J.P. Jain, J. - (1.) THESE are two references, one under the Wealth-tax Act and the other under the Gift-tax Act. The assessee in both the cases is the same and the basic question involved in both the references is common. We, therefore, propose to decide them by one common judgment.
(2.) THE facts leading to the wealth-tax reference are as follows: Thakur Gopalsingh was a jagirdar in the erstwhile State of Udaipur. His jagir was resumed in 1954 under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952. Compensation in respect of the jagir was awarded to the jagirdar. THE Wealth-tax Act, 1957 (Act No. XXVII of 1957), came into force on the first day of April, 1957. THE matter relates to the wealth-tax assessment years 1957-58 and 1958-59. THE valuation dates for each year are September 30, 1956, and September 30, 1957, respectively. THE compensation awarded in lieu of the jagir was not declared in the return of net wealth by the assessee and it was contended by him that the jagir was the ancestral property and it pertained to the Hindu undivided family consisting of himself, his wife and minor sons. Accordingly, it was urged that it was not taxable as individual in his hands. It was also asserted that the compensation was not ascertained on the valuation dates and it became quantified only in 1961. Thus, there being no ascertained wealth, it could not be included in the assessee's net wealth. THEse contentions did not find favour with the Wealth-tax Officer. He held that, in view of the fact that the rule of primogeniture was applicable, the jagir was the absolute property of the assessee and the compensation awarded to him in lieu of jagir will be treated as his assets and will be liable to wealth-tax. As regards the second contention, he was of the opinion that the compensation was ascertainable in view of the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, though it was payable in instalments. It cannot, therefore, be said that the property had no value on the valuation dates. THE assessment for the year 1957-58 was thus made by the Wealth-tax Officer on 28th February, 1962. THE assessment for the year 1958-59 was made on similar lines by the Wealth-tax Officer by his order dated 31st August, 1962. THE Appellate Assistant Commissioner of Wealth-tax, Udaipur Range, Udaipur, disposed of both the appeals of the assessee by his separate orders on February 13, 1963. THE same contentions amongst others were raised before him. Reliance was placed by the assessee on a Privy Council case, Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore, 1941 9 ITR 695 PC and it was argued that the impartible estate is owned by the joint family and the income from the estate was assessable in the hands of the Hindu undivided family. On this authority it was also urged that the position under the Income-tax Act prior to the Privy Council case is the same as existed under the Wealth-tax Act in the relevant years. After the Privy Council case was decided, Section 9(4) was added in the Income-tax Act which provided that for the purpose of Section 9 the holder of an impartible estate shall be deemed to be the individual owner of all the property comprised in the estate. Learned Appellate Assistant Commissioner did not agree with the argument raised by the assessee and he held that the jagir obtained by the assessee was not by inheritance and it was given to him by His Highness after the death of the assessee's father. He was of the opinion that the jagir in the hands of the assessee was a fresh jagir and he was thus the full and absolute owner of the jagir. He also held that the compensation that has been awarded to the assessee was also his absolute property and the assessee being the sole owner is liable to tax under the provisions of the Wealth-tax Act. He also found no merit in the second contention that the compensation could not be included for the purpose of taxation as it was not quantified on the date of valuation. THE assessee went in appeal before the Appellate Tribunal. THE Appellate Tribunal agreed with the view taken by the department. In its opinion, the assessee succeeded to the jagir in his own right by the rule of primogeniture and, in his hands, he had the absolute domain over it. THE bonds received by him as compensation on the resumption of the jagir were, therefore, the absolute property of the assessee. THE Tribunal also held that though the compensation amount became ascertained in a subsequent year, yet there was some value in regard to the jagir which was resumed. According to it, the market value on the date of the valuation has to be taken note of while computing the net wealth of the assessee. It, therefore, remanded the case to the Wealth-tax Officer to ascertain the worth of the compensation amount on the date of the valuation. THE appeals were decided by separate orders on November 19, 1963. THE assessee submitted separate applications with regard to both the assessments and requested the Appellate Tribunal to refer the questions of law arising out of its order to this court. Both the applications were consolidated and the following question was referred to this court: "Whether, on the facts and in the circumstances of the case, the present worth on the valuation dates in question of the compensation payable under the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, for the Jagir of Badnore and the immovable properties comprised in the said jagir were includible in the net wealth of the assessee in his individual status ? " The reference under the Gift-tax Act