COMMISSIONER OF INCOME TAX vs ARUN KUMAR JHUNJHUNWALLA and SONS.

In this reference under s. 256(1) of the IT Act, 1961 (for short the "Act"), the following question has been referred for opinion of this Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the status of the assessee after marriage was that of an HUF and not that of an individual ?"

The facts may be stated as follows :

The assessee is an HUF governed by the Mitakshara school of Hindu Law. The said assessee derived share of income from two firms, namely, Pawan Kumar Arun Kumar & Ors. and H. U. Textile, Shillong. The share income from the said two firms was included in the return filed by the assessee in the status of an HUF. The AO took the view that there should be at least two male members to form an HUF and in the absence of a second male member the assessee could not be assessed in the status of the HUF. The AO also took the view, that the fact that assessee, Arun Kumar Jhunjhunwalla, was married on 27th April, 1980, and no son was born to him during the relevant period would not alter the position. The AO treated the share from the above two firms as individual income of the assessee and made the assessment regarding payment of tax as an individual. The assessee preferred an appeal before the AAC. The appeal was allowed by the AAC accepting the contentions of the assessee that it was an HUF with his wife as member of the said HUF after the marriage. On further appeal before the Tribunal preferred by the Revenue, the Tribunal reversed the order passed by the AAC and restored the order passed by the AO. As a result, the share income was assessable as an individual income. At the instance of the assessee, reference has been made to this Court under s. 256(1) of the Act (IT Ref. No. 3 of 1988) and this Court by order dt. 20th April, 1993, remanded the case to the Tribunal with a direction to the Tribunal to record findings as to whether there had been a large HUF on partition of which the assessee obtained a share and whether the said share was invested in the firm in which the assessee became a partner. This Court further directed the Tribunal to rehear and decide the appeal after recording the proper finding on this aspect. The Tribunal, thereafter, passed an order recording its finding, holding, inter alia, that the share income of the firm were income from joint family consisting of the said Arun Kumar Jhunjhunwalla and his wife, and, accordingly, it was held that the share income was to be treated as joint family income and assessment ought to have made accordingly.

At the instance of the Revenue, the present reference has been made under s. 256(1) of the Act referring the above referred question.

We have heard Mr. G. K. Joshi, learned senior standing counsel assisted by Mr. U. Bhuyan, learned junior standing counsel on behalf of the Revenue, and Dr. A. K. Saraf, learned counsel assisted by Mr. K. K. Gupta, on behalf of the assessee.

Mr. Joshi submits before us that said Arun Kumar Jhunjhunwalla being the only male member, there could not be a joint family in view of the fact that the said Arun Kumar Jhunjhunwalla could dispose of the property in whatever manner he likes and the very element of family is totally absent in the present case and, therefore, the Tribunal erred in law in treating the said income received from the aforesaid two partnership firms as income of the HUF. In this connection, Mr. Joshi relied on two decisions, namely, Commissioner of Income Tax Vs. Vishnu Kumar Bhaiya, and also another decision of the Supreme Court in Surjit Lal Chhabda Vs. The Commissioner of Income Tax, Bombay, . Relying on these decisions, Mr. Joshi further submits that so long another coparcener comes to the family, it would be only an individual inasmuch as, it was the said Arun Kumar Jhunjhunwalla who can dispose of the property in any manner he likes and there is no restriction whatsoever under the law which empowers him regarding disposal of the property. Dr. Saraf, on the other hand, refutes the arguments submitted by Mr. Joshi. He submits that even a sole male member with some female members can form a family. No doubt he submits that female members of a Hindu joint family are not coparceners. Their rights are limited. It is the coparcener who has the right to seek partition and according to the present law, when there is partition female members shall also be entitled to receive share of the property. Dr. Saraf submits that a Hindu coparcenary is a much narrower body than the joint family. All members of a joint family are not coparceners. However, all coparceners are members of a Hindu joint family and they have right to seek partition. Dr. Saraf, further submits that a single male member, with some female can form a joint family. In support of his contention, Dr. Saraf has relied on the few decisions namely, in (1) CIT vs. Mulchand Sukmal Jain 1 GLR 79 ; (2) Gowli Buddanna Vs. Commissioner of Income Tax, Mysore, Bangalore, (3) N.V. Narendranath Vs. Commissioner of Wealth-tax, Andhra Pradesh, (4) Ashok Kumar Ratanchand Vs. Commissioner of Income Tax, and (5) Bharath Kumar D. Bhatia Vs. Commissioner of Income Tax, Besides these Dr. Saraf also relied on a decision in Surjit Lal Chhabda (supra). On the rival contentions of counsel appearing on behalf of the assessee as well as the Revenue, it is to be seen whether the assessee was assessable as an HUF or as an individual. The conception of a joint Hindu family constituting a coparcenary is that of a common male ancestor with his lineal descendants in the male line within four degrees counting from and inclusive of such ancestor. No coparcenary can commence without a common male ancestor, though after this death it may consist of collaterals, such as brothers, uncles and nephews, cousins, etc. A coparcenary is purely a creature of law; it cannot be created by act of parties, save in so far that by adoption a stranger may be introduced as a member thereof. No female can be a coparcener although a female can be a member of a joint Hindu family.

