AI Structured Summary
Not yet generated for this judgment
Judgment
The question before us is:
Whether in respect of the following three sums, viz., Rs. 8,436 being income assessable under the head ''property'', Rs. 998 under ''business'' and
Rs. 3,755 under other sources (quarries and fisheries) the petitioner was rightly taxed as an individual or whether he should have been taxed as the
representative of a Hindu undivided family.
The assessee, the Raja of Bobbili, is the present holder of the impartible estate of Bobbili. During the previous year (1st April, 1934 to 31st
March, 1935) he was also the Chief Minister to the Government of Madras. He is, besides, the managing member of a Hindu undivided family of
which he and his brother are the senior coparceners. For the assessment year 1935-36 his total income from all sources liable to Income Tax was
ascertained to be Rs. 64,083 made up of the following items:
Rs.
Salaries .. 49,399
Interest on Securities .. 420
Property .. 8,446
Business : Money-lending (Rs. 998) and
Kerosene oil agency (Rs. 525) .. 1,523
Other sources : Dividends (Rs. 540) and
quarries and fisheries (Rs. 3,755) .. 4,295
_________
64,083
__________
He was assessed both to Income Tax and super-tax, super-tax being levied as on an individual. With the exception of certain amounts it was
admitted that the Raja was rightly assessed as an individual. The sums about which there is a dispute are Rs. 8,436 from property, Rs. 998 from
money-lending business and Rs. 3,755 from other sources (fisheries and quarries). These sums are income derived from the impartible estate. The
assessee''s contention is that they are income of the joint family and therefore the joint family should have been assessed as such in respect of them
and not the Raja as an individual.
The point for consideration is whether for purposes of Income Tax the income from the impartible estate is income of the joint family of which
the Raja is the manager; and in this connection certain principles with regard to impartible estates must be stated: and they are that from the very
nature of the estate there can be no right of partition and that except in Madras no coparcener can restrain alienations by the head of the family
though the right to maintenance and of survivorship may exist. The distinction between an impartible estate and a joint family estate has now been
made clear in a number of decisions. What has now to be considered is the income from such an estate, the Income Tax Commissioner''s claim
being that this income must be regarded for the purposes of Income Tax as the income of an individual and in support of his claim a number of
cases have been cited. Amongst those cases which in our opinion lend considerable support to the Income Tax Commissioner''s contention is
Shiba Prasad Singh v. Prayag Kumari Debi (1932) 63 M.L.J. 196 : L.R. 59 IndAp 331 : ILR 59 Cal. 1399 (P.C.) a decision of the Privy
Council. The litigation in that case related to the succession to the estate of one Raja Durga Prasad who died childless survived by three widows
who were the plaintiffs in the suit and the respondents in the first appeal. The defendant Shiba Prasad Singh was a collateral relative of the
deceased Raja. The parties were governed by the Mitakshara Law. The chief item of property was the impartible estate but the Raja died
possessed of considerable other immovable property, also of cash, deposits in banks, jewellery and other movable property. Upon the Raja''s
death the defendant took possession of the impartible estate and also other property of the Raja claiming that it passed to him by survivorship. The
plaintiffs alleged that the family had ceased to be joint, and claimed the estate under the Hindu Law, claiming the other immovable and movable
property as self-acquisitions. Amongst the questions of law dealt with was whether the holder of an impartible estate can incorporate with it
property either movable or immovable so as to make that property descend according to the law of primogeniture governing the estate. It was held
that the blending of income from self-acquired property with income from an impartible estate raises no presumption of an intention to incorporate
but that intention can be indicated in other modes and that movable property cannot form an accretion to an ancestral impartible estate and even
the income of an estate of that nature is not an accretion to it. In the course of the judgment of their Lordships'' Board a large number of cases
touching the question are referred to and examined; and in drawing a distinction between an impartible estate and the ordinary joint family estate on
page 1413 it is stated:
Impartibility is essentially a creature of custom. In the case of ordinary joint family property, the members of the family have (1) the right of
partition, (2) the right to restrain alienations by the head of the family except for necessity, (3) the right of maintenance, and (4) the right of
survivorship. The first of these rights cannot exist in the case of an impartible, estate, though ancestral, from the very nature of the estate. The
second is incompatible with the custom of impartibility as laid down in Sartaj Kuari''s case (1888) L.R. 15 IndAp 51 : ILR 10 All. 272 (P.C.) and
the first Pittapur case (1899) 9 M.L.J. (Supp.) 1 : L.R. 26 IndAp 83 : ILR 22 Mad. 383 (P.C.) and so also the third as held in the second Pittapur
case (1918) 35 M.L.J. 392 : L.R. 45 IndAp 148 : ILR 41 Mad. 778 (P.C.). To this extent the general law of the Mitakshara has been superseded
by custom, and the impartible estate, though ancestral, is clothed with the incidents of self-acquired and separate property. But the right of
survivorship is not inconsistent with the custom of impartibility. This right therefore still remains, and this is what was held in Baijnath''s case (1921)
40 M.L.J. 387 : L.R. 48 IndAp 195 : ILR 43 All. 228 (P.C.). To this extent the estate still retains its character of joint family property, and its
devolution is governed by the general Mitakshara law applicable to such property.