arises out of the following facts : The Garh situated at Badnore was a part of the jagir of Takur Gopalsingh, the assessee. It had been in the assessee's family for more than fourteen generations. After the jagir was resumed, the Garh was held to be the private property of the jagirdar and thus it continued to be with the assessee. The assessee sold the Garh to the Government of Rajasthan for Rs. 2,00,000 by a registered sale deed dated 31st March, 1960. He received the sale proceeds. The assessee claimed to have divided the amount of Rs. 2,00,000 amongst himself, his wife and his three sons, each getting a sum of Rs. 40,000. Entries to this effect were also made in the books of account showing the payment of Rs. 40,000 to each one of them. In the assessment year 1961-62, a question arose before the Gift-tax Officer whether the distribution of Rs. 2,00,000 involved a transfer and the assessee was liable to gift-tax. The assessee contended that the Garh of Badnore did not belong to him as an individual. Though it was a part of the impartible estate, yet it was ancestral and belonged to the Hindu undivided family of which he was the karta. He was not liable for any gift-tax as it did not amount to a transfer. The Gift-tax Officer by his order dated January 30, 1965, held that the assessee was the absolute owner of the Garh having inherited the same under the law of primogeniture. The transaction did not involve a partition but a transfer. He accordingly held him liable to tax. The matter went in appeal before the Appellate Assistant Commissioner of Income-tax. He agreed with the view taken by the Gift-tax Officer and by his order dated October, 28, 1966, dismissed the appeal. The assessee approached the Income-tax Appellate Tribunal (Delhi Bench C). The Tribunal accepted the contention of the assessee and held that the jagir of which the Garh formed part was the ancestral and impartible estate and it was governed by the law of primogeniture, but it cannot be said that it was held by the assessee in his status as an individual. Placing reliance on various authorities of the Privy Council and of the Supreme Court in Puskpavathi Vijayaram v. P. Visweswar, (1) AIR 1964 SC 118 it held that the jagir was owned by the Hindu undivided family though it was impartible in character and governed by the law of primogeniture. The transaction did not involve any transfer creating any liability for gift-tax as it was a case of partition among the members of the Hindu undivided family. Against this order, the department made an application to the Tribunal for making a reference to this court, but it was rejected. The Commissioner of Gift-tax then moved this court under Section 26(3) of the Gift-tax Act, 1958, requesting the Appellate Tribunal to state the case. This court, by its order dated 16th December, 1968, directed the Appellate Tribunal (Delhi Bench C), to refer the following question to this court and to submit the statement of the case : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal, Delhi Bench C, was right in holding that the Garh at Badnore was the property of the Hindu undivided family of which the assessee was the karta and that the distribution of a sum of Rs. 2 lakhs received by the assessee as the sale proceeds thereof amongst his sons, his wife and him self was not a transfer of assets within the meaning of the Gift-tax Act, 1958, and hence was not liable to gift-tax ? " In compliance with the above direction, the Income-tax Appellate Tribunal submitted the statement of case and referred the question stated above for answer of this court by its order dated 17th May, 1969. Thus, in both the references, the basic question that arises for consideration is whether the jagir of the assessee was the property of the Hindu undivided family. The view of the Tribunal in the gift-tax case is different from the one taken by it in the wealth-tax case. It is admitted by the department in its application dated April 25, 1968, under Section 26(3) of the Gift-tax Act, 1958, that the fort at Badnore was a part of the jagir of Badnore. The said jagir had descended from generation to generation when it came to the hands of the assessee. It is also admitted that the succession to the jagir was governed by the rule of primogeniture. Thus, there is no controversy between the parties that the jagir of Badnore was ancestral and impartible and was governed by the rule of primogeniture. A copy of the patta of Samwat year 1929 of the jagir in question is on record. It shows that the jagir has been in the family of the assessee for nearly 100 years. A reference to the provisions of the Revenue Code, Mewar (Act No. V of 1947), shows that the jagirdar in the State of Udaipur was vested with all the revenue rights in the jagir lands. On the death of the jagirdar, the jagir was to pass to a male descendant of the original grantee as may be recognised by the Udaipur Darbar. It also provided that the jagirdar had no right to dispose of his jagir by will, mortgage or sale. Junior members and sons of the jagirdar were to be maintained from the income of the jagir. For non-payment of maintenance, such orders could be issued against the jagirdar to comply under the Code as may be necessary. It is thus clear that even under the Act of 1947 the jagir was hereditary and the junior members of the family had their right and interest in the jagir in respect of maintenance and a possible right of succession. In the circumstances, it cannot, therefore, be said that a jagirdar in the State of Udaipur had the absolute domain