Now, the question is whether a Hindu joint family can be formed only with sole male member. In Gowli Buddanna vs. CIT (supra), the apex Court had the occasion to consider this matter. In the said decision, the apex Court observed thus :

"A Hindu joint family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters. A Hindu coparcenary is a much narrower body than the joint family : it includes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grandsons and great-grandsons of the holder of the joint property for the time being. Therefore, there may be a joint Hindu family consisting of single male member and widows of deceased coparceners."

The Supreme Court further observed that : "The plea that there must be at least two male members to form an HUF as a taxable entity also has no force. The expression HUF in the IT Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the IT Act does not indicate that an HUF as an assessable entity must consist of at least two male members."

The Supreme Court in the said decision further observed at page 302 which is also extracted below :

"Property of joint family, therefore, does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess. In the case in hand the property which yielded the income originally belonged to an HUF. On the death of Buddappa, the family which included a widow and females born in the family was represented by Buddanna alone, but the property still continued to belong to that undivided family and income received therefrom was taxable as income of the HUF."

In N. V. Narendranath vs. CWT (supra), a similar point came for consideration before the apex Court. In the said decision also, the Supreme Court observed that :

"The expression HUF in the WT Act is used in the sense in which a Hindu joint family is understood in the personal law of Hindus. Under the Hindu system of law a joint family may consist of single male member and his wife and daughters and there is nothing in the scheme of the WT Act to suggest that an HUF as an assessable unit must consist of at least two male members."

In Ashok Kumar Ratanchand vs. CIT (supra), it was held that :

"The right of a Hindu wife to be maintained by her husband was recognised from ancient times. The law has not been altered so far. That right has been given statutory recognition by the provisions of s. 18 of the Hindu Adoptions and Maintenance Act, 1956. Maintenance of a wife by her husband is a matter of personal obligation which attaches from the moment of the marriage, even if her husband is not possessed of any property. She is entitled to enforce this personal obligation by creating a charge on his property, either acquired or ancestral. The property which a coparcener obtains on partition does not become for all times his individual and separate property. The property which a Hindu coparcener obtains on partition and who marries subsequently is conditioned by the obligation to maintain his dependents. The status of the unit of assessment after marriage is necessarily that of an HUF and the income from such property is assessable in that status and not that of the individual."

The last case cited by Dr. Saraf is Bharath Kumar D. Bhatia vs. CIT (supra). In the said decision, the Karnataka High Court observed as :

"Under Hindu law the wife of a coparcener is certainly a member of the family. Therefore, in the instant case, on the marriage of the assessee his wife became a member of his family with a right to claim maintenance charged on the property held by the assessee which he had obtained earlier under a partition. The family of the assessee, therefore, was a joint family and the property in the hands of the assessee which he got earlier at a partition should be considered as property held by the assessee in the capacity as a Karta of the HUF."

In Surjit Lal Chhabda vs. CIT (supra) the apex Court held that :

"A joint Hindu family under the Dayabhaga is, like a Mitakshara family, normally joint in food, worship and estate. In both systems, the property of joint family may consist of ancestral property, joint acquisitions and of self-acquisitions thrown into the common stock. In fact, whatever be the school of Hindu law by which a person is governed, the basic concept of an HUF in the sense of who can be its members is just the same."

However, in the said decision, it was also observed that until the birth of a son, the personal law of the appellant regarded the appellant as a owner of the property held in the name of the joint family and the income therefrom should be regarded as his income even after the property is thrown into joint family hotchpot. The income, therefore, is chargeable in the appellants hand as his individual income. On this, Mr. Joshi at a later stage agreed, that a joint family can be formed with a single member, but he emphasises that in the decision of Surjit Lal Chhabda (supra), it was held that till a son was born, the appellant was to be regarded as the owner of the property and the income therefrom should be assessed as his individual income.

It is now abundantly clear that in order to constitute a joint family, it is not always necessary that there should be two male coparceners. Even prior to the Hindu Succession Act, 1956, in a joint family property a wife or other female members were entitled to maintenance under the Hindu Womens Right to Property Act, 1937. This Act introduced an important change in the law relating to the rights of women succession, which came into force from 14th April, 1937. This Act gave at least a limited right to property to certain classes of the women members of the joint family. This limited right has been converted to a full right as per s. 14 of the Hindu Succession Act. Besides under s. 6 of the Hindu Succession Act, this aspect has also been dealt with by providing the manner of devolution of interest in the coparcenary property. Sec. 8 gives rights in the property of a male Hindu which are to devolve according to the section as mentioned in the said Act. However, from the above provisions of the Act, a Hindu is also empowered to dispose of other property which is capable of being disposed of by him in the Indian Succession Act but all these provisions indicate that a female has also a right over the property. In our opinion, a coparcener does not have an unfettered right of disposal of property under present law. In CIT vs. Mulchand Sukmal Jain (supra), this Court also held that : "A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. It may consist of a single male member and widows of deceased male members or unmarried daughters."

Considering the discussions made above, we are of the opinion that the said Arun Kumar Jhunjhunwalla after his marriage could duly form an HUF and the assessee can be recognised as an assessee in the status of an HUF and not as an individual. In this connection, the learned Tribunal was justified in coming to the conclusion that the assessee got the status of an HUF.

In view of the above, we answer the question referred in the affirmative, in favour of the assessee and against the Revenue.