerappa Chettiar's case [1970] 76 ITR 467 (SC), was also explained by the Supreme Court as one where the property was origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habda's case [1975] 101 ITR 776 (SC). For the purpose of highlighting the true basis of that case, we shall confine ourselves to two of the six branches in that case. They are the branches of Kanji and Sewadas. There was partition between the father, Moolji and his two sons. The two sons were partners in a firm. Kanji's family comprised of his wife and daughter while Sewadas family comprised of himself and his wife. Neither Kanji nor Sewadas had a son. The property invested in the firm was property which was gifted to each of them by their father, Moolji. Before the gift, Moolji owned it as his separate property. It was assumed by the Privy Council that Moolji intended that the gifted property should be ancestral in the hands of Kanji and similarly in the hands of Sewadas. That is to say, if a son should be born to either, he would have a right by birth in the gifted property. The Privy Council held that Kanji and Sewadas had each to be assessed as individuals. The reason was this. The gifted property was not the ancestral or joint family property of a subsisting HUF consisting of Moolji, Kanji and Sewadas (p. 791 in Chhabda's case [1975] 101 ITR 776 (SC)). Even though the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty has to be assessed as an individual till such time that he gets married. That is the exception to the rule in Gowli Buddanna's case [1966] 60 ITR 293 (SC), made in Krishna Prasad's case [1974] 97 ITR 493 (SC). (2) But where the property was not owned by a HUF before it came to be owned by a sole surviving coparcener living with female members of the family entitled to maintenance, the assessment has to be made as individual. The reason is that before it got converted as joint family property it was not owned by coparceners of a HUF. After conversion too the assessment remains so till a son is born. Such a conversion as joint family property occurred for the first time in the hands of the sole surviving coparcener by reason of the gift by the father in Kalyanji's case [1937] 5 ITR 90 (PC) and by reason of the sole coparcener throwing his separate property into family hotchpot in Chhabda's case [1975] 101 ITR 776 (SC). The property would have to be assessed as an individual even in spite of the existence of female members, until a son was born who could have right by birth. That is the rule in Kalyanji's case [1937] 5 ITR 90 (PC). Now the question is-which of the above rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e who is entitled to maintenance from the above-mentioned property........" But the said passage cannot be divorced from the facts of that case. The emphasis is more on the existence of the wife than on her rights. The share given to the assessee's wife in the present case may be in lieu of maintenance. But the female here is very much " in existence " in the family even after partition, as the assessee's wife, and that distinguishes the case from Krishna Prasad's case [1974] 97 ITR 493 (SC), where no female at all was in existence. Unlike the son who goes out of the family after partition or, the daughter on marriage, the wife continues to be a member of the Hindu joint family of her husband as long as the marital tie lasts, in spite of taking a share in the partition. We are, therefore, of the opinion that Krishna Prasad's case-the exception to Gowli Buddanna-applies only to a sole surviving coparcener who is without any other female member in the family. He must be all alone-solitary. It is then argued that in Kalyanji's case [1937] 5 ITR 90 (PC), Kanji and Sewadas received the property as their separate property and that that was why the property was treated as " indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was held by the HUF of father and five sons, i.e., six coparceners, simultaneously and there was then a partition, the case squarely fell within the rule in Gowli Buddanna's case [1966] 60 ITR 293 (SC), as applied in Narendranath's case [1969] 74 ITR 190 (SC), as the property was owned by the HUF before partition. Therefore, on the first question, we are of the opinion in R.C. No. 62/78, that the assessee has to be assessed as a HUF in respect of the income obtained from the property allotted to him in partition, notwithstanding the fact that his wife has been given a share thereat according to the Benaras School of Hindu law. The second question is whether the assessee's wife is a member of the assessee's family so as to attract the higher rate of tax applicable under Sub-para. II of Para A of Schedule I to the Finance Act, 1974, in view of the partition in which she took a share ? While dealing with the question whether the case fell within the rule in Gowli Buddanna's case [1966] 60 ITR 293 (SC), we have considered the question whether it can be brought within the exception to that rule as made in Krishna Prasad's case [1974] 97 ITR 493 (SC). . In that context, we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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