M.H.BEG J. - (1.)THIS reference made to us under section 66(1) of the Indian Income-tax Act arises in the following circumstances : One Durga Prasad and his son, Ram Rakshpal, and his grandson, Ashok Kumar, constituted a Hindu undivided family until the 11th of October, 1948, when there was a partition in the family so that Durga Prasad separated. After that, Durga Prasad carried on his own business in the name of Messrs. Murli Dhar Mathura Prasad until his death on 29th of March, 1958, and Ram Rakshpal and his son, Ashok Kumar, carried on their own separate business under the name and style of Messrs. Ram Rakshpal and Ashok Kumar, the assessee before us. Durga Prasad also left behind a widow, Jai Devi, and a daughter, Vidyawati. Upon his death, Vidyawati took her 1/3rd share of the property left by Durga Prasad, but his widow, Jai Devi, and his son, Ram Rakshpal, entered into a partnership with 2/3rd of the assets of the business known as Murlidhar Mathura Prasad which was, as already indicated, the separate business of Durga Prasad. A partnership was entered into between Jai Devi and Ram Rakshpal and its terms were incorporated in a deed which was duly registered on 23rd April, 1958. In the assessment year 1959-60, immediately following the death of Durga Prasad, the question arose whether the income from the one-third share which had come to Ram Rakshpal from Durga Prasad should be assessed as part of the income of the Hindu undivided family of Ram Rakshpal Ashok Kumar, the assessee before us, or as the separate property of Ram Rakshpal. The Income-tax Officer assessed it as the income of the Hindu undivided family applying the well recognized principle of Hindu law that the property left by the grandfather in the hands of the father is ancestral property in which the grandson has a right by birth. On an appeal, the Appellate Assistant Commissioner maintained the decision of the Income-tax Officer, but, on a second appeal, the Appellate Tribunal allowed the appeal with regard to the income from the share inherited by Ram Rakshpal from Durga Prasad on the ground that it was the separate property of Ram Rakshpal which had devolved upon him by succession under section 8 of the Hindu Succession Act. It was held that, until Ram Rakshpal himself decided to merge it with the property of the Hindu undivided family, of which he was the karta, it would continue to be his separate property. Hence, the question which has been referred to us is framed as follows :
Whether the 1/2 share held by Ram Rakshpal in the partnership firm of Messrs. Murli Dhar Mathura Prasad is held by him as a karta of the assessee Hindu undivided family or in his individual capacity ?

(2.)IT has been contended, on behalf of the department, that the Hindu Succession Act (hereinafter referred to as the Act) does not modify the rule thus stated in Mullas Hindu Law (13th edition, page 248, paragraph 223) : All property inherited by a male Hindu from his father, fathers father, or fathers fathers father, is ancestral property. The essential feature of ancestral property according to the Mitakshara law is that the sons, grandsons, and great-grandsons of the person who inherits it, acquire an interest in it by birth. Their rights attach to it at the moment of their birth. Thus, if A inherits property, whether movable or immovable, from his father or fathers father, or fathers fathers father, it is ancestral property as regards his male issue. If A has no son, sons son, in existence at the time when he inherits the property, he holds the property as absolute owner thereof, and he can deal with it as he pleases. But, if he has sons, sons sons, or sons sons sons in existence at the time, or if a son, sons son or sons sons son is born to him subsequently, they become entitled to an interest in it by the mere fact of their birth in the family, and A cannot claim to hold the property as absolute owner nor can he deal with the property as he likes.
In the above-mentioned statement of the law, the basic proposition is that the grandson acquires a right in the property of his grandfather at his birth and has a right of inheritance jointly with his father at the time of succession. This is described as unobstructed heritage. It has been observed in Mulls Hindu Law (13th edition, 1966, page 245) :

(1) The Mitakshara divides property into two classes, namely, apratibandha daya or unobstructed heritage, and sapratibandha daya or obstructed heritage. It is called unobstructed, because the accrual of the right to it is not obstructed, because the accrual of the right to it is not obstructed by the existence of the owner... Property, the right to which accrues not by birth but on the death of the last owner without leaving male issue, is called obstructed heritage. It is called obstructed, because the accrual of the right to it is obstructed by the existence of the owner.

All the cases which have been cited in Mullas Commentary on Hindu Law in support of the proposition put forward by Mr. Gulati, on behalf of the department, relate to the law as it stood before the Hindu Succession Act, 1956. There is no doubt whatsoever about the position under the Hindu law as it then stood.

(3.)MR.Gulati also relied on the following passage from Dr. Derretts Introduction to Modern Hindu Law (paragraph 411, at page 252) :
Since on the death of a father his separate property (or divided share passes to his sons as ancestral property between them and the sons and grandsons of each of them (the male issue) - a position which persists notwithstanding the reforms of the Hindu Succession Act -it is not uncommon, where a father dies in the lifetime of the grandfather, to find a grandson who is a member of a coparcenary in two distinct capacities.

He also directed our attention to another passage from this work :

Under the Hindu Succession Act the sons, along with other intestate heirs indicated in Class I of the Schedule must take the property of their intestate father as tenants-in-common in all circumstances, but their male issue will have a birth-right as before.