BANERJEE, J. - (1.) THIS is a reference under s. 27(1) of the WT Act, made under circumstances hereinafter stated.
(2.) THE assessee is one Narayandass (alias Naraindas) Sadani. He has a one-half share in three immovable properties in Calcutta. THE other one-half share belongs to his brother, Ramnarayan Sadani. THE assessment years in question are 1957-58 and 1958-59 and the corresponding valuation dates are Akshaya Tritia day of 2014 and 2015 S. Y. THE point in dispute is the status in which the assessee is to be assessed to wealth-tax. THE assessee is the son of one Amarchand and grandson of one Lachmandas. Lachmandas was a Hindu governed by the Mitakshara school. Amarchand was his only son. Amarchand had five sons, viz., (1) Sewnarain (2) Harnarain, (3) Ramnarain, (4) Naraindas and (5) Lachminarayan. THE last- mentioned son was born in the year 1934. Amarchand used to do business in the name of Lachmandas Amarchand, as the sole proprietor, and owned several properties in Calcutta and Bikaner. It is not disputed that the business and the properties were self-acquired in the hands of Amarchand. On 4th May, 1927, when Amarchand had only four sons born to him, he executed three deeds--the first one giving some immovable properties in Calcutta and Bikaner to Sewnarain, the second one giving some properties in Calcutta and Bikaner to Harnarain and the third one giving to Ramnarain and Narayandass in two equal shares some immovable properties in Calcutta and Bikaner. In this reference we are concerned with the interpretation of the third deed only. Amarchand also converted his proprietary business into a partnership, by a deed also bearing the date 4th May, 1927. Under the deed of partnership he retained, for himself, 5 annas 4 pies share and gave to each of his four sons, then in existence, two annas eight pies share. He also divided the capital in the account standing in his name in the proprietary business between himself and his four sons so that each of his four sons mentioned above got Rs. 1,25,000 and he himself retained an amount of Rs. 2,50,000. We shall refer to the relevant terms of the deed of gift and the deed of partnership hereafter. The assessee submitted returns for the asst. yrs. 1957-58 and 1958-59 claiming that he represented an HUF which owned the immovable properties and the share in the business. The WTO rejected the claim with the following observation : "It is submitted that there was a gift of 50 per cent share in the properties at 107, Old China Bazar Street, Calcutta, and 15, Kamarpara Lane, Baranagar, to the assessee by his father some time in May, 1927, when the assessee himself was below the age of 10 years (the present age of the assessee being 39 years) and, hence, there could not be any question of the gift being made to the assessee's family, the gift having been absolutely made to the assessee and to the assessee alone. As regards the cash gift of Rs. 1,25,000 no date has been furnished and as such it is not known if the assessee had by that date gathered a family. From the submission made in the petition dt. 25th March, 1958, it, however, appears that this was also a personal gift to the assessee only. In such circumstances, I am afraid I cannot accept the status for purposes of the WT Act as that of an HUF." The assessee appealed before the AAC who agreed with the WTO with the following observations : "The properties immovable and movable were acquired by the assessee directly or indirectly from the gift made by his father who himself had acquired it by self-earnings. In the hands of the assessee the property would fall to be considered as his individual estate acquired personally from a gift. It is not an ancestral property coming down to him under the law and he is competent to dispose it of at his own will. The wife and the sons of the assessee cannot acquire any right by birth in such a property. I, therefore, agree with the WTO that the property belonged to the assessee in his individual capacity and he was perfectly justified in assessing him in the status of 'Individual'". The assessee, thereafter, appealed before the Tribunal. The Tribunal, however, took a different view on the following line of reasoning : "Now, it is the contention of the learned counsel for the appellants that each one of them received this gift as an essential part of a family arrangement and that it was impressed with the quality of an HUF property and became coparcenary property on birth of sons to each of them. Great emphasis was placed on quality of shares given by the father to each of the sons, pointed reference was made to the father retaining two shares making provisions for unborn child and it was argued that the whole scheme left no doubt in one's mind that Sri Amarchand wanted the gift to his sons to be treated by them as properties of their respective HUFs and that in no other light can the distribution made by him be viewed. Reference was also made to para 13 of the partnership deed which provided that if a partner shall die intestate, his male descendants will step into his place and should he die without male issue, then his widow will get maintenance not exceeding Rs. 250 per month and the capital and the assets of the deceased partner shall go to his brothers. Reliance was also placed on para 14 of the partnership deed according to which any adult partner could dispose of his share in his business by a deed of gift only to a desirable person or persons of his own family. It was argued that these provisions clearly showed that Sri Amarchandji was anxious to distribute his assets, broadly speaking, in accordance with the requirements of the Mitakshara School of Hindu Law and wanted the properties in question to be impressed with the quality of Hindu coparcenary property. The Departmental Representative, on the other hand, contended that the properties gifted by Sri Amarchand were his self-acquired properties and he was free to dispose it of in any manner he liked. He gifted certain properties to his sons and there was no trace of HUF property at the source. He relied on the Supreme Court decision in Arunachala Mudaliar vs. Muruganatha Mudaliar (1954) SCR 243, which was concerned with the transfer of self- acquired property by a father to his