The important words affecting the question here are those which state that ""the impartible estate, though ancestral, is clothed with the incidents of
self-acquired and separate property"". After dealing with the question of whether the family had ceased to be joint their Lordships consider on page
1414, the second question, namely, whether it is competent to the holder of an ancestral impartible estate to incorporate with the estate other
properties belonging to him and a number of decisions are referred to, the first of them being 6 CWN 490 (Privy Council) which was a case
relating to succession to an ancestral impartible estate where some property had been purchased on behalf of the last holder out of the savings of
the estate. It was contended that this property had been incorporated with the estate and therefore passed with it. The evidence was that the rents
of the estate were collected by the same servant and the collection papers were kept with the papers of the estate and it was held that these facts
were not adequate for holding that the Raja intended to incorporate the property with the ancestral estate for the purposes of his succession and
that the property must therefore follow the rule of Mithakshara to self-acquired property. Next Janaki Prasad Singh v. Dwaraka Prasad Singh
(1913) 25 M.L.J. 34 : L.R. 40 IndAp 170 : ILR 35 All. 391 (P.C.) is cited. That also relates to immovable property and referring to the
previously cited case, it was held that the question whether properties acquired by an owner become part of the ancestral estate for the purposes
of his succession depends on his intention to incorporate the acquisitions with the original estate. Another case referred to is Jagadamba Kumari v.
Wazir Narain Singh (1922) 44 M.L.J. 503 : L.R. 50 IndAp 1 : I.L.R 2 Pat. 319 (P.C.) which was a case relied upon by Mr. Patanjali Sastri in
support of his argument, and to which a further reference will be made in this judgment. The actual point of the decision in that case was that where
the estate is impartible no such presumption as to an intention to incorporate can be drawn from the blending of the income of self-acquired
property with the income of the estate as in the case of ordinary joint family estate. The case does not decide that, if the estate is impartible, there
can be no incorporation at all. On the contrary, there is an implication, and that too a strong one, that there can be an incorporation at least as
regards immovable property. Several other cases are also referred to. On page 1418 the distinction between the blending of income in the case of
a member of a joint family and a member of it who is the holder of an ancestral impartible estate is stated as follows:
If a member of a joint family blends the income of his self-acquired property with the income of the joint family property, it raises a presumption of
an intention to incorporate the self-acquired property with the joint family property. Rajani Kanta Pal v. Jagmohan Pal (1923) 44 M.L.J. 561 :
L.R. 50 IndAp 173 : ILR 50 Cal. 439 (P.C.), But no such presumption can arise if a member of a joint family, who is the holder of an ancestral
impartible estate, mixes the income of his self-acquired property with the income of the estate.
Having dealt with the question of the incorporation of immovable property purchased out of the income of an impartible estate and having held
that it can form an accretion to the joint family estate provided the intention on the part of the holder of the impartible estate, is clearly proved, their
Lordships proceed to deal on page 1422, with movable property as distinguished from immovable property and there says:
None of these considerations, however, apply to movable property. Such property, their Lordships think, cannot form an accretion to an ancestral
impartible estate.
And here follow the very important words:
The income even of such an estate is not accretion to the estate. As was said by the. Board in Jagadamba Kumari v. Wazir Narain Singh (1922)
44 M.L.J. 503 : L.R. 50 IndAp 1 : ILR 2 Pat. 319 (P.C.) ''the income when received is the absolute property of the owner of the impartible
estate''. It does not attach to the estate as does the income of an ordinary ancestral estate attach to that estate. The conclusion to which their
Lordships have come on this part of the case is that while immovable property can be incorporated with an impartible estate, movable property
cannot.
