COMMISSIONER OF INCOME TAX Vs. KHANNA M M
LAWS(BOM)-1962-9-6
HIGH COURT OF BOMBAY
Decided on September 07,1962

COMMISSIONER OF INCOME TAX Appellant
VERSUS
M.M.KHANNA Respondents


Cited Judgements :-

CONTROLLER OF ESTATE DUTY VS. LAXMI BAI SMT [LAWS(ALL)-1980-3-45] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. BHIKRAJ JAIPURIA [LAWS(CAL)-1978-2-55] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. PRAHLADRAI AGARWALLA JALAN [LAWS(CAL)-1978-4-75] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. P N TALUKDAR [LAWS(CAL)-1981-1-24] [REFERRED TO]
THAKUR HARI SINGH VS. COMMISSIONER OF INCOME TAX [LAWS(RAJ)-1966-10-11] [REFERRED TO]
SATYANARAYAN KANHAIYALAL GAGRANI VS. COMMISSIONER OF INCOME TAX [LAWS(MPH)-2007-8-108] [REFERRED TO]


JUDGEMENT

V.S.DESAI, J. - (1.)THIS is a reference under s. 66(1) of the Indian IT Act 1922, at the instance of the CIT and relates to an item of Rs. 927, which has been deleted from the assessment of the assessee as an individual on the ground that the said amount was not the income of the assessee as an individual but of the HUF.
(2.)THE assessee was a member of an HUF consisting of his father, his younger brothers and the children of himself and his brothers and other female members of the family. THE assessee, however, has his own independent income arising from salary, interest on Government securities, interest on bank current accounts and dividend income in respect of which he was assessed in the status of an individual. On 27th Aug., 1955, the assessee made a declaration whereby he impressed the separate and self-acquired property which he then possessed with the character of the joint family property of the joint family consisting of himself, his wife, son and two daughters. THE declaration was to the effect that he had on that date thrown all his separate and self- acquired property into the family hotchpotch and the same would thereafter be held by him as the Karta of the HUF consisting of himself, his wife, son and daughters. It may be noted that before making the said declaration, he had not declared his intention to separate from the main joint family consisting of his father and his other brothers and their children. He and his branch, therefore, continued to remain in the main joint family as members thereof. THE income derived from the assets, which were the subject-matter of the declaration made by the assessee, was Rs. 927 in the asst. yr. 1956-57 for which the relevant account year was the financial year ending with 31st March, 1956. During the asst. yr. 1956-57 the assessee submitted two returns, one in the status of an individual and the other in the status of an HUF. THE amount of Rs. 927 was included in the return submitted in the status of an HUF and the other return filed in the status of an individual included the income derived from his self- acquired property. THE ITO took the view that although the declaration made by the assessee was a genuine and bona fide declaration, the income derived by the assessee from the assets, which were the subjects-matter of the said declaration, still remained the assessee's income as an individual because the assessee could not in law create an HUF a separate assessable unit in the circumstances of the case. According to the ITO, it was not possible to regard any joint Hindu family as being composed of a number of sub- families, which are stranded together for certain other purposes and have an independent existence for certain other purposes. Since the assessee was already a member of the HUF consisting of his father and other brothers from which he has not separated, it was not possible for him to constitute a joint Hindu family of himself, his wife son and daughters as a distinct and separate assessable unit apart from the main joint Hindu family to which he still continued to belong. In the view that he took the ITO included the amount of Rs. 927 in the individual assessment of the assessee. THE assessee took the matter in appeal to the AAC. According to the AAC the ITO was to correct in taking the view that it was not possible to regard a joint Hindu family as being composed of a number of sub-families which were stranded together for certain purposes and had an independent existence for certain other purposes. It was possible, according to him, that while the main joint Hindu family family remained intact, the branch families of the main family may have separate existence as assessable units as Hindu undivided families under the Indian IT Act. THE AAC was also of the opinion that it was possible for a member of the branch family to impress his self-acquired property with the character of the joint family property of the branch family so as to make the income from that property the income of the branch family as an HUF under the Indian IT Act. On the merits of the case, in view of the several steps, which the assessee had taken to give his self-acquired property the character of the joint family property of the branch family of which he was the Karta there could be no doubt whatsoever that he had clearly and unequivocally thrown the said property into common stock of his branch family and abandoned all intentions to hold it as a separate property thereafter. According to the AAC the item of Rs. 927 was the income of the HUF and had, therefore, to be deleted from the individual assessment of the assessee. He accordingly allowed the assessee's appeal in this respect and directed the ITO to revise the assessment accordingly. THE view taken by the AAC was confirmed by the Tribunal in the appeal which the Department took to it. THEreafter at the instance of the Department, the Tribunal drew up a statement of case and referred to this Court the following question as arising out of its order :
"Whether the income of Rs. 927 arising from the property covered by the declaration of 27th Aug., 1955, is properly excluded from the total income of the assessee ?"