sons through a will and the question was the same as the one which is agitated before us. The Supreme Court held that the question was primarily one of the intentions of the donor or the testator to be gathered from the terms of the deed of gift or will and that if there were no clear words describing the kind of interest intended to be given, the Court would have to collect the intention from the language of the document taken along with the surrounding circumstances in accordance with the established canons of construction. The question before us also is whether the grantor, Amarchand, really wanted to make a gift of the property to his sons or the apparent gift was only an integral part of the scheme to partition the property. Now, in the case before them, the Supreme Court took the view that the property transferred was intended to be a separate property in the hands of the donee on the ground that the testator wanted to make a distribution of properties in a way different from what would take place in case of intestacy, that there was no indication in the will that the properties bequeathed were to be held by the sons for their families or male issues and that the subsequent modifications of the will by the testator before his death suggested that the testator did not want to confer upon the sons the same rights as they would have on the intestacy. On the other hand, in the case before us, as the general scheme of distribution by Amarchand corresponds roughly to the distribution in accordance with the principles of intestate succession under Mitakshara Law, there are provisions in the partnership deed which indicate that at least he wanted the shares in the partnership to be held by his sons not only for their benefit but for the benefit of their families and there is no fact brought on record by the Department which in incongruous with the appellant's claim that they received gifts which were impressed with HUF character." In the result, the Tribunal set aside the order both by the WTO and by the AAC and directed that the appellant be treated as a member of an HUF as claimed by him.
(3.) AGGRIEVED by the order made by the Tribunal, the CWT applied for and obtained reference of the following question of law to this Court , namely : "Whether, on the facts and in the circumstances of the case, and on a proper construction of the deed of gift executed by Amarchand on 4th May, 1927, and the partnership deed dt. 4th May, 1927, the assessment of net wealth in the hands of Narayandass Sadani could properly be made in the status of an HUF for the asst. yrs. 1957-58 and 1958-59 ?" It is necessary for us at this stage to set out the relevant provisions of the deed of gift and the deed of partnership referred to above. The relevant portion of the deed of gift, dt. 4th May, 1927, reads as follows : "Whereas the donor in consideration of natural love and affection which he bears towards his sons, the donees, is desirous of making an absolute gift to them of the said properties particularly described in the said Schedule Now this indenture witnesseth that to effectuate the said desire and in consideration of natural love and affection which he the said donor bears towards his said sons the donees he the said donor both hereby give grant and convey unto and to the use of the said donees absolutely and for ever and in equal shares all those hereditaments and premises particularly described in the said schedule..... to have and to hold the said massuage tenements lands hereditaments and premises and all and singular other the premises hereinbefore expressed to be hereby granted unto and to the said donees for ever in equal shares and for their absolute use and benefit with full power and absolute authority to them the said donees to deal with the said properties hereby granted in any way they like without any claim and demand or interruption whatsoever on the part of the said donor or any person or persons claiming by from, through under or in trust for him and the said donor for himself his heirs representatives and assigns covenants with the said donees their heirs, representatives and assigns that he the said donor hath not done or committed any act deed or thing whereby or by reason whereof he is prevented from granting and transferring the said messuages, lands, hereditaments and premises to the said donees." The relevant portion of the deed of partnership bearing the same date namely, 4th May, 1927, reads as follows : "And whereas the said Amarchand Sadani was the sole proprietor of the said business which was carried on at 43, Clive Street, and also at No. 13 and 13/1, Jackson Lane, till Chait Sudi 8, Samvat year, 1984, and whereas the said Amarchand Sadani having agreed to divide the capital and assets of the said business between himself and his sons the said Sewnarain Sadani, Harnarain Sadani, Ramnarain Sadani and Naraindas Sadani as on Chait Sudi 9th, Samvat year 1984, paid to each of his said sons rupees one lakh and twenty-five thousand in the shape of stock, shares, hundi, Government securities, war bonds and cash money, etc., and whereas the said Amarchand Sadani has agreed to take and admit his said four sons in his said business as partners thereof on the terms, conditions and stipulation hereinafter mentioned. Now this indenture witnesseth that the said parties here to have mutually agreed to become and be partners upon the terms, conditions and stipulations hereinafter contained, that is to say : 2. The partnership business shall be carried on under the name and style of M/s. Lachmandass Amarchand..... 4. The capital of the partnership business shall be rupees seven lakhs and fifty thousand subscribed by the partners in the manner following, namely : 13. If any partner shall die intestate during the continuance of the said partnership his male descendants will step into his place and should he die without male issue then his widow shall get a proper maintenance not exceeding Rupees Two hundred and fifty per month during the term of her natural life and the capital and assets of the deceased partner shall go to his brothers. 14. Any adult partner may dispose of his share in the business by a deed of gift to a desirable person or persons of his own family only." ;