Commissioner of Income Tax, A.P. II, Hyderabad vs Dhanpal Jagadishwar

S.V. Maruthi, J

The questions referred by the Income Tax Appellate Tribunal for the opinion of this Court are as follows:

(1) Whether on the facts and in the circumstances of the case, the appellate Tribunal is justified in holding that the status of the assessee is minor HUF and not individual for the assessment years 1973-74,1974-75 and 1975-76?;

(2) Whether on the facts and in the circumstances of the case, the appellate Tribunal is justified in holding that the income of the minor sons who are admitted to the benefits of the partnership in a firm in which assessee is also a partner could not be included in the individual assessment of the assessee for the assessment years 1973-74, 1974-75 and 1975-76?;

(3) Whether on the facts and in the circumstances of the case, the appellate Tribunal is correct in holding that there was no justification for the Income Tax Officer to assess the income of the assessee and his minor sons in his assessment as an individual u/s 148 for the assessment Years 1973-74, 1974-75,1975-76?; and

(4) Whether on the facts and in the circumstances of the case, the appellate Tribunal is justified in holding that the status of the assessee is minor HUF and not individual for the assessment years 1976-77 and 1979-80.

The facts in brief are as follows:

The relevant assessment years are i973-74, 1974-75, 1976-77 and 1979-80. The assessee is an individual and also a kartha of Hindu undivided family consisting of his wife and five minor sons. Before his last son Master Venugopal was born, there was partial partition in respect of the capital invested in two partnership firms, viz., M/s. Kisan Stores and M/s. Vishnulaxmi Rice Mill on 29-10-1970 between him and his four sons. The partial partition was recognised by the Income Tax Officer as per his order dated 24-2-1974. Master Venugopal was born shortly thereafter. He is admitted to the benefits of partnership on 6-11-1972. The assessee contended that for the purpose of partnership he along with his wife and minor son Master Venugopal formed a separate smaller Hindu undivided family excluding his other sons. It is also his case that he along with his wife together with all his other sons continues to exist as a larger Hindu undivided family in respect of other properties, The Income Tax Officer assessed the smaller Hindu undivided family separately for the relevant assessment years in a separate file. The divided minor sons who were admitted to the benefits of partnership after the partial partition were also similarly assessed independently on their own names. The Income Tax Officer, however, later came to a different conclusion that the assets received on 29-10-1970 belonged to the assessee in his individual capacity only as at the relevant time, he and his wife alone were there. Since his wife had been given Rs.5,000/- at the time of partial partition, the assessee is interested in his individual capacity on the share income and not in the status of the family. If he is an individual partner in the firm, the incomes of the minors admitted to the benefits of partnership are also to be aggregated u/s 64 for assessment years 1973-74, 1974-75 and 1975-76. Even otherwise, it had to be aggregated for assessment years 1976-77 and 1979-80 as amendment was brought into effect from 1-4-1976.

On appeal, the appellate authority excluded the income of the minors for the assessment years 1973-74 to 1976-77. On further appeal, the Tribunal held that mere provision of Rs.5,000/- to the wife of the assessee does not make the joint family cease to exist and the Hindu undivided family continues to exist and it is a smaller Hindu undivided family. If it is a smaller Hindu undivided family the assessee is liable to be assessed as such insofar as the income of the two firms in concerned. If the assessee is to be assessed as a smaller Hindu undivided family insofar as the income of the two firms the income of the minors who were admitted to the benefits of me partnership firm cannot be included in view of the partial partition. However, at the instance of revenue the questions set out in the earlier paragraphs were referred for the opinion of this Court.

The main argument of learned Counsel for the revenue is that by virtue of making a provision to the wife by the asscssee the Hindu undivided family ceased to exist and therefore the assesses is liable to be assessed in his independent capacity and if he is liable to be assessed in his individual capacity the income of the minor son has to be included in the income of the assessee. In support of her contention she relied on the decisions of this Court rendered in the case of Controller of Estate Duty Vs. Smt. P. Leelavathamma, , and another decision in the case of Commissioner of Wealth-tax, Andhra Pradesh Vs. Mukundgirji, . The question therefore is whether on making a provision for maintenance in favour of the wife by the assessee the Hindu undivided family ceases to exist.

In Commissioner of Wealth Tax v. M.A. Raj Kumar, 226 ITR 804, a full bench of this Court held "the expression "Hindu undivided family" must be interpreted and understood in the sense in which it is understood in Hindu law even for the purpose of the Wealth Tax Act. The members of the Hindu joint family are bound together by their relationship."

From the facts narrated above, it is clear that there was a larger Hindu undivided family and there was a partial partition insofar as the two firms arc concerned and the partial partition was recognised by the Income Tax Officer. After the partial partition the assessee got a son and wife and the assessee made a provision of Rs.5,000/- in favour of the wife. The mere fact that a provision is made for the maintenance of the wife does not make the Hindu undivided family cease to exist, the respondent along with his wife still continues to be Hindu undivided family and a son was also born to the assessee later on. Therefore, the Hindu undivided family after partial partition insofar as the two firms are concerned continues to exist in a smaller way. This is known as the smaller Hindu undivided family. In other words, the assessee continues to be a smaller Hindu undivided family. If the assessee continues to be a smaller Hindu undivided family, the income of the minor sons who were admitted to the membership of the partnership firm insofar as the two firms are concerned cannot be added to the income of the asscssee. The Tribunal is right in its view.

The judgment cited in the case of Smt. P.L. Elavathamma (supra) is not relevant to the facts of the present case. That was a case which arose under the Estate Duty Act. In the context of the liability of the deceased for the maintenance of the female members of the joint family the following observations are made: "if a dependent has obtained any share in the estate of a deceased Hindu either by testamentary on intestate succession, he or she will not be entitled to maintenance from those who take the estate. The principle behind this sub-section is obvious. Once a dependant gets a share in the deceased Hindu''s estate, his or her right to get maintenance comes to an end and she cannot have not only a share but also maintenance besides." Similarly the judgment in Mukund''s case (supra) is also not relevant to the facts of this case. They were considering the case of devolution of property u/s 8 of the Hindu Succession Act. In the context of Section 8 of the Act, it was held that the property inherited u/s 8 of the Hindu Succession Act is an individual property. In the case of N.V. Narendranath Vs. Commissioner of Wealth-tax, Andhra Pradesh, , the Supreme Court held that " The expression "Hindu undivided Family" in the wealth Tax Act is used in the sense in which a Hindu joint family is understood in the personal law of Hindus. Under the Hindu sysiem of law a joint family may consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth Tax Act to suggest that a Hindu Undivided Family as an assessable unit must consist of at least two male members."

In the case of Smt. Sitabai and Another Vs. Ramchandra, , the Supreme Court held that "under the Hindu system of law, the recognised position is that there can be a joint family with a single male member and his wife."

From the above, it cannot be inferred that on making a provision for maintenance in favour of the wife the Hindu undivided family cease to exist. It follows from the above that the questions referred by the Tribunal are to be answered in the affirmative and in the favour of the assessee.

The reference is answered accordingly.