DIWAN, J. -
(1.)IN this case the following question has been referred to us for our opinion by the Appellate Tribunal at the instance of the revenue :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the self -acquired and personal assets left by the said Manilal Chhotalal, the deceased father of the respondent, were to be assessed in the hands of the Hindu undivided family represented by the respondent and not in his hands in his individual capacity?'
(2.)THE relevant assessment year in this case is 1964 -65 and the assessee in this case is an individual. The assessee's father, Manilal, was assessed as an individual in respect of his self -acquired properties and in respect of income from such property. Manilal dies in February, 1926, leaving behind him his widow, his only son, the present assessee, and his daughter, Vasumati. At the time of the death of Manilal, both the assessee and his sister, Vasumati, were unmarried. Subsequently, the assessee got married to Mrinalini and Mrinalini bore a child, a daughter, Jayashree, and no other issue was born to the couple. What the assessee received on the death of his father, Manilal, consisted entirely of the self -acquired properties of Manilal. Before the Wealth -tax Officer, the assessee claimed the status of a Hindu undivided family in regard to the net wealth which consisted entirely of the assets which he had received on the death of his father, Manilal. On the relevant valuation date the family consisted of the assessee, his wife, Mrinalini, his daughter and his mother. The Wealth -tax Officer held that the correct status was to be treated as an individual and not that of a Hindu undivided family. Against the decision of the Wealth -tax Officer, the matter was carried in appeal by the assessee and the Appellate Assistant Commissioner upheld the decision of the Wealth -tax Officer and dismissed the appeal. The matter was taken in further appeal to the Appellate Tribunal and the Tribunal held that the value of the assets left behind him by the assessee's father, Manilal, on his death was to be assessed in the hands of the Hindu undivided family represented by the assessee and not in the individual capacity of the assessee. On these facts, at the instance of the revenue, the question hereinabove set out has been referred to us for our opinion.
On behalf of the revenue, Mr. Kaji has relied upon certain observations of their Lordships of the Privy Council in Kalyanji Vithaldas v. Commissioner of Income -tax. It was contended before us that in Kalyanji Vithaldas's case, the facts were that there was a partnership firm and the partners were governed by the Mitakshara school. In or about 1912, the partnership business was started by Moolji and Purshottam, who were brothers, who had separated prior to 1912, and one Kalyanji who was not related to either of the two brothers and in no case were ancestral funds employed for the purpose of that business. In 1919, Moolji made gifts of capital to each of his two sons, Kanji and Sewdas, and since 1919, Moolji, Kanji and Sewdas had been separate from each other. In 1919, by a deed dated May 1, 1919, Kanji and Chaturbhuj, who was the brother of Kalyanji, were taken into partnership and in 1930, Sewdas and Kalyanji's brother, Champsi, were taken into the firm on the terms of the deed of September 11, 1930. Interest of Kanji and of Sewdas were gifts individually from their father and the interest of Chaturbhuj was a gift from his brother, Kalyanji. It was found as a fact that the individual partner had thrown his interest in the firm or his receipts therefrom into the common stock, i.e., treated it as joint family property. The Privy Council held that from the facts it clearly appeared that so far as Moolji, Purshottam and Kalyanji were concerned, they were each members of a Hindu undivided family. Each had a son or sons from whom, so far as the evidence went, he was not divided. But the income from the firm was clearly the separate and self -acquired property of the partner, and as it had not been thrown into the common stock, it could not be regarded as income of the family. The question before the Privy Council was whether the income of these different partners from the partnership could be considered as income of the different Hindu undivided family represented by each of the partners and be assessable to super -tax as income of the Hindu undivided family. The Privy council also found that so far as Chaturbhuj was concerned, he had obtained his interest in the firm from his brother, Kalyanji. It was not self -acquired and not ancestral property. Chaturbhuj had no son, but even if he had, the son would have taken by birth no interest in the income from the partnership. Thus, in none of the cases of the four partners, Moolji, Purshottam, Kalyanji and Chaturbhuj did the fact that the partner concerned had a wife and daughter or more than one daughter affect the result and the existence of a son did not make his father's self -acquired property family property or joint property, and the existence of a wife or daughter did not make any difference. As regards the cases of Kanji and Sewdas, it was found that neither had a son but, in the case of each, his interest in the firm was obtained by gift from his father, Moolji. The Privy Council left the question open whether the interest obtained by each of the two partners, Kanji and Sewdas, by gift from their father, Moolji, was ancestral property or not in their respective hands but their Lordships proceeded upon the assumption that their interest was ancestral property, so that, if either had a son, the son would have taken an interest therein by birth. But no son having been born, no such interest had arisen to qualify or diminish the interest given by Moolji to Kanji and to Sewdas. And the question before the Privy Council was, whether the existence of a wife, or of a wife and a daughter, made income of Kanji and Sewdas from the partnership, income of a Hindu undivided family rather than income of the individual partner. At page 95 of the report, Sir George Rankin, delivering the opinion of their Lordships, has observed :
'In an extra -legal sense, and even for some purposes of a 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.'
(3.)WE may point out that the assumption on which their Lordships of the Privy Council proceeded in Kalyanji Vithaldas's case no longer holds good after the decision in Arunachala Mudaliar v. Muruganatha Mudaliar. After considering the text of the Mitakshara and various relevant texts, the Supreme Court observed at page 499 of the report :
'The property of the grandfather can normally vest in the father as ancestral property if an when the father inherits such property on the death of the grandfather or receives it by partition, made by the grandfather himself during his lifetime. On both these occasions the grandfather's property comes to the father by virtue of the latter's legal right as a son or descendant of the former and consequently it becomes ancestral property in his hands..... To find out whether a property is or is not ancestral in the hands of a particular person, not merely the relationship between the original and the present holder but the mode of transmission also must be looked to; and the property can ordinarily be reckoned as ancestral only if the present holder has got it by virtue of his being a son or descendant of the original owner.'