It will be convenient now to examine the case reported in Jagadamba Kumari v. Wazir Narain Singh (1922) 44 M.L.J. 503 : L.R. 50 IndAp 1 :
ILR 2 Pat. 319 (P.C.), namely, another decision of the Privy Council. There it was held that the income of an impartible estate is not so affected by
its source that it should be assumed to form an accretion to the estate and further as the holder is entitled to the whole of the income, the principle
applicable to an ordinary join family that self-acquired moneys are to be regarded as joint family property if mixed with the moneys of the joint
family, does not necessarily apply to property acquired by the holder of an impartible estate out of the income. In that case, the deceased holder of
an impartible estate had applied saving out of the income, to purchasing immovable properties and making loans, the rents and interest being
received by the manager of the estate and treated in his books as part of the income of the estate and it was held that the property so acquired had
not become part of the impartible estate but remained the separate property of the deceased holder. On question raised, namely, whether movable
property can ever be treated as an accretion to immovable property, about which their Lordships expressed considerable doubt has since been set
at rest by the decision of their Lordships in Shiba Prasad Singh v. Prayag Kumari Debi (1932) 63 M.L.J. 196 : L.R. 59 IndAp 331 : ILR 59 Cal.
1399 (P.C.) already referred to. Lord Buckmaster in delivering the judgment of their Lordships'' Board on page 325 states as follows:
Originally the estate was in debt, and as there is no evidence of any acquisition of property from other sources, it follows that all the estate
possessed by the Raja, other than the impartible raj, was derived from the income of the raj itself. In the end this income produced very
considerable property. There were certain villages, certain mortgages, usufructuary and otherwise, sums due on bonds and decrees, Government
promissory notes to the extent of two lakhs, and other movable and immovable properties. With the exception of the Government promissory
notes the whole of these have been awarded to the plaintiff upon the ground that they represented an accretion to the estate and descended with it.
Their Lordships think that this conclusion is wrong and that its error is due to the idea that the produce of the impartible estate naturally belongs
to and forms an accretion to the original property. In fact when the true position is considered there is no accretion at all. The income when
received is the absolute property of the owner of the impartible estate. It differs in no way from property that he might have gained by his own
effort or that had come to him in circumstances entirely dissociated from the ownership of the raj. It is a strong assumption to make that the income
of the property of this nature is so affected by the source from which it came that it still retains its original character.
It is possible that this confusion is due to the consideration of the position with regard to an ordinary joint family estate. In such a case, the
income, equally with the corpus, forms part of the family property, and if the owner mixes his own moneys with the moneys of the family as per
example by putting the whole into one account at the Bank, or by treating them in his accounts as indistinguishable, his own earnings share with the
property with which they are mingled, the character of joint family property; but no such considerations necessarily apply, to the income from
impartible property. These two cases and 6 CWN 490 (Privy Council) are the only three Privy Council decisions where this question of income
from impartible estate has been considered. It appears clearly from these decisions that such income is in no respect different from the income
derived from the personal exertions of the holder of the impartible estate or his other self-acquisitions and this income comes to him because he is
the holder of the impartible estate. Why should this income be treated for the purposes of Income Tax differently to his income arising from his
salary as a Minister in respect of which he is assessed u/s 3 as an individual. In addition to these three Privy Council decisions, there is a decision
of the Patna High Court which is directly in point, namely, Sri Sri Rajah Shiva Prasad Singh v. The Crown (1924) ILR 4 Pat. 73. There it was held
that the Finance Act of 1922, which for the purpose of assessing super-tax allows a larger deduction from income in the case of a Hindu joint
family than in the case of an individual, contemplates that that larger deduction shall be made only in a case of the income of an undivided family in
which all the coparceners are interested, and not in the case of an impartible estate where the income is the sole property of the holder for the time
being. On page 88 Dawson Miller, C.J., says:
The income of the estate is that of the incumbent for the time being, nor does the fact that he is bound to maintain his sons entitle him to treat the
income as that of the undivided family. It is essentially his income and I so hold. The Finance Act contemplates the larger deduction for purposes of
super-tax only in a case where the income is that of the undivided family in which they are all jointly interested and not in the case of an impartible
estate where the income is the sole property of the holder for the time being.