Mr. Joshi, the learned counsel for the Revenue, has argued that the view taken by the AAC and the Tribunal is erroneous and the amount of Rs. 927 must be properly regarded as the income of the assessee as an individual. According to Mr. Joshi a joint Hindu family or a Hindu coparcenary, which is a narrower body within the Hindu joint family, is a creature of law and cannot be created by act of parties save in so far that by adoption, a stranger may be introduced as a member thereof. A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. It is this corporate body, which is an assessable unit under the Indian IT Act. No two or more members of a joint Hindu family can form themselves into another Hindu joint family distinct from the main body and having a separate existence as an assessable unit under the Indian IT Act. According to Mr. Joshi, in the present case the HUF, which is an assessable unit under the Indian IT Act, is the unit consisting of the assessee father, the assessee, his brothers and their children and the other female members. The assessee intention, by the declaration which he made on the 27th of August, 1955, was to constitute another assessable unit consisting of a few members of the main joint Hindu family. Since this the assessee was incompetent to do in law, the declaration made by him or the steps taken by him could not have the effect of bringing into existence a different HUF as an assessable unit and the income from the said property would still be the separate income of the assessee himself. According to Mr. Joshi, therefore, the income of Rs. 927 was still in law the income of the assessee himself as an individual and the ITO was right in including it in his individual assessment.

Mr. Joshi's argument in the alternative was that even if it were assumed that it was possible for a branch Hindu family exist as a separate assessable unit while it was still a member of the main HUF, the assessee was not in a position to give to this latter HUF any property which it could regard as belonging to it exclusively and independently of the main family, by impressing some of his own self-acquired property with the character of the property of the said HUF. Mr. Joshi contended that if the assessee, who was a member of the main HUF, were to exercise the power possessed by him under the Hindu law to throw his self- acquired property in the hotchpotch of the joint family, the only hotchpotch into which he could throw his property was the hotchpotch of the main HUF. According to Mr. Joshi while the assessee had not separate from the main HUF and had continued to remain a member thereof, he had no right to throw his self- acquire property into the hotchpotch of a branch family consisting of himself, his wife and children. Another argument advanced by Mr. Joshi was that even if it were assumed that a member of the main family could throw his self-acquired property into the hotchpotch of the branch family to which he belongs, it was only if the branch family had a hotchpotch as distinct and separate from the hotchpotch of the main Hindu family that he could do so. Where, however, there was no such hotchpotch of the new joint family or the said hotchpotch was empty, there could be no right in the member of the branch family to throw his self- acquired property into the hotchpotch, which either did not exist or was wholly empty if it could be deemed to exist. Finally Mr. Joshi has argued that whatever may be the position so far as the Hindu law is concerned, under the Indian IT Act once an assessable unit exists, until the said unit is completely disrupted by a partition thereof, other assessable units as HUF cannot be recognised under the Indian IT Act. Since in the present case the main HUF is not shown to have been disrupted, a new HUF as an assessable unit under the declaration made by the assessee cannot be recognised by the IT Department.

(3.)IN our opinion there is no substance in any of the contentions raised by the learned counsel for the Revenue. It is true that a HUF, which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters, and the Hindu coparcenary, which is a narrower body within the joint family consisting of persons, who acquire by birth an interest in the joint or coparcenary property, are creatures of law and cannot be created by act of parties save in so far that by adoption a stranger may be introduced as a member thereof. It must, however, he remembered that a joint Hindu family springs from a Hindu male and every Hindu male can be the stock of a fresh descent constituting a joint Hindu family or a Hindu coparcenary. Where from a Hindu male a joint Hindu family springs into existence, this family goes on having its different branches and sub-branches. Each branch starts with the male descendant of the common ancestor and each sub-branch with the male descendant of the head of the branch. While the entire group proceeding from the common ancestor with its several branches and sub-branches in the normal undivided state is a Hindu joint family, each of the branches of each of the sub-branches again is a Hindu joint family according to the concept of a joint family under the Hindu law. It is, therefore, possible for a main HUF to be composed of a large number of branch families, each of the branches itself being a Hindu joint family and so also the sub-branches of those branches. As to the property possessed by the Hindu family, property may be possessed by the entire family in which members of the family have interest by birth. INdividual members of the family again may possess property, which belongs to them separately as distinct from the joint family of which they are members. Where a Hindu joint family consists of branch families it may also be that each of the branch families may possess property which constitutes the joint family property of that branch alone and in which the other branches or the main Hindu family as such have no right or interest. That such is the position under the Hindu law is clearly pointed out in Sudarsanam Maistri vs. Narasimhulu Maistri (1901) ILR 25 (Mad) 149. Bhashyam Ayyangar, J. dealing with the principles of Hindu law bearing on the conception of the Hindu joint family observed as follows :
"The Mitakshara doctrine of joint family property is founded upon the existence of an undivided family, as a corporate body.... and the possession of property by such corporate body. The first requisite therefore is the family unit; and the possession by it of property is the second requisite."
5. Omitting the female members of the family out of consideration the learned Judge observed :
"... the conception of a Hindu family is a common male ancestor with his lineal descendants in the male line, and so long as that family is in its normal condition, viz., the undivided state--it forms a corporate body. Such corporate body, with its heritage, is purely a creature of law and cannot be created by act of parties save in so far that, by adoption a stranger may be affiliated as a member of that corporate family. Persons, who by birth or adoption are not members of a Hindu family, cannot in the absence of a custom having the force of law, by mere agreement, become or be made members of a joint family."

Having thus described the concept of the joint family, the learned Judge observed :

"According to the above conception of a family, there may, of course, be one or more families all with one common ancestor, and each of the branches of that family, with a separate common ancestor."



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