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TMI Blog1979 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... der the W.T. Act. Meiyappa Chettiar of M/s. A.V.M. Studios has four sons of whom the assessee is one. On 5th June, 1966, he issued cheque for Rs. 10,000 in favour of the assessee and gave him also cash of Rs. 100 expressing his intention that the benefit of the said sums should go to the assessee's wife and children also as and when he got married and that he should enjoy it as a Hindu joint family. These sums as well as the accretions thereto were to be subject to the incidence of joint family property under the Hindu law. The assessee accepted the gift. He was bachelor at the time. The assessee invested the sum of Rs. 10,000 in the firm of M/s. A.V.M. Sons, Madras, in which he had 3/20ths share. Under the partnership deed of A.V.M. Sons, he had to contribute Rs. 15,000 as capital, and he took a loan of Rs. 5,000 from the said firm itself and deposited it along with the sum of Rs. 10,000 mentioned above as his capital. Later on, from the accrued profits, he carried on a business in finance, and he became a partner in another firm known as M/s. Emkeyesbee. He transferred two sums of Rs. 10,000 and Rs. 5,000 on 15th December, 1966, and 6th April, 1967, respectively, to an account st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , neither the income nor the assets could be assessed in the hands of the assessee as an individual. The status in which the assessee has been assessed under the I.T. Act as well as under the W.T. Act is " individual ". The real question is whether the individual or any HUF consisting of the assessee, his wife and his daughter, is liable to be assessed with reference to the assets and the income. In the letter dated 5th June, 1966, written by the assessee's father, A. V. Meiyappan, it is stated as follows: " I am enclosing herewith my cheque for Rs. 10,000 drawn in your favour and cash of Rs. 100. It is my intention that, the benefit of these sums should go to your wife and children also as and when you get married and that you should all enjoy it as a Hindu joint family and these sums as well as the accretions thereto should be subject to the incidence of the joint family property under the Hindu law. I shall be glad to have your acceptance of this gift on the duplicate copy hereof." The assessee signed in the duplicate as requested under the following words: " Gift accepted." There is no dispute about the fact that the gifted amount belonged to A. V. Meiyappan as hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute rights and with powers of alienation such as gift, exchange, sale, etc., from son to grandson hereditarily. The Supreme Court held in the judgment pronounced by Mukherjee J., as he then was, that there was no warrant for saying that according to the Mitakshara, an affectionate gift by the father to the son constituted ipso facto ancestral property in the hands of the donee. At p.254, their Lordships observed as follows: " As the law is accepted and well settled that a Mitakshara father has complete powers of disposition over his self-acquired property, it must follow as a necessary consequence that the father is quite competent to provide expressly, when he makes a gift, either that the donee would take it exclusively, for himself or that the gift would be for the benefit of his branch of the family. If there are express provisions to that effect either in the deed or gift or a will, no difficulty is likely to arise and the interest which the son would take in such property would depend upon the terms of the grant. If, however, there are no clear words describing the kind of interest which the donee is to take, the question would be one of construction and the court would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint. At pp. 95 and 96, the Privy Council observed as follows: "In an extra legal sense, and even for some purposes of legal theory, ancestral property may perhaps be described, and usefully described, as family property; but it does not follow that in the eye of the Hindu law it belongs, save in certain circumstances, to the family as distinct from the individual. By reason of its origin a man's property may be liable to be divested wholly or in part on the happening of a particular event, or may be answerable for particular obligations, or may pass at his death in a particular way; but if, in spite of all such facts, his personal law regards, him as the owner, the property as his property and the income therefrom as his income, it is chargeable to income-tax as his, i. e., as the income of an individual. In their Lordships' view it would not be in consonance with ordinary notions or with a correct interpretation of the law of the Mitakshara, to hold that property which a man has obtained from his father belongs to a Hindu undivided family by reason of having a wife and daughters." The present case would be identical with that of Kanji dealt with above as in both cases there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from an ancestral source or as income of the undivided family of the partner, his wife and daughter. In Gomedalli Lakshminarayan's case [1935] 3 ITR 367 (reversed by the Privy Council in Gomedalli's case [1937] 5 ITR 416) the property from which the income accrued already belonged to an HUF, and the effect of the death of the father, who was a manager, was merely to invest the rights of manager upon the son. The income from the property was and continued to remain the income of the undivided family. This distinction which, (in their Lordships' view) had a vital bearing on the issue was not given effect to by the judicial Committee in CIT v. A. P. Swamy Gomedalli [1937] 5 ITR 416 (PC). The same criticism was also reiterated in Narendranath v. CWT [1969] 74 ITR 190 (SC). The only distinction between Gowli Buddanna's case [1966] 60 ITR 293 and Narendranath's case [1969] 74 ITR 190 (SC) is that in the case of Narendranath there was a Partition in the HUF which consisted of Narendranath and his wife. After the partition, Narendranath, his wife and his minor daughters received the assets. The question was whether the family consisting of Narendranath, his wife and his minor daught ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty which belonged (already) to a subsisting undivided family ceased to have that character merely because the family was represented by sole surviving coparcener, who possessed rights which a sole owner of property might possess. Even where the family consisted of widows of deceased coparceners as in CIT v. Rm. Ar. Ar. Veerappa Chettiar [1970] 76 ITR 467 (SC), so long as the property, which was originally of the joint Hindu family, remained in the hands of the widows as the members of the family and was not divided amongst them, the property would be joint family property. With reference to the other class of cases, Kalyanji Vithaldas' case [1937] 5 ITR 90 (PC) can be taken as illustrative and in such a case the question is whether the property, which did not belong to a subsisting undivided family, has truly acquired the character of a joint family property in the hands of the assessee. With reference to this class of cases, it was pointed out that the composition of the family was matter of great relevance for, though a joint Hindu family may consist of a man, his wife and daughter, the mere existence of a wife and daughter would not justify the assessment of income in the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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