The latest decision of the Privy Council in Collector of Gorakhpur v. Ram Sunder Mal (1934) 67 M.L.J. 274 : L.R. 61 IndAp 286 : ILR 56
All. 468 (P.C.) does not touch this question and what was decided there was that the right of the junior members of the family to maintenance out
of an ancestral impartible estate is based upon their joint ownership and not custom. It does not say that the income of an impartible estate is not
the income of the holder for the time being or that the latter is bound in law to apply the income or any portion thereof towards maintenance of the
junior members. The contention of the assessee that this income falls to be assessed as that of a Hindu undivided family is founded upon the words
of Section 14 of the Income Tax Act which reads as follows:
The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family.
The object of this exemption is to save double taxation and therefore where the Hindu undivided family has been assessed u/s 3 in respect of
its income a member of it is not to be assessed again individually. It is argued that the assessee here who is admittedly a member of a Hindu
undivided family, has received the income in question as such member, that he is therefore exempt from an individual assessment and that the
words of the section themselves therefore negative the Income Tax authorities'' contention : and further assistance is sought by reference to
decisions both of this High Court and other High Courts. Taking this High Court first, there is Commissioner of Income Tax v. Zamindar of
Chemudu (1934) 67 M.L.J. 306 : ILR 57 Mad. 1023 where it was held that a sum received as maintenance by an assessee as the brother of the
last holder of an ancestral impartible estate entitled under the law to receive maintenance out of such estate is a sum received by him as a member
of a Hindu undivided family, within the meaning of Clause (1) of Section 14 of the Indian Income Tax Act and that the right to maintenance which
the son of a zamindar still possesses is not the creature of custom but it is an incident to the ordinary joint family property which has been left
untouched by custom despite its encroachment on the other incidents, that is, he receives the maintenance by reason of his status. As Ramesam, J.,
who delivered the judgment of the Full Bench on page 1027 says:
The question is whether the assessee received his payment as a member of a Hindu undivided family. Undoubtedly he does receive this payment of
Rs. 6,000 because he is a member of the undivided Hindu family.
It is different in the case of the assessee here. It is true that he is a member of a Hindu undivided family but he receives nothing from the family.
The income is received by him as the holder of the impartible estate and it cannot be said that he receives it as a member of a Hindu undivided
family. The income is his and the junior members have no right therein. Krishan Kishore v. The Commissioner of Income Tax ILR (1932) 14 Lah.
255 was also cited for the assessee. What was decided in that case was that there is no legal sanction for the proposition that an estate which is
governed by the rule of primogeniture cannot belong to an undivided Hindu family but must be the sole property of the person who has succeeded
to it by the rule of primogeniture. This decision, however, does not touch the question in point here. It is not disputed that the corpus belongs to the
undivided family. The question is as regards the income; and if in this case it is assumed that the income from an impartible estate means the joint
family income, then that is clearly contrary to what was decided in Jagadamba Kumari v. Wazir Narain Singh (1922) 44 M.L.J. 503 : L.R. 50
IndAp 1 : ILR 2 Pat. 319 (P.C.), 6 CWN 490 (Privy Council) and Shiba Prasad Singh v. Prayag Kumari Debi (1932) 63 M.L.J. 196 : L.R. 59
IndAp 331 : ILR 59 Cal. 1399 (P.C.) and to none of these cases is any reference made; and we must respectfully dissent from that view. In
Commissioner of Income Tax, Bihar and Orissa v. Maharajadiraj Kumar Visheswar Singh ILR (1935) 14 Pat. 785 it was held that Section 14(1)
of the Income Tax Act applies only to sums received by a member of a Hindu undivided family out of income to a share in which he has a vested
right, that is to say, sums which he receives from the joint income of the family and that a sum received by an assessee because he is a member of
an undivided family does not stand on the same footing as a sum received by him as a member of the family within the meaning of Section 14(1) of
the Act. It is contended that this case assists the assessee because it shows that the income is still the joint income of the family. But the assertion of
the assessee that the allowance was paid out of joint family property was not contraverted in that case and as stated in the leading judgment the
Court had not to consider the nature of the income from the impartible estate in the hands of the holder. In our view the junior member receives
maintenance because he is entitled to a share in the corpus and the holder of the impartible estate is bound to maintain the junior members of the
family and no useful purpose will be served by a reference to other cases as none of the cases cited on behalf of the assessee, in our opinion,
destroy the force of those relied upon by the Commissioner of Income Tax. We hold, therefore, that the assessee was rightly assessed in respect
of his income as an individual. The question propounded is answered accordingly. The assessee will pay Rs. 250 costs to the Commissioner of
Income Tax.