over the estate and he held the same without any strings. The fact that the property is ancestral and its succession is governed by the rule of primogeniture does not mean that the estate is not capable of being the joint family property. As noticed above, the jagirdar is bound to maintain and defray the reasonable expenses of the junior members of the family from the jagir. In Baijnath Prasad Singh v. Tej Bali Singh, AIR 1921 PC 62, 65 their Lordships held that the fact that a raj is impartible does not make it separate or self-acquired property ; a raj, though impartible, may in fact be self-acquired or it may be family property of a joint undivided family ; if it is the latter, succession will be regulated according to the rule which obtains in an undivided joint family, so far as the selection of the person entitled to succeed is concerned, i.e., the person will be designated by survivorship, although then, according to the custom of impartiality, he will hold the raj without the others sharing it. The eldest of the senior branch would be the head of a joint family and he is entitled to succeed by survivorship. Their Lordship quoted with approval the following observations of Sir Barnes Peacock : "The impartibility of the property does not destroy its nature as joint family property or render it the separate estate of the last holder, so as to destroy the right of another member of the joint family to succeed to it upon his death in preference to those who would be his heirs if the property were separate." In another Privy Council case, Komammal v. Annadana Jadaya Gounder, AIR 1928 PC 68 their Lordships observed : " Impartible estates are the creatures of custom, and where no special custom is proved, the customary law of succession applies with such qualifications only as flow from the impartible nature of the subject, and consequently for purposes of succession, an impartible estate must be considered joint family property unless it were shown to be separate, and in order to establish that an impartible estate has ceased to be joint family property for the purpose of succession, it is necessary to prove an intention expressed or implied on behalf of the other members of the family to give up their chance of succession to the impartible estate."
(3.) SIR Dinshah Mulla for the Board in the case of Shiba Prasad Singh v. Rani Prayag Kumari Debi, AIR 1932 PC 216, 222, 138 IC 861, 867 (PC) stated the law in this regard as follows : " The keynote of the whole position, in their Lordships' view, is to be found in the following passage in the judgment in the Tipperah case, [1869] 12 MIA 523 'Where a custom is proved to exist, it supersedes the general law, which, however, still regulates all beyond the custom.' 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 impartiality as laid down in Sartaj Kuari's case, 1888 10 ILR(All) 272 PC and Rama Krishna v. Surya Rao, 1899 22 ILR(mad) 383 and so also the third as held in Rama Rao v. Rajah of Pittapur, 1918 41 ILR(mad) 778 PC. 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. To this extent the estate still retains its character of joint family property, and its devolution is governed by the general Mistakshara law applicable to such property. Though the other rights which a coparcener acquires by birth in joint family property no longer exist, the birthright of the senior member to take by survivorship still remains. Nor is this right a mere spes successionis similar to that of a reversioner succeeding on the death of a Hindu widow to her husband's estate. It is a right which is capable of being renounced and surrendered. Such being their Lordships' view, it follows that in order to establish that a family governed by the Mitakshara in which there is an ancestral impartible estate has ceased to be joint, it is necessary to prove an intention, express or implied, on the part of the junior members of the family to renounce their right of succession to the estate. It is not sufficient to show a separation merely in food and worship. Admittedly, there is no evidence in this case of any such intention. The plaintiffs, therefore, have failed to prove separation, and the defendant is entitled to succeed to the impartible estate. Being entitled to the estate, he is also entitled to the improvements on the estate, being the immovable properties specified in items 9 to 19 of Sch. kha. These improvements, in fact, form part of the impartible estate." The last decision of the Privy Council in Shiba Prasad Singh v. Rani Prayg Kumari Debi has been quoted with approval by their Lordships of the Supreme Court in Pushpavathi Vijayaram v. P. Visweswar. According to their Lordships, it must be taken to be well-settled that an estate which is impartible by custom cannot be said to be separate or exclusive property of the holder of the estate. If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture, it will be a part of the joint estate of the undivided Hindu family. The right of survivorship is not inconsistent with the custom of impartibility. This right, therefore, still remains and it is by reference to this right that the property, though impartible, has, in the eye of law, to be regarded as joint family property. This decision of the Supreme Court has been considered by the Tribunal in both the cases, but the interpretation of this authority was different in each case. There is yet another recent case of the Supreme Court in State of U.P. v. Rajkumar Rukmini Raman Brahma, AIR 1971 SC 1687, 1690. In this case the malgujar, who was the proprietor of an impartible estate, executed a gujaranama in favour, of bis younger brother stating that, according to the law and custom of the estate, he being the eldest son of the Raja, became the owner of the estate on the death of the earlier Raja and that "the younger sons have a right to maintenance and they are given a reasonable share of the estate in lieu of the right of maintenance". The question arose whether the estate belonged to the joint Hindu family and the gujaranama executed by the estate holder involved a transfer by way of gift. Their Lordships considered various Privy Council cases and held that the estate was of the undivided Hindu family and could not be said to be the separate or the exclusive property of the holder of the estate. The following observations can be reproduced below profitably : " Since the decision of the Privy Council in Shiba Prasad Singh v. Rani Prayag Kwmari Debi, it must be taken to be well-settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the estate. If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture, it will be a part of the joint estate of the undivided Hindu family. In the case of an ordinary joint family property the members of the family can claim four rights: (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. It is obvious from the very nature of the property which is impartible that the first of these rights cannot exist. The second is also incompatible with the custom of impartibility as was laid down by the Privy Council in the case of Rani Sartaj Kuari v. Deoraj Kuari, 1888 LR 15 IA 51, ILR 10 All 272 (PC) and the First Pittapur case, The right of maintenance and the right of survivorship, however, still remain and it is by reference to these rights that the property, though impartible, has, in the eye of law, to be regarded as joint family property. The right of survivorship which can be claimed by the members of the undivided family which owns the impartible estate should not be confused with a mere spes successions. Unlike spes successions the right of survivorship can be renounced or surrendered. It was held by the Judicial Committee in Collector of Gorakhpur v. Ram Sunder Mal, AIR 1934 PC 157, 163 that the right of maintenance to junior members out of an impartible estate was based on the joint ownership of the junior members of the family. In that case Lord Blanesburgh, after stating that the judgment of Lord Dunedin in Baijnath Prasad Singh v. Tej Bali Singh had definitely negatived the view that the decisions of the Board in Sartaj Kuari's case and the First Pittapur case were destructive of the doctrine that an impartible zamindari could be in any sense joint family property, went on to observe : ' One result is at length clearly shown to be that there is no reason why the earlier judgments of the Board should not be followed, such as for instance the Challapalli case, [1900] ILR 24 Mad 147 (PC) (Mullikarjuna Prasada Nayadu v. Prasada Nayadu) which regarded their right to maintenance, however limited, out of an impartible estate as being based upon the joint ownership pf the junior members of the family, with the result that these members holding zamindari lands for maintenance could still be considered as joint in estate with the zamindar in possession.' Lord Blanesburgh said: ' The recent decisions of the Board constitute a further landmark in the judicial exposition of the question at issue here. While the power of the holder of an impartible raj to dispose of the same by deed (Sartaj Kuari's case) or by will (the First Pittapur case and Protap Chandra Deo v. Jagdish Chandra Deo, AIR 1927 PC 159), remains definitely established, the right of the junior branch to succeed by survivorship to the raj on the extinction of the senior branch has also been definitely and emphatically reaffirmed. Nor must this right be whittled away. It cannot be regarded as merely visionary. As was pointed out in Baijnath Prasad Singh's case , when before the Allahabad High Court in Dhanraj Singh v. ML Lakhrani Kuar, AIR 1916 All 103 the junior members of a great zamindari enjoy a high degree of consideration, being known as babus, the different branches holding babuana grants out of the zamindari. Their enjoyment of these grants is attributable to their membership of the joint family, and until the decisions above referred to beginning in 1888 supervened, they had no reason to believe that their rights of succession were being imperilled by their estrangement from the zamindari in possession.' In the present case there is the statement of Raja Anand Brahma Shah in the gujaranama deed that according to the law and custom of the estate, the eldest son of the Raja becomes the owner of the estate on the death of the earlier Raja and that the 'younger sons have right to maintenance and they are given reasonable share of the estate in lieu of right of maintenance'. In view of this admission of Raja Anand Brahma Shah it is not possible to hold that the transfer of the properties in the gujaranama deed was a transfer by way of gift. It is also not possible to contend that it was a sale of the properties for there is no money consideration. It is manifest that the transaction is by way of a settlement to the respondent by Raja Anand Brahma Shah in lieu of the right of maintenance of the respondent which is obligatory upon the holder of impartible estate. In our opinion, the gujaranama deed dated October 5, 1949, is not hit by the provision of Section 23 of the Act and the argument of the appellant on this aspect of the case must be rejected." ;